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Positive Steps

The Rogue Valley economy has a ways to go before it could be called robust.

Even if 2014 was not an out-and-out year of prosperity, it did see significant signs and trends indicating the region is on the right path.

"We still have some room to go before we see an economy that most people would find to be normal," said Tim Duy, an economist at the University of Oregon. "Certainly 2014 continued the trend from 2013, of making ground lost in the recession."

Bill Thorndike has observed the local economy from various perspectives over the decades — from his manufacturing business (Medford Fabrication), higher education and health care boards, economic development agencies and national park advocacy, as a port commissioner and as a board member of the Portland Branch of the San Francisco Federal Reserve Bank.

"It's been a transition year here in Southern Oregon," Thorndike said. "You see Lithia Motors putting up new dealerships. In health care, you see coordinated care organizations have increased their capacity to provide more primary care. The county needed two more floors for its Health and Human Services building."

Picking through piles of data, Guy Tauer, a regional economist with the Oregon Employment Department, said Jackson County hasn't kept stride with gains made in the Portland area, but is trending with the rest of the state.

Of the 9,180 jobs Jackson County lost during the Great Recession, about half have returned, Tauer said. While the state as a whole saw 0.7 percent wage gains, adjusted for inflation, Jackson County saw a more modest 0.3 percent increase.

Should lower fuel prices linger into the 2015 tourism season, he said, the Rogue Valley stands to see a flow of more dollars.

"There will be more money in consumer pockets and that benefits tourism, retail, leisure and hospitality. All of Southern Oregon stands to benefit from lower gas prices," Tauer said.

The Oregon Office of Economic Analysis predicts wood products employment to trend up 3 percent in 2015 and professional services such as architects, accountants and software developers to match this year's 4.2 percent expansion. Retail trade gains are likely to diminish, from 3.2 percent growth to 2.5 percent.

At the same time, Thorndike is finding more competition for his family business as firms far and wide bid for jobs.

"Volume was off this year, but the products we produced we did a little better on," Thorndike said. Sales of the Medford Log Fork, developed 60 years ago, exceeded expectations, he said.

"We're bidding on some national projects, where people are still bidding 20 percent less," Thorndike said. "I can't blame the owners, if they can get the quality and deliver at that price, but you can't do that long term."

One long-term trend ended in 2014, or at least took a lengthy break.

The Rogue Valley is hundreds of miles from major metropolitan areas of Sacramento, the Bay Area and Portland. Yet those distances seemed to shrink when the interstate highway system and expanded commercial aviation routes improved connections. But 40 years of rising fuel prices, pushing up freight and cargo costs, created an isolation of its own for manufacturers and retailers.

Trucking is a major component to the local economy, far outstripping rail and air freight activity.

Mike Card, president of Combined Transport and former chairman of the American Trucking Associations board, said the 3.5 percent gross domestic product gain of recent quarters is expected to carry into 2015. That's good news for his industry, where all the indices are at record highs.

"Most of the truckers I know are very bullish on the economy for the next year, with oil prices coming down," Card said. "If we could get some more truck drivers we'd really be growing, but we have a shortage of truck drivers and that's causing rates to go up."

With shipping demand up, the economic ripple hits truck sales, fuel stop operations, parts suppliers and other allied entities, he said.

"Payrolls grow with expanding maintenance needs. You are hiring mechanics, and there are logistics people, dispatchers and accountants," he said.

There are job openings downtown as well.

Pacific Retirement Services' bold move to the new One West Main building underscores CEO Brian McLemore's confidence in downtown Medford and its core possibilities.

PRS' headquarters building, shared with Rogue Disposal & Recycling and Procare Software, gave local construction a boost in 2014 and will likely spur additional activity in 2015 when ground-floor retail begins to fill.

"I'm an optimist," McLemore said. "I think things are getting better, although some sectors are coming out quicker than others. We're still looking for IT people."

PRS operates or manages senior care facilities in the West, Texas and upper Midwest.

