GREATER OKLAHOMA CITY ECONOMIC FORECAST€¦ · 2017 GREATER OKLAHOMA CITY ECONOMIC FORECAST OKLAHOMA CITY METRO Prepared by Russell Evans Executive Director, Economist Steven C

2017

GREATER OKLAHOMA CITY ECONOMIC FORECAST

OKLAHOMA CITY METRO

Prepared by

Russell EvansExecutive Director, EconomistSteven C. Agee Economic Research and Policy InstituteOklahoma City University

Eric LongResearch EconomistEconomic Development DivisionGreater Oklahoma City [email protected]

TABLE OF CONTENTS

Overview & Introduction ............................................................................................ 1

The U.S. Economic Outlook ...................................................................................... 11

The Oklahoma Economic Outlook ......................................................................... 14

Oklahoma City MSA Economic Outlook ................................................................ 21

OKC MSA Population and Per Capita Income ..................................................... 22

OKC MSA Nonfarm Employment ............................................................................ 22

OKC MSA Private Employment ................................................................................ 23

OKC MSA Mining Employment ................................................................................ 24

OKC MSA Manufacturing Employment .................................................................. 24

OKC MSA Retail Employment .................................................................................. 25

OKC MSA Health Services Employment ................................................................. 26

OKC MSA Leisure Services Employment ................................................................. 26

OKC MSA Labor Market ........................................................................................... 27

Appendix A: U.S. Economic Outlook Summary Table .......................................... 29

Appendix B : Statewide Employment Table .......................................................... 30

Appendix C: Oklahoma Quarterly GDP, Income and Population ..................... 32

Appendix D: Oklahoma/Oklahoma City MSA Pop, Inc, & Gross Product ......... 33

Appendix E: Oklahoma City Employment Outlook Table .................................... 34

12017 ECONOMIC FORECAST

The Greater Oklahoma City Economic Forecast provides a comprehensive analysis of the national, state and metro economies. It details historic trends, a snapshot of the current situation, as well as a forecast for 2017.

For the Oklahoma City metro, 2016 can be characterized as a book with two entirely different stories. The reader was encouraged by an optimistic beginning, but disappointed by the outcomes of the second half of the book. The early part of the year helped to prop up overall annual job growth of about half a percent or 3,100 jobs. The 2017 sequel book may begin with some of the same disappointments carried over from late 2016, but have an entirely different and uplifting ending. Metro job growth in 2017 is expected to grow by 0.7 percent or 4,200 jobs with much of that growth coming by the end of the year.

While total job growth was relatively flat in 2016, this was actually viewed as a positive given the downturn in the oil and gas sector. Historically, the region and state have performed much worse in times of declining oil prices. The avoidance of overall job declines can, in part, be attributed to increased diversification within the Greater Oklahoma City regional economy.

One specific example highlights how soft job growth truly was in 2016 for Oklahoma City. Comparing the average monthly “Not Seasonally Adjusted Nonfarm Employment” for the first half of the year against the second half of the year is quite revealing. In large part due to seasonality, the average monthly Nonfarm employment for the second half of the year is almost always larger than the first half. However in 2016, for only the second time in the past 26 years, average monthly Nonfarm employment for the last half of the year was lower than the first half. Oklahoma City is expected to carry this dampening of job growth into

the first part of 2017. But there are already signs of optimism. This will lead to an economic reality that feels distinctively healthier by the end of the year in 2017.

In 2016, unemployment rates for the state and the Oklahoma City metro ticked upward as compared to the nation. September 2016 was the first time in 26 years that the state’s unemployment rate (5.0 percent) topped the nation (4.9 percent). This was a combination of economic hardship at the state level, but also relative improvement for the national economy. In comparison, while Oklahoma City also experienced an increase in unemployment, it remained competitive with other large metros. Oklahoma City MSA has been among the 25 lowest unemployment large metros (over one million population) for six years (about 72 consecutive months). The Oklahoma City metro ended 2016 with an annual average unemployment rate for the year a little more than four percent, with monthly unemployment rates ranging as low as 3.6 percent and as high 4.7 percent.

Population Growth Continues To Be A Major Story For Oklahoma City

From 1970 to 2005, the Oklahoma City metro enjoyed a 1.1 percent annual growth rate, adding approximately 430,000 people during those three and a half decades. However, since 2005, annual growth accelerated to a 1.6 percent annual growth clip. Currently, the Oklahoma City metro population is approximately 1.38 million. In the next five years, the metro is expected to grow even faster at 1.66 percent annually, reaching 1.5 million by 2021. Since 2010, the Oklahoma City MSA is the 10th fastest growing large metro in the country (more than 1 million population) and has grown more than twice as fast as the nation. Given current growth rates, the Oklahoma City metro will exceed 2 million population before the year 2040.

OKLAHOMA CITY OVERVIEW

2 2017 ECONOMIC FORECAST

Job Growth from Chamber-Assisted Companies

2016 brought about the first year of a five-year economic development program called Forward Oklahoma City V. This is the fifth iteration of the Forward Oklahoma City campaign that has provided long-range planning to the region’s economic development initiatives during the past 20 years.

