Continuing high unemployment rates, weak economic growth, and stock market volatility are all contributing to concern and uncertainty about the national economy. But how’s Oklahoma faring in these turbulent times? I recently spoke with Chad Wilkerson, the Oklahoma City Branch Executive of the Federal Reserve Bank of Kansas City about conditions in the Sooner State. This is an edited and abridged transcript of our conversation on August 24, 2011.
David Blatt: How would you characterize the current state of Oklahoma’s economy?
Chad Wilkerson: I would say things are still pretty solid for us. We’ve had fairly solid job growth over the past year. Unemployment’s down to 5.5 percent, and in some parts of the state… it’s less than 5 percent.
However, I think that measure may be overstating the degree to which we’ve recovered from the recent recession. There’s been a fairly sizable number of people drop out of the labor force in the last couple of years. This has been interesting me of late because of the fact that Oklahoma’s unemployment rates are down to a level that many economists consider full employment levels, 5 – 6 percent. But if the same share of the adult population was looking for jobs today as in 2007, our unemployment rate for the state would be a little over 8 percent. That’s probably too high because I think the share of the population that was looking for jobs in 2007 was also a bit abnormal – the boom was going on, perhaps too many people were looking for jobs from a productivity standpoint. So our actual unemployment is probably somewhere between 5 and 8 percent. We’re probably not quite fully recovered, but we’re still doing much better than the nation.
DB: We’ve seen that manufacturing has actually been a bright spot over the past year. How do you account for the increase in manufacturing jobs?
CW: I think there are a couple of things. One is, there was a huge decline in manufacturing jobs during the recession, so part of it is a bounce-back effect. There’s more room and need to bounce back in manufacturing. Another is that much of the global economy has continued to grow, and in emerging markets grow solidly, so exports have been very strong – that’s boosted manufacturing. In our region, and in Oklahoma specifically, those manufacturers that have done the best, especially in recent months, have been those associated with the energy and agricultural markets, which continue to be very strong. Our region’s manufacturing survey has held up better than other Fed regional surveys that have been getting a lot of press recently. A big reason for that is our high concentration of energy and agriculture-related manufacturing.
DB: How vulnerable is Oklahoma to the softening of the national economy?
CW: I think the experience of a few years ago may be the best analogy. We continued to grow for 3 to 4 quarters after the nation started to decline, primarily because energy activity was still strong. Despite the recent slowing in some of the national economic indicators, some of the market turmoil in the last couple of weeks, oil prices have stayed highly profitable. Natural gas prices have stayed steady at around $4, which isn’t high enough for long-term growth, but still is not a horrible price. So, as long as energy stays strong and the national slowing stays moderate, we should hold on fairly well.
DB: Final question – a recent report that came out of the Kansas City Federal Reserve Bank referred to the ongoing weakening of economic and social conditions among low and moderate-income populations. What factors do you see contributing to continued stress among lower-income households?
CW: Higher education levels have had unemployment stay lower than groups with lower educational attainment. That’s typically fairly highly correlated with incomes. Some of the rising prices that we’ve seen over the past year, much of that has been driven by food and energy prices. Energy prices have come down a little bit in the past couple of months but food prices remain high, and of course that’s a much higher share of low and moderate-income families’ monthly purchase basket. So that’s been a strain, and so long as energy prices and food prices stay high that could continue to be more of a strain for groups that have a higher share of their income devoted to those goods.
This is the second in a series of OK Policy interviews with experts on the economy. Click here for our interview with Lynn Gray of the Oklahoma Employment Security Commission