federal reserve bank of kansas city is oklahoma’s …/media/files/publicat/... · 21.11.2019 ·...

FEDERAL RESERVE BANK OF KANSAS CITY

Is Oklahoma’s Economy Still Growing?Oklahoma State Senate RetreatStillwater, OKNovember 21, 2019

Chad WilkersonVice President and Oklahoma City Branch Executive*The views expressed herein are those of the presenter only and do not necessarily reflect the views of the Federal Reserve Bank of Kansas City or the Federal Reserve System.

FEDERAL RESERVE BANK OF KANSAS CITYFEDERAL RESERVE BANK OF KANSAS CITY

The “Fed” consists of three main entities:• Board of Governors: 7 members appointed by U.S. President• Federal Reserve Banks: 12 total; semi-independent by design• Federal Open Market Committee: 19 members; 12 voting

Primary responsibility areas:• Monetary policy• Bank regulation • Financial services

Structure & Functions of the Federal Reserve


• Functions and purposes ~ 50 staff• Research on U.S. and Oklahoma economies; energy sector and business survey focus• Examinations of Oklahoma financial institutions (~45 banks, ~175 holding cos.)• Community development programming for low and moderate income groups, workforce focus• Economic education and public outreach programming

• 2019 OKC Fed Branch Board of Directors• Clint Abernathy (chair), Owner, Abernathy Farms, Inc., Altus• Susan Chapman Plumb, Chair & CEO, Bank of Cherokee County, Tahlequah• Walt Duncan, President, Duncan Oil Properties, Oklahoma City• Tina Patel, Co-Owner & CFO, Promise Hotels, Tulsa• Chris Turner, President & CFO, First State Bank, Oklahoma City• Katrina Washington, Owner/Broker, Stratos Realty, Oklahoma City• Dana Weber, Chair & CEO, Webco Industries, Sand Springs

The Oklahoma City Branch of the Federal Reserve Bank of Kansas City


Board of Governors• Jerome H. Powell, Chairman• Richard H. Clarida, Vice Chairman• Randal K. Quarles, Vice Chairman of Supervision• Lael Brainard• Michelle W. Bowman• Open• Open

Reserve Bank Presidents• John C. Williams, New York, Vice Chairman• James Bullard, St. Louis• Charles L. Evans, Chicago• Esther L. George, Kansas City• Eric Rosengren, Boston• Patrick T. Harker, Philadelphia• Robert S. Kaplan, Dallas• Neel Kashkari, Minneapolis• Loretta J. Mester, Cleveland• Thomas I. Barkin, Richmond• Raphael W. Bostic, Atlanta • Mary C. Daly, San Francisco

*Permanent voters in bold; 2019 rotating voters in red; 2020 rotating voters in blue

The Federal Reserve’s Role in Monetary Policy• Dual Mandate from U.S. Congress:

1) Maximum employment2) Price stability

• Federal Open Market Committee (FOMC):


U.S. Economic Outlook and Monetary Policy


Source: U.S. Bureau of Economic Analysis

Contributions to Percent Change in Real GDP

Oct. FOMC: “Economic activity has been rising at a moderate rate…household spending has been…strong”

1.1 1.4

-4.7

4.8

1.5

3.5

-0.4

3.1

1.1

-1.0

4.4 4.1

-1.5

2.92.0

4.6

-3.0

-1.0

-5.7

0.0

4.8

1.92.9

5.1

-3.0

0.7 1.22.0

-6

-4

-2

0

2

4

6

8

-6

-4

-2

0

2

4

6

8

Total GDP Consumerspending

Residentialinvestment

Businessinvestment

Exports Imports Governmentspending

Q4 2018Q1 2019Q2 2019Q3 2019

Percent change from the previous period, SAAR


Oct. FOMC: “The labor market remains strong…the unemployment rate has remained low.”

Sources: U.S. Bureau of Labor Statistics, FOMC

U.S. Unemployment Rate

0

2

4

6

8

10

12

0

2

4

6

8

10

12

2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 LongerRun

U.S. unemployment rateRangeMedian

PercentCurrent (Oct. 2019): 3.6%

Sept FOMC Forecast



Oct. FOMC: “Overall inflation and inflation for items other than food and energy are running below 2%.”

PCE Inflation Index

-1

0

1

2

3

4

5

-1

0

1

2

3

4

5

2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 LongerRun

PCE InflationRangeMedian

PercentCurrent Overall PCE (Sept. 2019): 1.3%Current Core PCE (Sept. 2019): 1.7%

Sept FOMC Forecast


Federal Funds Rate Year-End Target


Oct. FOMC: “In light of… global developments… muted inflation… the [FOMC] decided to lower the… rate.”