As part of that program, overall chamber metrics are tracked for Chamber-assisted companies in a number of different areas including new start-up companies assisted, job growth from existing companies, new to market firms, wages, capital investment, and growth in tax base. In 2016, Chamber-assisted companies announced plans for the creation of 3,835 jobs with an annual salary of $38,898. In addition, those same companies announced more than $225 million in capital investment. The tax revenues generated from the incremental growth in employment and capital investment is estimated at more $19 million. While the overall numbers were down from last year in many of these areas, the region’s economic development efforts remain a key component to the region’s recovery.

In October 2016, the GE Global Research Center held the grand opening of its new facility at 300 NE 9th (just south of the Oklahoma School of Science and Mathematics). The company’s first ever research facility dedicated to oil and gas technologies will eventually lead to 130 high-tech jobs, with room for potentially more growth. It is anticipated to attract international attention from oil and gas partners around the world. Research from this facility will help reduce costs and expand opportunities for oil and gas companies.

In July 2016, Boeing opened its new engineering, research and development lab facility in Oklahoma City. The lab will design, test and apply modernization technologies for legacy aircraft such as the C-17 Globemaster III and the Airborne Warning and Control System (AWACS). The 300,000-square-feet structure, which is

larger than the footprint of five football fields, is the newest addition to Boeing’s Oklahoma City site, headquarters to the company’s Aircraft Modernization and Sustainment business. The lab expands the company’s ability to maintain and upgrade existing aircraft. These capabilities help the United States and other Boeing customers realize greater value from their aircraft while maintaining readiness, technological relevance and aircraft affordability for many years after initial delivery. The lab represents 800 additional jobs in the Oklahoma City aerospace industry. At the end of 2016, Boeing employed approximately 2,600 in the Oklahoma City metro.

National Litigation Law Group announced plans to add 100 new jobs in Oklahoma City, eventually adding 500 jobs over the next five years. About a third of the jobs are attorney positions and the rest are for paralegals as well as other administrative, customer service and support staff. The firm was founded about two years ago and has about 100 employees, but is growing at a rate of around 10 to 15 percent each month. The firm offers legal services to its clients with debt problems for a fixed monthly rate and has represented nearly 200,000 clients in the past two years.

In June 2016, Progrexion, a Utah based credit-repair company, opened an office in the OKC Works building on West Reno in Oklahoma City. During the next five years, approximately 500 people will be employed at the facility. This is Progrexion’s eighth new location in the past seven years. It also has offices in Idaho and Arizona.

M-D Building Products announced an expansion to its headquarters location at 4101 N. Santa Fe Ave., in Oklahoma City. The company manufactures and distributes weatherization products under its own brand name. Other products include the Shrink ‘n Seal window insulating kit and the Smart Tool digital level. M-D is planning to add 105 jobs in the next three years. The company will also construct a 100,000-square-foot addition to its 80,000-square-foot headquarters. The $11.9 million dollar project, including new equipment purchases, is expected


to be completed in the summer of 2017. The firm employs about 500 people in the metro with eight other manufacturing and distribution sites nationwide.

Retail Successes

Challenges in the oil and gas sector contributed to a small decline in taxable retail sales for both the state of Oklahoma as well as the Oklahoma City metro economy. For the seven county Oklahoma City metropolitan area, 2016 total taxable retail sales declined by 4.9 percent from 2015 totals. However, at approximately $20.7 billion, the Oklahoma City metro accounts for about 42 percent of the taxable retail sales for the entire state of Oklahoma. The city limits of Oklahoma City account for nearly half of the 1.38 million population of the Oklahoma City MSA. This makes the City of Oklahoma City the driving force for retail trade in the metro as well as the state.

Oklahoma City continues to focus upon destination retail that will increase sales tax revenue for the region. While Oklahoma City itself experienced some slight declines in month over month sales tax revenue toward the end of 2016, the metro area overall continues to be relatively stable in terms of taxable retail sales. Retail openings at Chisholm Creek development near John Kilpatrick Turnpike included Fuzzy Taco’s, Republic, Yokozuna, Sidecar, Polished and Longevity Health Beauty & Wellness. Quail Springs Mall will be adding Lifetime Fitness to the mix where the former Macy’s building

resided. It will include 181,400 square feet of enclosed space including indoor tennis courts, exercise equipment, basketball courts, exercise studios, daycare facilities and two health food areas.

The Outlet Shoppes of Oklahoma City continues to see an uptick in sales and brought in new retailers such as Zales, Croc’s and Old Navy Outlet with several more tenants opening in 2017. Classen Curve has several boutique retailers to add to the lineup of the tenants which include Lily Rain, Rustic Cuff and CycleBar (opening in February 2017). Penn Square Mall added White Barn, a new concept from Bath & Body Works, along with The Fix and Gold Elements. Other changes included renovated space for Apple and Coach.

Downtown Oklahoma City has experienced a surge in new coffee shops and eateries throughout the area. A few of the new retailers include Hank’s Coffee, Okay Yeah Co., Hatch, Barrios, Twisted Spike Brewery, and the reopening of 200 Park for Her.

In September 2016, shoppers celebrated the opening of the first Trader Joe’s location in the Greater Oklahoma City region.

