After the Aeron chairs were packed off to the furniture liquidator, after the layoffs, after the stock options went so far under water they sprouted gills — in short, after...

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After the Aeron chairs were packed off to the furniture liquidator, after the layoffs, after the stock options went so far under water they sprouted gills — in short, after the Puget Sound region’s tech wreck and the grinding recession it touched off — once-smug Washingtonians could still hold onto one small, cold comfort:

Things could be worse. They could be living in Oregon.

The Beaver State lost a larger percentage of its jobs than Washington, and lost them faster: Oregon’s unemployment rate soared from 4.2 percent to 9.5 percent in just 15 months. For most of the past three and a half years, Oregon’s unemployment has not only exceeded Washington’s but has topped the Lower 48 states.

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And even as the Northwest economy has stirred back to life, Oregon is recovering more slowly than Washington.

Over the past 12 months, Washington has added jobs at the seventh-fastest rate in the nation: 2.38 percent; Oregon ranks eighth, at 2.29 percent. Washington’s unemployment rate last month was 5.6 percent; Oregon’s was 6.7 percent. (All figures in this story are not seasonally adjusted.)

Even that pace may not last: The market for semiconductors — Oregon’s signature tech industry and leading export — is expected to weaken next year.

And while Washington forecasters expect the state’s recovery to continue strengthening next year, in Oregon “we’re looking at a much softer 2005 than we were looking at just six months ago,” state economist Tom Potiowksy said last month.

A volatile industry

There are a lot of reasons why the recession hit Oregon particularly hard. But the single biggest one, experts agree, is the state’s heavy reliance on a single, notoriously volatile industry — semiconductor manufacturing.

Unlike Washington, where the tech economy is largely software-driven, Oregon entered the “new economy” through the factory door. The chip plants, or “fabs,” that sprouted up and down the Willamette Valley in the 1990s helped bring the state a level of prosperity not seen since the heyday of the lumber industry.

At the sector’s peak, in February 2001, 36,000 Oregonians made semiconductors or other electronic components; an additional 14,900 worked in other high-tech manufacturing. (Even today, after three wrenching years, the percentage of Oregonians making computer chips is more than five times that of the nation as a whole.)

STEVE RINGMAN / THE SEATTLE TIMES

Workers in a clean room at Intel’s Ronler Acres Campus in Hillsboro, Ore., load an etcher with 8-inch wafers located in the light-tight black boxes. The wafers are eventually made into chips for computer processors.

The surge was exemplified by Intel’s archipelago of campuses in Portland’s western suburbs. The chip giant may be headquartered in California, but it employs more people in Oregon than anywhere else in the world; Intel is the state’s largest private-sector employer. By April 2001, 16,547 of Intel’s 88,200 worldwide employees worked in Oregon, spokesman Bill MacKenzie said.

But even then, the bursting Internet bubble was undermining demand for PCs, servers and other silicon-powered devices. By the time the sector bottomed out this past January, 20.3 percent of Oregon’s semiconductor jobs were gone. (Even so, the state fared better than the nation’s semiconductor industry as a whole, which lost 37 percent of its peak-level jobs.)

Washington’s software industry, by contrast, lost relatively few jobs during the downturn, and resumed growing more than a year ago. Much of that stability can be traced to the monolithic dominance of Microsoft, which continued hiring throughout the recession.

Oregon’s chip sector finally began adding jobs earlier this year, but growth flattened late this summer and dipped last month, amid signs of a worldwide semiconductor glut.

IDC, a leading tech-industry research firm, recently predicted that worldwide semiconductor revenue will fall 2 percent next year, compared with 26 percent growth this year. The reason, said the Framingham, Mass.-based firm, is simple: “production plans that outstripped real demand.”

Other manufacturing

Oregon’s economy is more diversified than is generally recognized; silicon chips haven’t simply replaced wood chips. (In fact, Oregon’s wood-products sector still employs almost twice as many people as Washington’s; both states’ lumber industries have thrived during the nation’s housing boom.)