012345678

012345678

2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 LongerRun

Fed Funds RateRangeMedian

PercentCurrent Target: 1.50-1.75%

Sept FOMC Forecast


OklahomaEconomic Outlook


-6-5-4-3-2-101234

-6-5-4-3-2-101234

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Percent change, year-over-year

U.S.OK

OKC MSA

Tulsa MSA

Sources: U.S. Bureau of Labor Statistics, NBER recession shading

Nonfarm Payroll Employment Growth

The pace of Oklahoma job growth has slowed steadilyin 2019, and is now up only slightly from a year ago


Sources: U.S. Department of Labor, NBER recession shading

UI Claims Weekly AverageSeasonally Adjusted

Weekly initial claims for unemployment insurance have also been running at nearly 2015-16 levels in 2019

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

2004 2006 2008 2010 2012 2014 2016 2018

Number Number

U.S., left

OK, right


13Source: OK Tax Commission

Oklahoma and Metro Sales Tax Revenues

State sales tax receipts are now below year-ago levels, though sales in the 2 large cities have picked up a bit

-15

-10

-5

0

5

10

15

20

-15

-10

-5

0

5

10

15

20

Q1-08 Q1-09 Q1-10 Q1-11 Q1-12 Q1-13 Q1-14 Q1-15 Q1-16 Q1-17 Q1-18 Q1-19


OK OKCTulsa

Note: Q4 2019 tax data is shown through October 2019.


Sources: U.S. Bureau of Labor Statistics/Haver Analytics

-6-4-2024681012

-10-8-6-4-202468

1012

Constr. Transp. Edc. &Health

Trade FedGovt.

State &LocalGovt.

Leis. &Hosp.

Prof. &Bus.

Services

Fin. Act. Mfg. Mining

U.S.OKOKC MSATulsa MSA


Job Growth by IndustryOctober 2019

The slower state job growth in 2019 has been driven mainly by job losses in energy and related sectors


Industry Share of GDP, 2018


Oklahoma’s main difference from the nation in terms of industrial structure is its very sizable energy sector

1.7

14.5

0246810121416

02468

10121416

Govt. Mining Whlsl.Trade,

Transp. &Util.

RealEstate

Mfg. Prof. &Bus.

Services

Edc. &Health

Services

Leisure &Hosp.

Retail Fin. &Insurance

Const. Info. Ag.

U.S. Oklahoma

Percent of total GDP

15


Sources: U.S. Bureau of Economic Analysis/Haver Analytics

Mining Sector Share of Oklahoma Economic Activity

Oil and gas’s share of Oklahoma’s economy has fluctuated over time, but is currently still very high

0%

5%

10%

15%

20%

25%

0%

5%

10%

15%

20%

25%

1963 1968 1973 1978 1983 1988 1993 1998 2003 2008 2013 2018

Percent

GDP

Employment

PersonalIncome


Sources: EIA, Federal Reserve Bank of Kansas City Energy Survey

Marginally profitable oil prices since spring, plus low natural gas prices, have contributed to slower activity

Oil & Natural Gas Profitability and Prices

0

20

40

60

80

100

120

0

1

2

3

4

5

6

7

8

2014 2015 2016 2017 2018 2019

Henry Hub, leftNatural Gas: Avg. Profitable Price, leftWTI, rightOil: Avg. Profitable Price, right

Oil prices ($/barrel)Natural gas prices ($/mmbtu)


Sources: Baker Hughes, U.S. Energy Information Administration

Note: Employment is for total mining and logging, which in Oklahoma is almost completely oil and gas related. Production is shown as a 3-month moving average.

Oklahoma Oil & Gas Rig Count, Employment, and Production

Firms have also been able to find considerably more oil and gas with fewer rigs and workers than in the past

0

25

50

75

100

125

150

175

200

0

25

50

75

100

125

150

175

200

1990 1994 1998 2002 2006 2010 2014 2018

Index May-90=100

Rig Count

Production (BOE/day)Employment


Source: Baker Hughes/Haver Analytics

Oklahoma’s percentage drop in rigs is easily the largest among the top 8 oil- and gas-producing states

October 2019 Rig Count Change from a Year Ago

-82

-58%

-120%

-100%

-80%

-60%

-40%

-20%

0%

20%

-120

-100

-80

-60

-40

-20

0

20

Texas New Mexico Louisiana North Dakota Oklahoma Wyoming Pennsylvania Colorado

Number change, left

Percent change, right

# of rigs Percent


Sources: FRBKC Ag Credit Survey

Oklahoma Farm Income and Farmland Values

-20

-15

-10

-5

0

5

10

15

20

020406080

100120140160180200

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Farm Income, left

Farmland Value, right

Diffusion Index

Expectations


In agriculture, incomes have continued to decline, but by less than in recent years, and land values have held

20


Source: FDIC

0

5

10

15

20

25

30

35

0

5

10

15

20

25

30

35

Q22008

Q22009

Q22010

Q22011

Q22012

Q22013

Q22014

Q22015

Q22016

Q22017

Q22018

Q22019

U.S.