Continued Progress on MAPS 3 Projects

MAPS 3, a 10-year, $777 million construction program funding eight community projects, experienced notable progress during the past year. The projects are funded on a pay-as-you-go basis through a seven-year, 1-cent-sales tax. Funds for projects are accumulated over time and construction cannot begin until all of the funds are available. This enables the city to avoid the cost of using debt to finance projects. The program continues to be on schedule. Current timelines for select projects are as follows:

70-acre Downtown Public Park

Construction will ramp up in 2017. The north section of the park will extend from the new Oklahoma City Boulevard south to Interstate 40, and from S Hudson Avenue east to S Robinson Avenue. The south section of the park is bordered


on the north by I-40, extending south to SW 10 between S Walker Avenue and Robinson, and to SW 15 between S Harvey Avenue and Robinson. The park will include everything from a café and sports facilities to nature trails.

Modern Streetcar/Transit Groundbreaking for the $130 million OKC Streetcar is scheduled for Feb. 7. Santa Fe Railroad station is under construction. Installation of the rail and other infrastructure should take about two years. Brookville Equipment Corporation out of Pennsylvania is building the modern street cars. The OKC Streetcar will operate on rails flush with the street in regular traffic lanes, just like a bus or a car. Each streetcar will have a dedicated driver.

Senior Health and Wellness Centers Two of the four 40,000-square-foot Senior Health and Wellness Centers will open in 2017. The first, at 11501 N. Rockwell Ave., will open in February. The second, 4021 S. Walker Ave., is expected to open later in the year.

Oklahoma River improvements The $45 million whitewater rafting and kayaking center held their grand opening on May 7, 2016 and offers rafting, kayaking and canoeing for all skill levels. The facility was used for the Olympic Team Trials in May 2016.

Oklahoma State Fairgrounds improvements The Bennett Event Center opened at State Fair Park on Jan. 5, 2017. The 279,000-square-foot, $58-million dollar expo building provides more than six acres of contiguous space under its roof and can host large exhibitions and private events, including banquet space for up to 2,500 people. Promoters of large events have historically bypassed Oklahoma City because it lacked the necessary space under one roof. The metro and state should benefit economically from the new expo building for years to come.

Convention Center The site for the $287-million convention center will be located just south of the Chesapeake Arena, running south from SW 4th Street to SW 7th Street, between Shields Boulevard and Robinson Ave.) Design of the Oklahoma City Convention Center should be complete by the end of 2017, with construction beginning early in 2018. A 2020 opening should coincide with completion of the north half of the new 70-acre park and a streetcar system connecting the park and convention center with Bricktown, Midtown, Automobile Alley and the Central Business District.

The initiative has also invested more than $57 million into sidewalks and trails across the community. To get the most up-to-date information on MAPS 3 visit www.okc.gov/maps3.

MAPS 3 will be the culmination of more than a decade of development, implementation and construction. These projects will help to shape the quality of life for Oklahoma City residents and visitors for years to come.

The following economic forecast is based upon historic growth models and does not necessarily take into account unanticipated growth from relocations or “new-to-market” firms. In addition, announced expansions of existing companies may take place over a multi-year timeframe and not be fully recognized in the next year. Announced projects that have not taken place are not reflected in forecasted job numbers.


ECONOMIC FORECAST INTRODUCTIONBoth empirical and anecdotal evidence confirms Oklahoma’s economic reality as an energy state. This reality, however, occasionally leads casual observation to give too much credit to the state’s oil and gas sector in determining economic outcomes. Such was the case in 2016. Energy industry activity peaked in the fall of 2014 and contracted sharply through the fall of 2015. The pace of contraction slowed in early 2016 and formed a bottom by summer. Industry activity has since improved modestly with cautious optimism guiding expectations for 2017. The Bank SNB Oklahoma Energy Index created and maintained by Oklahoma City University in partnership with the Oklahoma Independent Petroleum Association summarizes the state’s recent oil and gas experience.

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Figure 1: Bank SNB Oklahoma Energy Index: 2000-2016


Although it has been said repeatedly, it is worth emphasizing again the severity of the industry contraction. The bust was greater in both magnitude and duration than the experience of the great recession and the influence of an inventory of drilled but uncompleted wells combined with only modest growth in global energy demand make an imminent return to boom conditions unlikely. Rather, the expectation is that 2017 marks a year of persistent but modest expansion.

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Figure 2: Energy Index Components, Y/Y Growth

Comparing the fall of 2014 to subsequent years illustrates the depth of the contraction. Through November 2015, all index components were down significantly led by a 61 percent drop in rig activity, commodity prices and Oklahoma equity valuations that fell nearly by half, and employment contractions of 22 percent in energy employment and 32 percent in energy support employment. In contrast, moving from November 2015 to November 2016 saw natural gas prices rise by 22 percent and oil prices by 8 percent. Oklahoma equity valuations were up 19 percent. Employment is still down year-over-year, but up from the lows set in the summer of 2016. The weakness experienced in local economies in 2016 cannot be explained by energy sector weakness alone.

U.S. economic activity as measured by gross domestic product can be calculated either by adding together expenditures on final goods and services or by adding together all income and profit streams (the expenditure and income approach to calculating GDP). Taking the expenditure approach, GDP can be decomposed into sales to domestic purchasers (households, firms, and governments), sales to foreign purchasers (net exports) and internal sales to the producer (change in private inventories). As GDP is measured at the point of production rather than the point of sale, goods produced but unsold are treated as imputed purchases to the producer who holds product in inventory to be sold at a later date. Inventories


generally follow a natural ebb and flow cycle as inventory accumulation in one period prompts a slowdown in the next period’s production as producers work to draw down existing inventory before rebooting the production process. In periods of recession, however, working through existing inventory can take longer, leading to a prolonged period of suppressed production. The U.S. economy experienced an inventory cycle consistent with a modest recession that began in the second quarter of 2015 and continued through the second quarter of 2016. The average annual rate of growth in the U.S. economy over this period was just 1.5 percent.