"We thought '14 was going to be a great year for us and it was," McLemore said. "It was advantageous for our business model with retirement waves still hitting and lending loosening up. We saw '14 as our window for several projects. We were able to refinance $220 million in 10 weeks because interest rates were staying low. They'll start inching up in '15, but I don't see them rising dramatically."

Along with retirees finding their way to the valley, oiling the health care industry's machinery, McLemore said the wine industry and U.S. Cellular sports park complex continue to entice people.

"I don't see some big company relocating to the Rogue Valley in '15," he said. "There are some good things happening with big strides coming, but first we've got to take the little ones."

Few businesses have prospered to the extent of Lithia Motors, the nation's No. 8 auto retailer whose headquarters building punctuates the downtown Medford skyline.

While Lithia's presence on The Commons highlighted local building earlier this decade, the addition of two new stores along Crater Lake Highway were a major contributor this year.

"Our businesses in the valley did well in '14 and it allowed us to expand to the Auto Mall," said Mark DeBoer, who oversees Lithia's real estate and construction. "I think Medford is still on the lower side of its growth curve and think it has huge opportunities. We're still trying to get people to invest in downtown, but there is still that little bit of hesitation."

His concern is that Medford hasn't been able to match similar-size cities such as Bend when it comes to long-term economic growth.

"Medford historically hasn't been able to sustain major development," DeBoer said. "Just look at Bend, where the Old Mill District gets a lot of traction, but it's taken time."

He takes exception to the notion Medford has traffic and parking issues.

"If you look downtown, there are signs for how you can get out to Ashland and Jacksonville," DeBoer said. "We need to make downtown a pedestrian-oriented place like Ashland, Bend, Helena (Mont.) or Missoula (Mont.)."

Residential housing sales gained ground during 2014. New home construction has picked up sporadically, with subdivisions planned prior to the real estate bubble now coming to fruition.

"The housing market still has not rebounded to what we saw not just during the housing boom, but prior to the housing boom," Duy said. "It's not clear we've rebounded to the point of seeing some of those migration trends return that were so important to driving consistent sustained growth over a long period of time."

While not all new construction runs through its system, Southern Oregon Multiple Listing Service showed the price per square foot rose to nearly $158 in 2014 from $133 a year earlier.

Louis and Charles Mahar enter 2015 on an even keel, initiating Stonegate Estates Phase 2A, east of North Phoenix Road and south of Larsen Creek.

They plan to build out 35 lots on the 100-home project over the next four years.

"In the last year and a half it's picked up," Louis Mahar said. "It's not exploding, but we've got a nice pace going at this time."

The critical thing, Mahar said, is matching the right house with the right price point.

"When we did Eastgate Estates, we built 1,600-1,700-square-foot homes for $275,000 to $310,000," he said. "Our plan here is to build 1,600 square feet and keep it under $300,000. I don't see interest rates going up dramatically. They might go up a little, but I can't see why they'd want them to go up too much and kill any kind of recovery we have going."

Even with mortgage interest rates well below historical norms and employment substantially better than it was six years ago, the number of homes sold a year ago is down 30 percent from 2004. New construction in 2014 tracked fairly evenly with 2013, said Roy Wright, a local appraiser and longtime observer of the Jackson County real estate market.

"We're seeing a lack of first-time home buyers," Wright said. "College graduates, as a group, are so tied down with student loans they can't get into a home.

"I don't think that will change anytime soon."

As a result, he said, much new construction is rental property.

One of the surprises Duy saw in 2014 data was the resilience of manufacturing.

"It's what separates the Rogue Valley from the rest of state where we haven't seen that kind of rebound from the recession," the UO economist said. "It's only 1,000 jobs, but still it's a good sign at least that sector has been able to rebound so strongly."

Looking forward to 2015, Duy said, "I anticipate steady pace of improvement like we've seen in 2014."

Reach reporter Greg Stiles at 541-776-4463 or business@mailtribune.com. Follow him on Twitter at www.twitter.com/GregMTBusiness, on Facebook at https://www.facebook.com/greg.stiles.31, and read his blog at www.mailtribune.com/Economic Edge.

Lithia Motors did well in 2014, allowing its expansion to the Auto Mall on Highway 62. Mail Tribune / Jamie Lusch