Since early settlement, Oregon's natural resources have formed the basis of its economy. Vast forests have made lumber and wood products the leading industry in the state. Since World War II, however, the state has striven to diversify its job base. The aluminum industry has been attracted to Oregon, along with computer and electronics firms, which now constitute the fastestgrowing manufacturing sector. Development, principally in the "Silicon Forest" west of Portland, was expected to bring as many as 3,000 jobs a year during the mid- and late 1980s. Meanwhile, the trend in employment has been toward white-collar and service jobs, with agriculture and manufacturing holding a declining share of the civilian labor force. Tourism and researchrelated businesses growing out of partnerships between government and higher education are on the rise.
A large portion of manufacturing jobs outside the Portland area are in the lumber and wood products field, making them dependent on the health of the US construction industry. Jobs are plentiful when US housing starts rise, but unemployment increases when nationwide construction drops off. The cyclical changes in demand for forest products are a chronic problem, with rural areas and small towns particularly hard hit by the periodic closing of local lumber and plywood mills. State efforts at diversification in the 1990s were very effective, however, resulting in an astounding 79.8% growth in output from the electronics field of manufactures 1997 to 2000, the main component in an overall increase in output from manufactures of 43% across this period. Oregon was almost unique among the states in that growth in manufacturing, instead of services, led overall growth coming into the 21st century, with the state economy's annual growth rate accelerating from 5.6% in 1998, to 7.2% in 1999 to 10% in 2000. Oregon's economy was clearly headed for a correction, which came abruptly in the national recession of 2001, in which year manufacturing output fell 7.7% and the state economy contracted overall -1.1% (one of the few states to register negative growth for the year). As of the third quarter 2002, the personal bankruptcy rate in Oregon was the 12th highest in the country, and foreclosures were running at rates not seen since the mid-1980s. By the end of 2002, employment in the electronic products and industrial machinery manufacturing sectors (which produce semiconductors and computers) had fallen 3%, and Oregon was posting the 2nd-highest unemployment rate in the country (7%).
In 2001, Oregon's gross state product gross state product was $120.4 billion, the 27th largest among the states, to which manufacturing contributed $30.6 billion (down 9.2% from the peak in 2000); general services, $21.8 billion; trade, $18.5 billion; financial services, $17.6 billion; government, $14.65 billion; transportation and public utilities, $7.75 billion, and construction, $5.9 billion. The public sector in 2001 constituted 12.2% of gross state product, close to the 12% average for the states.