Heading into 2016, the baseline expectation was for slow U.S. growth, but not nearly as slow as recorded in the first half of the year. Inventory drawdown in the latter half of 2015 was expected to yield modest production increases in early 2016. Instead, production slowed further as firms worked through existing inventory. U.S. economic growth in the first half of the year struggled to top 1 percent and was not expected to reach 2 percent for the year even with some second half strength.

The local impact of a marked slowdown in national conditions when already fully exposed by a regional oil bust mirrored that of a mild recession. That is, rather than hold steady with energy industry activity statewide labor market and fiscal outcomes experienced a second round of contractions.

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Figure 3: Composition of U.S. Growth – Inventory Cycle Highlighted


In both the state and metro economy, the effect of the inventory cycle headwind was stronger than any developing tailwind from a stabilizing oil and gas sector. The result was a second wave of labor market challenges. Private payroll employment growth at both the state and metro level stalled with peak activity in the oil and gas sector. Statewide employment contracted modestly through 2015 while Oklahoma City metro employment moved laterally (highlighted as the commodity cycle in figure 4). As 2015 turned to 2016, both the state and metro were in an economically weakened state when confronted with a recession-like inventory adjustment cycle. The effect of which was declining payroll employment in both economies (highlighted as the inventory cycle in figure 4).

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Figure 4: Oklahoma and Oklahoma City MSA Private Employment


The dual cycle influence is also seen in average weekly earnings data. The effect of the commodity cycle was to force from the labor market disproportionately high wage jobs in the oil and gas sector causing the all private sector average to contract. The effect of the inventory cycle, however, was to force from the labor market a mix of low income jobs from the goods producing (primarily manufacturing) sector causing the all private sector average weekly earnings to expand. While initially seen as a source of economic strength, the growth in average wages belied a labor market contraction.

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Figure 5: Oklahoma and Oklahoma City MSA Average Weekly Earnings


The impact of the inventory cycle following closely the bottom of the commodity price cycle exerted different impacts in the goods and services producing sectors of the economy. In the services sectors, the commodity cycle dampened the rate of growth (flattened the trend) through 2015 before yielding nearly all growth in 2016. In the goods producing sectors, employment tried to hold a bottom in late 2015 only to be turned loose again to the downside in 2016. Again, the Oklahoma experience in both of these sectors is very similar to what was experienced in both of the last two national recessions.

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Figure 6: Oklahoma Goods and Services Sector Employment

The macroeconomic theme of 2016 was the pronounced, recession-like inventory cycle. That the inventory cycle followed so closely the energy sector bust left energy states like Oklahoma exposed to the full effect of national weakness. Indeed, the 2016 experience underscores how fortunate the state was to avoid an outright recession when so economically vulnerable.


THE U.S. ECONOMIC OUTLOOKEconomic activity is expected to stabilize in 2017, expanding at an annual rate of just over 2 percent consistent with the post-recession recovery, but still disappointing compared to pre-recession activity. The age and maturity of the current expansion indicate some risk of a developing recession, but moving out of the inventory cycle discussed previously should push any economic weakness into 2018 or beyond. Additional risks include lingering global economic weakness, political and regulatory uncertainty associated with an administration change and rapidly shifting geopolitical relationships (particularly with regard to trade relationships).

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Figure 7: U.S. Real GDP


The U.S. labor market continues its slow but persistent move towards full employment. Improving labor market conditions likely signal at least two interest rate moves by the Federal Reserve in 2017. Importantly, a labor market at or near full employment also suggests that any large infrastructure initiative from the new administration would have a larger price effect (inflation) than employment effect (job creation). The U.S. labor market is expected to create an average of 175,000 new nonfarm jobs per month through 2017 with the unemployment rate trending slowly towards 4.5 percent.

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Figure 8: U.S. Nonfarm Job Creation and Unemployment Rate


Improving labor market conditions combined with modest inflationary pressures should give weight to the argument for less accommodative monetary policy. While the Federal Reserve remains dovish, a consensus seems to be emerging among policymakers that they must begin the process of monetary policy normalization. Exactly what normalization will entail remains to be seen and may include adjusting both the balance of assets and the size of the central bank’s balance sheet. Any path to normalization likely begins with increases in the targeted federal funds rate. The baseline expectation is for two rate hikes in 2017, likely in the first and third quarters. The worst of the commodity price cycle has passed as prices of metals, agriculture products and energy rise. The potential for an acceleration in inflation is present (should global growth surprise to the upside) and would require the attention of policymakers if they are to maintain the stated inflation target of 2 percent.

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Figure 9: U.S. Inflation, Interest Rates, and Monetary Policy


THE OKLAHOMA ECONOMIC OUTLOOKNational recessions are measured in terms of successive periods of declining gross domestic product. It is less clear, however, if gross production is the best proxy for a regional economy’s health. Therefore gross state (or metro) product may not be the appropriate measure of aggregate economic well-being. Instead, regional economists generally prefer measures of employment and income. Following the great recession that stretched from December 2007 through June 2009, Oklahoma suffered a state recession as both state GDP and employment contracted sharply. The state then enjoyed a period of prolonged growth from the middle of 2010 through 2014 before oil prices peaked and the recent downturn ensued. As measured by gross state product, the state suffered a recession very similar to the experience of 2009. As measured by employment, however, the state narrowly skirted a significant recessionary period and instead drifted laterally through much of 2016 and into 2017. Baseline expectations remain for the state’s economy to turn in 2017, transitioning by the end of the year to a level of activity very close to full economic health.

