More economic weakness and leaner payrolls are in Oregon's future, the latest University of Oregon Index of Economic Indicators predicts.

More economic weakness and leaner payrolls are in Oregon's future, the latest University of Oregon Index of Economic Indicators predicts.

More than half the components evaluated monthly in the index declined in July, and the overall index fell 2 percent to 86.4 from a revised June figure of 88.1. The percentages are calculated on a base rate of 100 representing the condition of the state's economy in 1997.

Compared to six months ago, the UO Index dropped at an annualized 4.7 percent rate.

"The UO Index is currently following a pattern similar to that in the wake of the 2001 recession — a temporary improvement followed by renewed weakness, albeit of a lesser degree of the initial decline in nonfarm payrolls," said Oregon Economic Forum Director Timothy Duy. "Unless reversed quickly in the next month, recent behavior of the UO Index is consistent with renewed economic weakness again emerging in the next three to six months. If the pattern of the 2001 recession holds, this weakness would be less severe compared to declines registered in 2008 and early 2009."

While Oregon saw its growth fade during that period, the national economy didn't and eventually the state regained its footing.

"The National Bureau of Economic Research has never declared an end to the recession," Duy said Thursday. "The last time they spoke was in April and they said 'we need more information.' When we look at it from a historical perspective, we could have one long recession rather than two shorter ones."

The report noted initial jobless claims rose in July, crossing the 10,000 mark for the first time since January. Claims, already at an elevated level, have climbed slowly since March.

"While claims remain well below the highs of late 2008 and early 2009, the upward drift is a discouraging indicator of persistent economic weakness," Duy said.

Potential job losses would come in the hardest-hit areas, such as construction and wood products, because of tumbling prices. Real estate also is an area of concern, he said.

Residential building permits tumbled in July, reverting to the lowest level since September 2009. With first-time home-buyer tax credits no longer an incentive, housing markets are once again struggling.

New orders for nondefense, nonaircraft capital goods fell sharply in July, suggesting that the pace of the manufacturing recovery is waning.

Reach reporter Greg Stiles at 541-776-4463 or e-mail business@mailtribune.com.