TULSA MSA 2003 Forecast


	Table of Tulsa MSA Economic Indicators

*Recent Performance* While the national economy officially slipped into recession in March 2001 and shed more than 1.5 million jobs by year-end, the Tulsa metro economy managed to post strong non-farm job growth of 1.0 percent in 2001. Job formation has ground to a halt, however, as Tulsa metro employment declined by .2 percent in the twelve months ended September 2002. The metro jobless rate has also increased steadily during the national slowdown, rising from 2.8 percent in March 2001 to 4.7 percent in September 2002. Nevertheless, Tulsa's job growth the past year continues to outpace the nation, ranking the metro area 123rd out of 288 metropolitan areas reporting September 2002 non-farm payroll employment. The Tulsa economy outperformed the nation in a similar fashion during the 1990-1991 recession, slowing along with the rest of the nation, but managing to post job gains instead of the sharp losses in employment seen at the national level. In fact, Tulsa has not suffered a year-over-year loss in non-farm employment since the bottom of the oil bust in 1987. Most of the job losses for the nine months ended September 2002 are confined to Mining, Transportation, Communications, and Public Utilities (TCPU), Wholesale and Retail Trade, and Federal Government, while Services, Manufacturing, Construction, and Finance, Insurance, and Real Estate (FIRE) show impressive gains despite the recession at the national level. *2002 Employment and Income Forecast* The employment forecast for the Tulsa metro area for the remainder of the year calls for total non-farm payrolls to recover somewhat by year-end, posting a modest increase of .3 percent for all of 2002. Non-farm payrolls are expected to increase 1 percent in 2003, the same growth rate experienced in 2001, but well below the 3.4 percent average pace set in the 1994 to 1998 period. The unemployment rate is also expected to edge higher from an average of 4.6 percent for all of 2002 to 4.8 percent 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 is expected to reach 4.4 percent for 2002, falling slightly to 4.3 percent in 2003. This growth is slow relative to the 7.1 percent average pace set in the 1995-1998 period and is more reflective of the 3.7 percent rate of growth in the 1993-1994 post-recession period. With Tulsa job growth exceeding the rate for the nation, the metro area is expected to end 2002 at parity with the nation in per-capita personal income. The relationship is expected to reverse in 2003 as national job growth is expected to slightly exceed that for Tulsa, leaving per-capita metro income at $32,262, only slightly below the expected national level of $32,362. Figure 3 contains historical and forecasted per-capita income levels for the Tulsa area. *Metro Tulsa Industry Trends and Forecasts* Figure 4 highlights both actual and forecasted employment growth rates for the major industry sectors in the Tulsa area in the 2001-2003 period, while Figure 5 compares the 2003 industry forecasts for Tulsa with those for the state and nation. Although overall employment growth is forecast to rebound to 1 percent in 2003, not all job sectors are slated to participate equally in the recovery. Industries expected to strengthen in 2003 include Services, Non-Durable Manufacturing, TCPU, FIRE, and Federal Government. The Construction and State and Local Government sectors should slow from their strong 2002 performance, while continued hiring weakness is expected for the Mining and Wholesale and Retail Trade sectors. The Services sector is now home to one-third of all Tulsa metro area workers and has served to buoy the metro economy during the slowdown. Services job growth reached 2.6 percent in 2001, and nearly 1,000 services jobs have been added in the first nine months of 2002. For the full year 2002, services job growth is expected to reach 1.3 percent, and our forecast calls for it to strengthen to 2.2 percent in 2003. Transportation, Communications, and Public Utilities (TCPU), one of Tulsa's strongest industry sectors in recent years, is expected to post only 1 percent job growth in 2002. The slowing of job formation is symptomatic of the problems faced by the telecommunications and air travel industries, but the bottom is expected in 2002 as TCPU job growth returns to 2.1 percent in 2003. Both the Construction and Finance, Insurance, and Real Estate (FIRE) sectors continue to benefit from the continued decline in long-term interest rates. Construction employment surged 6.2 percent in 2001 and 3.3 percent growth is expected for all of 2002. The forecast for 2003 Tulsa area Construction employment, however, reflects the inevitable exhaustion of building activity at the national level and calls for a 1.1 percent decline, the first drop in employment in the sector since the 1990-1991 economic slowdown. FIRE employment is expected to return to 1.1 percent growth in 2003 after slowing to .4 percent growth in 2002. Weak federal government hiring has also been problematic for the Tulsa area economy in 2001 and 2002. After a Census-related increase of 3 percent in 2000, federal government payrolls declined 11.2 percent in 2001, and are expected to decline an additional 2.4 percent in 2002 before recovering and increasing a forecasted .7 percent in 2003. State and local government payrolls increased .7 percent in 2001 and are expected to increase 1.2 percent in 2002, but our forecast calls for a slowing to .3 percent growth in 2003. The forecast of further job losses in Mining in 2003 reflects the continuing maturation of Oklahoma's oil and gas fields and the resulting long-run downsizing of the state's oil and gas industry. Mining is expected to post a fifth consecutive year of losses in 2003, declining an additional 6.4 percent in 2003 on top of the 7.8 percent loss suffered in 2002. The reduction in oil and gas related employment in the five-year period ending in 2003 is expected to total 2,500 jobs. Although providing nearly 30,000 Tulsa metro wage and salary jobs in 1982 (10 percent of the metro workforce), the Mining sector is expected to account for only 5,300 area jobs in 2003 (1.3 percent). Tulsa's manufacturing sector defied national trends by posting an employment gain of 1.9 percent in 2001 as manufacturing jobs at the national level declined by 4.2 percent in the same period. Manufacturing jobs are expected to increase .9 percent in 2002, with continued but modest expansion of .4 percent in the forecast for 2003. All of the gains in 2003, however, are expected in Non-durable Manufacturing as Durable payrolls are expected to decline .3 percent. The Retail Trade sector employs nearly 70,000 Tulsa area workers, the second largest sector after Services, and in 2001 contracted 1.4 percent, the first decline in Retail jobs since 1988. Further job losses of 2.2 percent are expected for 2002, with only modest growth in payrolls of .3 percent expected in 2003. The forecast reflects the ongoing nationwide slowdown in retail trade activity as well as the sluggish forecast of 2.1 percent growth in Tulsa retail trade for all of 2002. Retail purchases are then expected to recover to 4.9 percent growth in 2003. Wholesale trade is expected to shed jobs for the fifth consecutive year, declining an expected .1 percent in 2003, a symptom of the industry's ties to the somewhat sluggish Durable Manufacturing sector. *Summary* Economic activity in the Tulsa area has slowed along with the nation in 2002, but just as in the last recession, the metro area is experiencing a much milder slowdown than the nation. The muted severity of the downturn will consequently limit the strength of the expected recovery. Our forecast calls for non-farm employment growth of only .3 percent for all of 2002, followed by a rebound to 1 percent job growth in 2003. Continued strong growth in Services and Non-durable Manufacturing employment, along with a rebound in FIRE and TCPU hiring, should provide most of the job gains in 2003.

2003 ECONOMIC OUTLOOK Tulsa Metropolitan Area	Mark C. Snead