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Figure 10: Oklahoma Gross State Product and Nonfarm Employment

The state’s population currently stands at just under four million persons and continues to grow at annual rates just less than 1 percent. These population growth rates are expected to maintain, leading Oklahoma’s population to break the four million barrier in the second half of 2018. The decline in commodity prices constrained an important source of income to many Oklahomans, curbing growth in income. Per capita income has stalled for several years and will enter the first quarter of 2017 at the same level as the last quarter of 2014. Per capita income is expected to return to growth in the latter half of 2017 and into 2018, reaching $47,690 by the end of the period.


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Figure 11: Oklahoma Population and Per Capita Income

A year ago the outlook for 2016 was described as a lateral move disguising a modest expansion in Oklahoma City offsetting a modest contraction in the rest of the state. This description proved largely correct. As discussed previously, however, the inventory adjustment cycle that crimped national activity imposed constraints on economic activity in the state. Oklahoma City managed only a lateral move insufficient to fully counter the contraction in the rest of the state. Average monthly nonfarm and private sector payrolls fell in 2016 with the state averaging 8,000 fewer private sector jobs in 2016 than 2015.

The year ahead is anticipated to be a year of recovery and economic improvement. The depth of the improvement will depend on how early in the year the state’s economy transitions to strength and how strong the second half of the year proves to be.

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Nonfarm Private

Figure 12: Oklahoma Nonfarm and Private Employment


The year ahead will be a year of transition. Both national economic conditions and activity in the oil and gas sector are improving in a transition to something that resembles full health. Just as the state’s economy was hit by the dual headwinds in 2016, it should benefit from dual tailwinds in 2017. Increases in drilling activities combined with a return to inventory accumulation will arrest the contraction in goods producing sectors. Similarly, improving economic conditions combined with persistent population growth will support a return to growth in the service sectors. The year ahead will mark a transition from an economic reality that feels less than satisfying at the beginning of the year to an economic reality that feels decidedly (and refreshingly) healthy by year’s end. The significance of the improvement will be obscured in the numbers as the second half of the year will offset the first half of the year leaving the average annual level of employment little changed from 2016.

-0.6%

0.1%

1.4%

1,309 1,310

1,328

-6.0%

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

1,140

1,160

1,180

1,200

1,220

1,240

1,260

1,280

1,300

1,320

1,340

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

OK

Empl

oym

ent,

Thou

sand

s

Oklahoma Private Employment

Annual Growth Private

Figure 13: Oklahoma Private Sector Employment

As indicated by the Bank SNB Oklahoma Energy Index, industry activity formed a bottom in the second half of 2016 that appears to be holding. Industry activity is slowly improving with commodity prices, rig activity, and equity prices all trending positively. Oil and gas employment continues to hold steady but has yet to show signs of significant gains. This will likely be the case for 2017, with hiring activity picking up in the second half of the year. The baseline expectation is for a holding pattern to dominate 2017 before growing at 3.7 percent in 2018.


-17.2%

-0.3%

3.7%

45.0 44.8 46.5

-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

0

10

20

30

40

50

60

70

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

OK

Empl

oym

ent,

Thou

sand

s

Oklahoma Mining Employment

Annual Growth Mining

Figure 14: Oklahoma Mining Employment

Oklahoma manufacturing employment was among the hardest hit sectors of 2016. The experience of this sector mirrors that of energy sector conditions generally. Already vulnerable from a lack of oil and gas related equipment demand, goods production dropped precipitously with the inventory adjustment further contracting the industry. Payroll employment fell by 7.2 percent in 2016 and is expected to fall by 2.4 percent in 2017. This contraction in the average monthly manufacturing payroll disguises the expectation that conditions will improve substantially in the second half of the year. The strength is expected to carry into 2018 with 1.6 percent growth.

-7.2%

-2.4%

1.6%

126.9123.9 125.8

-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

50

60

70

80

90

100

110

120

130

140

150

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

OK

Empl

oym

ent,

Thou

sand

s

Oklahoma Manufacturing Employment

Annual Growth Manufacturing

Figure 15: Oklahoma Manufacturing Employment


Retail employment in the state managed to expand in 2016 in spite of the challenges in the broader economy. Baseline expectations are for the retail expansion to continue, but ebb a bit from the nearly 2.5 percent growth averaged in 2014 and 2015. Employment in the retail industry is expected to grow at a pace closer to its recent long run average posting gains of 0.4 percent and 1.0 percent respectively in 2017 and 2018.

1.0%

0.4%

1.0%

185.2 185.9187.7

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

155

160

165

170

175

180

185

190

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

OK

Empl

oym

ent,

Thou

sand

s

Oklahoma Retail Employment

Annual Growth Retail

Figure 16: Oklahoma Retail Employment

Professional business services employment also experienced recession-like contractions in 2016. Average monthly payroll levels fell 2.6 percent from their 2015 mark with the biggest reductions coming in the administrative and support services and management subsectors. Lingering first half weakness is expected to dominate second half strength leaving the sector down 0.7 percent in 2017. Improving conditions will take positive momentum from 2017 into 2018 with the sector posting average monthly payroll gains of 2.1 percent.