Oregon has sizable metals, machinery and food-processing industries. The state’s transportation-equipment sector has no single dominant player à la Boeing, but its truck, RV and railcar makers weathered the recession far better.

But all of those are manufacturing industries — and manufacturing jobs have been the slowest to recover. Nationwide, the number of manufacturing jobs is still 17 percent below its June 2000 peak; over that same period, private-sector service jobs are up about 2 percent.

Last month, durable-goods manufacturing jobs accounted for 9.3 percent of Oregon jobs and just 6.6 percent of Washington jobs; the national figure was 6.75 percent.

Tim Duy, director of the Oregon Economic Forum and an economics professor at the University of Oregon, noted that the manufacturing jobs underpinning Oregon’s economy are especially vulnerable to competition from overseas.

“I don’t care if it’s computer chips or potato chips,” Duy said. “You’re putting raw materials in one end and getting finished products out the other, and that can be done anywhere in the world.”

One way to defend against overseas competitors is to export. Oregon was the nation’s eighth-biggest exporter last year, with goods leaving the state equal to 8.6 percent of gross state product (GSP). Semiconductors, transportation equipment and machinery, and farm products were the leading exports.

But Washington was the nation’s top exporting state, with exports equal to nearly 14 percent of GSP. And just as Washington suffered more than most when the world economy went into the tank, forecasters expect it to benefit disproportionately from the sizzling Asian economies and the weak dollar.

So far this year, Oregon is leading the export race: Through October, Oregon exports are up 8.1 percent, while Washington’s are barely up at all. (Washington state forecasters say the flat figures are due entirely to declining airplane sales; exclude transportation equipment and exports are up 21 percent this year over last.)

In addition, Oregon has largely missed out on something not often factored into views of the regional economy: U.S. military expenditures.

Military and homeland-security spending has soared since the Sept. 11, 2001, terrorist attacks and the wars in Afghanistan and Iraq. From Boeing’s defense business to payrolls at area military bases, that spending has acted to stabilize the local economy.

Oregon, by contrast, has relatively few defense contractors and next to no military facilities — a legacy, some say, of having had pacifist Mark Hatfield in the U.S. Senate rather than hawkish Scoop Jackson.

“We have nothing like Puget Sound Naval Shipyard, Fort Lewis, McChord [Air Force Base] — just nothing,” said Joseph Cortright, an economist and consultant in Portland.

Growing population

Despite Oregon’s economic troubles, it continues to attract new residents. In fact, Cortright noted, people migrated to Oregon, and particularly metro Portland, during the recession: “Our unemployment rate is probably higher than it otherwise would be, because folks keep moving here.”

Oregon’s civilian work force rose fairly consistently throughout the late ’90s boom, the early ’00s bust, and today’s ragged recovery. In Washington, by contrast, the labor force shrank starting in mid-1999, and didn’t start growing again until October 2001.

Cortright sees several reasons for the disparity: Portland’s lower cost of living compared with Seattle; the relative ease of getting around, particularly without a car; and a general sense of livability and human scale.

Duy, the UO professor, noted that the Northwest as a whole remains an unusually appealing place to live — a long-run positive for the region, since talented people want to come here and are reluctant to leave.

“For some reason, if you lose your job in Washington or Oregon, you stick around and endure the time it takes to find a new job,” he said. “You just won’t leave. If you were in California and lost your job, you’d throw up your résumé and go wherever you had to.”

But for Oregon to strengthen its economy for the long haul, Duy added, it needs more knowledge-based industries — so that after attracting those smart, creative people, it can set them to productive, high-paying work.

In short, he said, Oregon ought to become more like Washington.

“I do think the intellectual-property, creative side of the high-tech industry is more recession-resistant,” he said. “The really important thing isn’t how the technology is made, but how it’s used.”

Drew DeSilver: 206-464-3145 or ddesilver@seattletimes.com