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| 2003 ECONOMIC OUTLOOK Oklahoma City Metropolitan Area |
Mark C. Snead |
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| Table of OKC MSA Economic Indicators | |
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The Oklahoma City metro economy has slowed along with the nation and will complete a second consecutive year of modest job growth in 2002. After a .5 percent increase in non-farm employment in 2001, payrolls are expected to expand only .6 percent for all of 2002. This will mark the first time the Oklahoma City area has experienced consecutive years of job growth below 1 percent since the last recession when job gains were capped at only .7 percent in 1991 and .9 percent in 1992. The growth rates are also well below the impressive 2.7 percent average pace of hiring gains enjoyed in the 1993 to 2000 period. Despite slowing job growth, the rate of hiring in the metro area continues to exceed the rate for the nation. For the twelve months ending September 2002, Oklahoma City area non-farm job growth was .7 percent, well ahead of the -.7 percent pace of the nation. This also ranks metro area job growth 67th out of 288 metropolitan areas reporting September 2002 non-farm payroll employment. The OKC economy showed similar strength during the 1990-1991 recession posting job gains throughout. In fact, the Oklahoma City area economy has not suffered a year-over-year loss in non-farm employment since the bottom of the oil bust in 1987. Most of the jobs lost in the recent slowdown are confined to only four industry sectors: Manufacturing, Transportation, Communication, and Public Utilities (TCPU), Wholesale Trade, and Government. Strength in hiring is mostly concentrated in the Services, Construction, and Retail Trade sectors.
The steady performance of the Oklahoma City economy during the recession makes a strong rebound unlikely. Our employment forecast for the Oklahoma City metro area calls for a modest increase in the pace of hiring from .6 percent for all of 2002 to .9 percent in 2003. The unemployment rate is also expected to increase slightly from an average of 4.3 percent for all of 2002 to 4.4 percent in 2003, but will remain well below the 6 percent unemployment rate forecast for the nation in 2003. Figure 1 and Figure 2 contain historical and forecasted total non-farm employment and unemployment rates for the metro area. Growth in personal income reflects the relatively strong job growth in the metro area and is expected to reach 4.9 percent for 2002 before falling slightly to 4.4 percent in 2003. This expected growth rate is only slightly below the 5.1 percent average experienced in the 1990 to 2001 period. With OKC area job growth well ahead of the nation, the metro area is expected to gain substantial ground in per-capita personal income, reaching $28,751, or 89 percent of the expected national level of $32,362, in 2003. Figure 3 contains historical and forecasted per-capita income levels for the Oklahoma City area.
Figure 4 highlights both actual and forecasted employment growth rates for the major industry sectors in the Oklahoma City area in the 2001-2003 period, while Figure 5 compares the 2003 industry forecasts for the metro area with those for the state and nation. Although overall employment growth is forecast to rebound to .9 percent in 2003, not all job sectors are expected to participate equally in the recovery. Services and Retail Trade should continue to provide strong job growth, while the job losses in 2002 in TCPU and Non-Durable Manufacturing should be reversed in 2003. Construction and FIRE are expected to slow from recent growth rates but continue to provide a small number of new jobs, while the Mining, Durable Manufacturing, Wholesale Trade, and Federal Government sectors are forecast to suffer job losses. The Services sector continues to provide the bulk of the job formation in the Oklahoma City metro area. Of the nearly 75,000 metro area jobs created since 1995, more than 45,000 are in the Services sector, with Retail trade (14,300 new jobs) and Construction (6,800 new jobs) the only sectors managing to create more than 5,000 new jobs in the same period. Services hiring is expected to increase 2.2 percent in both 2002 and 2003, or approximately 4,000 new jobs each year. Oklahoma City has been in the throes of a manufacturing recession since 2000 but the job losses are expected to ease in 2003. Following manufacturing employment declines of 2.2 percent in 2000, 6.3 percent in 2001, and an estimated 5.5 percent in 2002, our forecast is for a much-improved .4 percent decline in 2003. This translates into 7,700 metro manufacturing jobs lost between 1999 and 2003, with the majority (6,200 jobs) in Durable Manufacturing. This trend of relatively greater weakness in the Durable goods sector will continue in 2003. However, Non-Durable Manufacturing hiring is expected to post an increase of 1.7 percent. While the contraction of jobs in the Transportation, Communications, and Public Utilities (TCPU) sector reflects the problems faced by the telecommunications and air travel industries, the losses in the Oklahoma City area have exceeded the level of losses suffered at both the state and national levels. TCPU hiring declined 4.8 percent in 2001 and 2.6 percent in 2002, but weakness will continue as the sector is expected to post only .2 percent job growth in 2003. Job growth in the Finance, Insurance, and Real Estate (FIRE) sector is expected to mirror the state by advancing a surprisingly strong 1.9 percent for all of 2002 before easing to .6 percent growth in 2003. This is a reversal from recent years as hiring in FIRE has lagged the state, averaging only .1% growth in the 1999 to 2001 period, while the state FIRE sector averaged 1.2% annual job growth in the same period. The fundamentals in the OKC area Construction sector remain strong as it continues to benefit from the ongoing decline in long-term interest rates. Construction employment increased 3.5 percent in 2001 and a surge in growth to 5.5 percent is expected for all of 2002. The forecast for 2003 Construction employment, however, reflects an expected slowdown in building activity at the national level and calls for a modest 1.0 percent increase in Construction hiring. The sector has not experienced a decline in hiring since 1989. Weak overall government hiring has also limited job growth in the metro area economy, decreasing .4 percent in 2001 and an estimated .3 percent in 2002. Most of the reductions have occurred in state and local government payrolls, which are expected to decline .3 percent in 2003, the third consecutive year of contraction. Other than a post-Census decline of .3 percent in 2001, federal government payrolls have increased annually since 1995 and are expected to increase .5 percent for all of 2002 and .3 percent in 2003. The state has experienced strong growth in the Mining sector since 2000, with Oklahoma City providing much of the job gains. After increasing 3.2 percent in 2000, 14.7 percent in 2001, and an estimated 1.7 percent in 2002, the Oklahoma City metro area is nonetheless expected to finally weaken and resume its trend of long-term job contraction, declining 1.1 percent in 2003. Retail Trade has remained one of the strongest sources of employment in the OKC area throughout the slowdown. The second largest job sector after Services, Retail Trade is expected to post a 1.9 percent gain in hiring for 2002, with continued growth of 1.3 percent expected in 2003. These jobs gains are noteworthy given the ongoing nationwide slowdown in retail trade activity. Wholesale trade is expected to post job losses for the fourth consecutive year in 2003, a direct result of ties to the area's reeling Manufacturing industry. More than 3,000 jobs have been lost in Wholesale Trade since 1999 and our forecast is for an additional decline of 1.3 percent in 2003.
Economic activity in the Oklahoma City
area has slowed along with the nation in 2002, but just as in the last
recession, the metro area is managing to add jobs as the national workforce
contracts. The mild slowdown in the metro economy, however, is expected to
translate into a mild recovery. Our forecast calls for non-farm employment
growth of .6 percent for all of 2002, followed by a rebound to .9 percent growth
in 2003. The metro area will lag the 1.1 percent job growth expected for the
nation in 2003 but exceed the .7 percent rate forecast for the state. Most of
the job gains in 2003 are expected in the Services, Retail Trade, and
Construction sectors. Only the Mining, Durable Manufacturing, Wholesale Trade,
and State and Local Government sectors should experience job losses. |
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| 2003 Forecast Contents: |
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