-2.6%

-0.7%

2.1%

180.4179.2

183.0

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

160

165

170

175

180

185

190

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

OK

Empl

oym

ent,

Thou

sand

s

Oklahoma Business Services Employment

Annual Growth Professional Business Services

Figure 17: Oklahoma Professional and Business Services Employment

Health services employment continues to grow with a state population that is both growing and aging. Growth in 2016 is estimated at 1.6 percent, just ahead of trend growth. Population influences will be joined by positive economic influences in 2017 leading expectations of continued growth. The pace of expansion is expected to slow modestly and return to trend with employment growth of 1.2 percent in 2017 followed by growth of 1.1 percent in 2018. However, it is still not clear how the potential repeal/replace of the Affordable Care Act will impact healthcare employment in Oklahoma. According to the Oklahoma Hospital Association, nine hospitals have closed in Oklahoma in recent years – especially impacting rural areas.

1.6%

1.2%1.1%

214.7

217.4

219.7

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

190

195

200

205

210

215

220

225

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

OK

Empl

oym

ent,

Thou

sand

s

Oklahoma Health Services Employment

Annual Growth Health Services

Figure 18: Oklahoma Health Services Employment


Leisure services (arts, food, and accommodations) posted surprising growth in 2016 in spite of economic conditions. The industry is projected to have grown at its fastest rate in a decade posting 4.3 percent growth. Baseline expectations are that some of this activity is stolen from 2017, suggesting 2017 will post more modest growth of 0.7 percent. All of the growth in 2017 is expected to come from gains in the food and accommodations subsector. Current expectations are for 2.8 percent growth in 2018 that is both closer to trend and more broad across the sector.

4.3%

0.7%

2.8%

168.3 169.6174.4

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

100

110

120

130

140

150

160

170

180

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

OK

Empl

oym

ent,

Thou

sand

s

Oklahoma Leisure Services Employment

Annual Growth Leisure Services

Figure 19: Oklahoma Leisure Services Employment


THE OKLAHOMA CITY METRO ECONOMIC OUTLOOKOklahoma City gross metro product and personal income growth slowed in 2016 as national weakness coupled with local exposure stalled economic activity. Gross metro product reached $71.3 billion dollars in 2016, up a modest 2.3 percent for the year and the slowest rate of growth in the post-recession period. Personal income growth was even slower, expanding by only 1.6 percent. Both metro product and personal income are expected to resume solid growth in 2017 with gross metro product climbing by 3.0 percent to $73.5 billion and personal income growing by 3.9 percent to $66 billion. Both measures are expected to maintain strength into 2018.

$48,744$51,941 $54,502 $56,176

$59,465$62,592 $63,578 $66,046 $68,189

$56,591$59,956

$62,908 $65,499 $67,844 $69,749 $71,341 $73,495 $76,072

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

2010 2011 2012 2013 2014 2015 2016 2017 2018

Oklahoma City Personal Income and Gross Product

Pers. Income* Gross Metro Product*

Figure 20: Oklahoma City Income and Metro Product


Oklahoma City’s population continues to grow at an average annual rate of 1.6 percent trending towards 1.4 million in 2018. Slowing income growth combined with population gains are projected to leave per capita income unchanged in 2016 at $46,064. Per capita income is expected to return to growth in 2017 and 2018 at rates of 2.2 percent and 1.6 percent respectively. Baseline expectations are for per capita income to reach $47,818 by the end of the forecast period.

$38,749 $40,680 $41,986 $42,524 $44,456 $46,076 $46,064 $47,083 $47,818

1,257,950

1,426,011

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

1,150,000

1,200,000

1,250,000

1,300,000

1,350,000

1,400,000

1,450,000

2010 2011 2012 2013 2014 2015 2016 2017 2018

Oklahoma City Population and Per Capita Income

Per Cap Income Population

Figure 21: Oklahoma City MSA Per Capita Income

Oklahoma City nonfarm employment growth slowed considerably in 2016 with preliminary numbers indicating falling year-over-year employment in the second half of the year. The local economy is at an inflection point, with year-over-year employment expected to reverse from losses to gains by late spring. Solid growth in the second half of the year should be sufficient to post a 0.7 percent increase in average monthly levels. Nonfarm payrolls are expected to average 637,200 positions in 2017 before growing by 1.9 percent in 2018 to 649,100. Baseline expectations are for the second half of 2017 to feel like an economy at full health with 2018 posting numbers that match that reality.


0.5% 0.7%

1.9%

637.2

649.1

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

520

540

560

580

600

620

640

660

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Ann

ual G

row

th, A

vera

ge M

onth

ly P

ayro

lls

Okl

ahom

a C

ity E

mpl

oym

ent,

Thou

sand

s

Oklahoma City MSA Nonfarm Employment

Annual Growth Nonfarm

Figure 22: Oklahoma City MSA Nonfarm EmploymentOklahoma City private employment stalled in 2016 before yielding to an outright contraction in the latter half of the year. Private payrolls managed a modest gain in 2016 (0.3 percent) and will start to gain traction in 2017. Private payrolls will turn positive on a year-over-year basis in the spring of 2017, growing throughout the end of the year. Baseline expectations are for average monthly private payrolls to expand by 0.7 percent in 2017 before posting robust growth in 2018 - more typical of Oklahoma City’s post-recession experience at 2.4 percent.