OK

Percent Percent

Share of Banks Not Making a ProfitCommercial Banks

Banking conditions in Oklahoma remain very good



01234567891011

0123456789

1011

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Percent

U.S.

OKOKC MSA

Tulsa MSA

And despite slower job growth and rising UI claims this year, unemployment remains low across the state

Unemployment RatesSeasonally Adjusted

22


U.S. vs. Oklahoma population growth, 1970-2018

Note: Annual BEA population data used through 2017, Census population data used for the most recent year.

-2

-1

0

1

2

3

4

-2

-1

0

1

2

3

4

1970 1976 1982 1988 1994 2000 2006 2012 2018


U.S.

OK

Sources: Bureau of Economic Analysis, Census Bureau/Haver Analytics,Population and Housing Unit Estimates – Census Bureau and authors’ calculations

One reason unemployment is low is because more people have been moving out than moving in recently

Net Domestic Migration by County, 2015-2018


Oklahoma Net Domestic Migration of Those with a Bachelor's Degree

or More by Age

Sources: U.S. Census Bureau ACS 1-year sample Public Use Microdata, IPUMS-USA, authors' calculations.

Highly educated Oklahomans of most age groups have been leaving the state, especially for Texas

21 Note: Metro area timeseries data was harmonized in IPUMS using the 2013 OMB delineations. Metro level data not available prior to 2005.

States Gaining the Most Oklahomans with a Bachelor's or More on Net

2013-2018

-12,000

-10,000

-8,000

-6,000

-4,000

-2,000

0

2,000

4,000

6,000

-12,000

-10,000

-8,000

-6,000

-4,000

-2,000

0

2,000

4,000

6,000

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Under 2525 to 3435-54Over 55Total with Bachelor's or More

Number of people

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Texas Colorado Washington Virginia Arkansas

Number of people


Sources: U.S. Census Bureau ACS 5-year estimates, ACS 1-year sample Public Use Microdata, IPUMS-USA, authors' calculations.

Consequence: Educational attainment is growing less Silver lining?: People keep coming, just more have left

Educational Attainment as the Share of Population Over 25 with a Bachelor's or More

28.8

23.5

28.126.2

31.3

37.3

30.9

24.8

29.628.7

33.7

39.4

2022242628303234363840

2022242628303234363840

U.S. Oklahoma OKC Texas DFW Colorado

2013 2017

Percent of Population

Oklahoma Domestic Migration Flows of Those with a Bachelor's or More

-30000-25000-20000-15000-10000-5000050001000015000200002500030000

-30000-25000-20000-15000-10000

-50000

50001000015000200002500030000

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Inflow Oklahoma Outflow OKC MSAInflow OKC MSA Outflow Oklahoma

Number of people


* Local Government Sector

Note: Only includes industries with data disclosed for both 2013 and 2018 that grew faster than the nation. A sizeable portion of the growth in aerospace product and parts manufacturing (NAICS 3364) jobs in Oklahoma in recent years appears to be due to the reclassification of several thousand jobs in air transportation (NAICS 481) to that sector.

Sources: Bureau of Labor Statistics QCEW data and authors' calculations

While Oklahoma job growth has lagged the nation, some industries in the state have outpaced the U.S.

Oklahoma Job Growth vs. U.S., 2013-2018

Rank Industries Adding the Most Jobs OK Empl. Change

OK Empl. % Change

U.S. Empl. % Change

Location Quotient

2013

Location Quotient

2018

Avg. Wage 2018

1 Warehousing and storage 8,148 153% 61% 0.7 1.1 $34,6942 Aerospace product and parts manufacturing 6,314 94% 1% 1.2 2.4 $88,4643 Gambling industries* 3,729 21% -13% 11.1 16.4 $36,1634 Executive, legislative and general government* 3,439 12% 3% 0.9 1.1 $40,0845 Outpatient care centers 3,074 48% 37% 0.8 0.9 $51,7036 Management of companies and enterprises 2,647 16% 13% 0.7 0.7 $83,5117 Other amusement and recreation industries 2,324 25% 18% 0.7 0.8 $16,7718 Computer systems design and related services 2,018 27% 25% 0.4 0.4 $75,5169 Accounting and bookkeeping services 2,011 15% 8% 1.2 1.4 $61,444

10 Offices of other health practitioners 2,008 26% 23% 0.9 1.0 $40,019


• The national economy continues to grow, with low unemployment, but business investment has slowed

• Oklahoma’s economy has slowed in 2019, as lower oil and gas prices hurt, but unemployment remains very low

• A longer-term trend worth watching is the state’s switch in net domestic migration flows in recent years, as more highly educated Oklahomans have been moving out

• At the same time, some industries in the state have continued to thrive, many of which pay good wages

Summary


Questions?

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