0.3%0.7%

2.4%507.7

520.1

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

400

420

440

460

480

500

520

540

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Ann

ual G

row

th, A

vera

ge M

onth

ly P

ayro

lls

Okl

ahom

a C

ity E

mpl

oym

ent,

Thou

sand

s

Oklahoma City MSA Private Employment

Annual Growth Private

Figure 23: Oklahoma City MSA Private Employment


Oklahoma City’s oil and gas employment base contracted for two consecutive years in 2015 and 2016 as prices and drilling activity pushed unforeseen lows. Local employment in the industry fell through 2016 but has since stabilized at a level near 15,000 payroll positions. Employment is expected to hold steady around this level early in 2017 before returning to a modest expansion by the spring/summer. In total, average annual employment levels will be modestly lower in 2017 but will be exhibiting significant growth heading into 2018. Discussion is developing around the inability to find skilled workers willing to return to the oil field having been soured by the experience of the last two years and similar reticence may be expected from those returning to office positions. We don’t anticipate any labor market reluctance sufficient to curb growth as the industry recovers; we do anticipate the industry to make considerable strides towards full health in 2017 and 2018.

-18.8%

-3.8%

10.2%15.0

16.5

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

0

5

10

15

20

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018A

nnua

l Gro

wth

, Ave

rage

Mon

thly

Pay

rolls

Okl

ahom

a C

ity E

mpl

oym

ent,

Thou

sand

s

Oklahoma City MSA Mining Employment

Annual Growth Mining

Figure 24: Oklahoma City MSA Mining Employment

Oklahoma City manufacturing employment contracted with the sharp decline in goods production experienced statewide. Average annual manufacturing payrolls fell by 4.3 percent in 2016. This trend is expected to reverse over the course of 2017 as both national activity and local oil and gas activity rebound. The net effect will be little change in average payroll size in 2017 and modest growth in 2018. Not included in the forecast is any assumption as to the industrial development and trade policies to be pursued by the new Trump administration with its associated effect on the U.S. manufacturing sector.


-4.3%

-0.2%

1.0%

35.9 36.2

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

10

15

20

25

30

35

40

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Ann

ual G

row

th, A

vera

ge M

onth

ly P

ayro

lls

Okl

ahom

a C

ity E

mpl

oym

ent,

Thou

sand

s

Oklahoma City MSA Manufacturing Employment

Annual Growth Manufacturing

Figure 25: Oklahoma City MSA Manufacturing Employment

Retail employment slowed to 1.2 percent in 2016 as general economic weakness combined with broader shopping trends slowed retail development. Improving economic conditions will help in 2017, but challenges to the sector will remain from national movements away from large retailers and towards online shopping. Baseline expectations are for average monthly retail payrolls to grow by 1.6 percent and 2.6 percent in 2017 and 2018 respectively.

1.2%1.6%

2.6%69.4

71.2

-5.0%

-3.0%

-1.0%

1.0%

3.0%

5.0%

54

56

58

60

62

64

66

68

70

72

74

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Ann

ual G

row

th, A

vera

ge M

onth

ly P

ayro

lls

Okl

ahom

a C

ity E

mpl

oym

ent,

Thou

sand

s

Oklahoma City MSA Retail Employment

Annual Growth Retail

Figure 26: Oklahoma City MSA Retail Employment


Urbanization and population demographics continued to drive predictable increases in health services employment. The recent experience suggests some ebb and flow in the growth with high growth years followed by periods of slower growth as population trends build up and pressure the next wave. Health services employment grew at 3.5 percent in 2016, the sector’s fastest rate of growth in the post-recession period. Baseline expectations are for growth to ease modestly in 2017 to 1.8 percent - a level roughly equal to the post-recession average. Health sector employment will carry into 2018 with baseline expectations for 1.3 percent growth.

3.5%

1.8%1.3%

85.486.5

-5.0%

-3.0%

-1.0%

1.0%

3.0%

5.0%

68

70

72

74

76

78

80

82

84

86

88

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Ann

ual G

row

th, A

vera

ge M

onth

ly P

ayro

lls

Okl

ahom

a C

ity E

mpl

oym

ent,

Thou

sand

s

Oklahoma City MSA Health Services Employment

Annual Growth Health Services

Figure 27: Oklahoma City MSA Health Services Employment

Similar to the expectations for overall employment, leisure services employment is expected to carry lingering weakness into early 2017 before turning to growth in the spring of 2017. The second-half strength is expected to draw largely from growth in the food services and accommodations subsector and will carry into 2018. Growth in leisure services employment will continue to follow population movements with increased urbanization expected to bring leisure service sector jobs to the urban core in the years ahead. Average monthly payrolls are expected to grow by 1.6 percent in 2017 with growth accelerating to 3.8 percent in 2018.


2.6%

1.6%

3.8%

70.973.6

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

40

45

50

55

60

65

70

75

80

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Ann

ual G

row

th, A

vera

ge M

onth

ly P

ayro

lls

Okl

ahom

a C

ity E

mpl

oym

ent,

Thou

sand

s

Oklahoma City MSA Leisure Services Employment

Annual Growth Leisure Services

Figure 28: Oklahoma City MSA Leisure Services Employment

The Oklahoma City MSA labor market moved laterally in 2016 posting almost no growth in the metro area labor force. At the same time, unemployment rates in both Oklahoma City MSA and Oklahoma County increased to 4.2 percent and 4.3 percent respectively. Modest labor force growth is expected in 2017 with little change in local unemployment rates. Labor force growth more consistent with economic expansion is expected for 2018 with unemployment rates trending towards 4 percent in both the MSA and county.

4.3% 4.3% 4.1%

4.2% 4.2% 4.0%

670,379682,980

697,370

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

500,000

550,000

600,000

650,000

700,000

750,000

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Unem

ploy

men

t Rat

e

Okl

ahom

a C

ity L

abor

For

ce

Oklahoma City MSA Labor Market

OK County Un. Rate Okla. City Un. Rate Okla. City Labor Force

Figure 29: Oklahoma City MSA Labor Force and Unemployment Rates



U.S.

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Min

ing

43.4

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ual G

row

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Con

stru

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Info

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26.8

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ual G

row

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Prof

Bus

169.

817

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117

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row

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chni

cal

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68.7

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70.5

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ual G

row

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APP

ENDI

X B


Var

iabl

e /

Year

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Ad

min

90.5

92.6

94.7

95.9

96.2

98.6

97.5

94.3

92.8

95.3

Ann

ual G

row

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3 %

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2 %

0.3

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7 %

Educ

atio

n He

alth

218.

622

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122

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8.1

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5.6

239.

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ual G

row

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0.2

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1.9

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5 %

1.1

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ucat

ion

18.1

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19.0

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19.4

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ual G

row

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alth

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isure

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Food

and

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ther

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ual G

row

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over

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Fed

eral

46.6

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48.4

47.1

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46.9

47.6

48.0

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ual G

row

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K Ho

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APP

ENDI

X C

App

endi

x C

: Okl

ahom

a Q

uarte

rly G

DP, I

ncom

e, a

nd P

opul

atio

n

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2016

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2017

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2017

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2017

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2017

Q4

2018

Q1

2018

Q2

2018

Q3

2018

Q4

OK

RGD

P (M

il)$1

71,9

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72,5

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6$1

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1$1

73,4

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4$1

74,9

36.1

9$1

76,4

84.0

2$1

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APP

ENDI

X D

App

endi

x D:

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ahom

a an

d O

klah

oma

City

Pop

ulat

ion,

Inco

me,

and

Gro

ss P

rodu

ctO

klah

oma

2010

2011

2012

2013

2014

2015

2016

2017

2018

Pers

. Inc

ome*

$135

,011

$145

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$156

,874

$164

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sure

d in

Milli

ons o

f Dol

lars


Okl

ahom

a C

ity E

mpl

oym

ent O

utlo

ok 2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Non

farm

568.

156

6.8

580.

159

4.2

608.

061

9.6

629.

963

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637.

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Prof

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76.8

77.6

78.9

80.6

79.4

78.6

80.1

Ann

ual G

row

th-7

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1.7%

3.7%

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ntifi

c27

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ual G

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Mgm

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7.5

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7.8

8.8

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9.4

9.5

9.2

8.9

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Ann

ual G

row

th-1

1.2%

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Ad

min

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aste

Sup

port

36.8

37.6

38.9

38.0

38.7

39.3

40.1

39.1

38.2

38.7

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ual G

row

th-9

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Ed &

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APP

ENDI

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ual G

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22.7

22.7

22.4

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23.7

24.8

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25.2

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ual G

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Gov

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ual G

row

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Fed

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26.2

28.1

28.4

28.2

27.6

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27.4

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ual G

row

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ual G

row

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l52

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ual G

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OK

Cou

nty

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19,9

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18,8

8617

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17,9

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14,3

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Ann

ual G

row

th56

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12.6

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OK

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436

7,86

337

5,99

4

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ual G

row

th-1

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8.7%

1.8%

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2%

OK

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r For

ce32

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236

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ual G

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0%

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Cou

nty

Un. R

ate

6.1%

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4.2%

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4.3%

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4.1%

Okl

a. C

ity U

nem

pl.

33,7

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31,6

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30,3

3826

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24,7

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28,5

9527

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Ann

ual G

row

th59

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3.6%

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Okl

a. C

ity E

mpl

.53

5,99

258

6,94

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8,67

661

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262

1,27

862

4,88

964

3,49

164

2,46

065

4,38

666

9,65

7

Ann

ual G

row

th-1

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9.5%

2.0%

2.9%

0.9%

0.6%

3.0%

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%1.

9%2.

3%

Okl

a. C

ity L

abor

For

ce56

9,78

362

3,50

263

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964

5,21

465

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665

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366

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667

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968

2,98

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7,37

0

Ann

ual G

row

th0.

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2.7%

0.3%

1.9%

2.1%

Okl

a. C

ity U

n. R

ate

5.9%

5.9%

5.0%

4.5%

4.7%

4.0%

3.7%

4.2%

4.2%

4.0%

Ann

ual G

row

th58

.0%

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%-1

4.5%

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%2.

6%-1

4.0%

-7.7

%12

.7%

0.5%

-5.1

%



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GREATER OKLAHOMA CITY ECONOMIC FORECAST€¦ · 2017 GREATER OKLAHOMA CITY ECONOMIC FORECAST OKLAHOMA CITY METRO Prepared by Russell Evans Executive Director, Economist Steven C