Investor Relations Oklahoma August 21, Chad Wilkerson

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1 Investor Relations Oklahoma August 21, 214 Chad Wilkerson Vice President, Economist, and Oklahoma City Branch Executive Federal Reserve Bank of Kansas City

2 Overview of the Federal Reserve System 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 As with most central banks, the Fed s primary responsibilities fall within four general areas: Lender of last resort provide liquidity in times of crisis Monetary policy promote full employment and low inflation Bank regulation ensure safety and soundness of banks Financial services bank for banks, bank for federal govt.

3 Federal Reserve Districts and Office Locations

4 The Oklahoma City Branch of the Federal Reserve Bank of Kansas City Functions 4 staff Research on U.S. and Oklahoma economies Economic and financial education outreach Examinations of Oklahoma financial institutions 214 board of directors Jim Dunn (chair), Chairman, Mill Creek Lumber & Supply, Tulsa Clint Abernathy, Owner, Abernathy Farms, Inc., Altus Linda Capps, Vice Chairman, Citizen Potawatomi Nation, Shawnee Michael Coffman, CEO, Panhandle Oil & Gas, Inc., Oklahoma City Pete Delaney, Chairman & CEO, OGE Energy Corp., Oklahoma City Chuck Hall, Chairman & CEO, Exchange Bank & Trust, Perry Jane Haskin, President & CEO, First Bethany Bank & Trust, Bethany

5 The U.S. Economy and Monetary Policy

6 GDP growth rebounded considerably in the second quarter, across all sectors Growth in Components of Real GDP 15 Percent change from the previous period, SAAR Q4 213 Q1 214 Q Total GDP Consumer spending Residential investment Business investment Exports Government spending Source: U.S. Bureau of Economic Analysis, Macroeconomic Advisors

7 And monthly data on U.S. business activity in July showed further growth U.S. Private Payroll Employment and Business Indexes 6 Change from previous month, thousands Index Private Employment (left axis) ISM Manufacturing Index (right axis) ISM Non-Manufacturing Index (right axis) Jul-6 Jul-7 Jul-8 Jul-9 Jul-1 Jul-11 Jul-12 Jul-13 Jul-14 Source: Institute for Supply Management, Bureau of Labor Statistics

8 GDP forecasts for remain solid, as the economy recovers further Real Gross Domestic Product 8 Percent change, year-over-year 8 6 Jun. FOMC Forecast Ranges in Yellow Long Term Source: U.S. Bureau of Economic Analysis, FOMC

9 Unemployment continues to fall and could reach long-term levels by 215 Unemployment Rate Seasonally Adjusted 12 Percent 12 1 Jun. FOMC Forecast Ranges in Yellow Long Term Sources: U.S. Bureau of Labor Statistics, FOMC

10 Inflation remains low and is expected to stay relatively subdued through Percent change, year-over-year PCE Inflation Index Jun. FOMC Forecast Ranges in Yellow Long Term Sources: U.S. Bureau of Labor Statistics, FOMC

11 Most FOMC participants project the first federal funds rate increase in Percent Federal Funds Rate Year-end target Long Term Jun. FOMC Forecast Ranges in Yellow (12) (3) (1) Note Number of participants who project the initial increase will occur in the specified year in parenthesis Sources: Federal Reserve Board, FOMC

12 The Fed s balance sheet sits at nearly $4.5 trillion as the taper comes to an end Sources: Federal Reserve Board Federal Reserve Balance Sheet 5 4 $Trillions Assets MBS & agency debt Short term lending, targeted lending programs, and rescue operations Treasury securities Currency Reserves Other -3-4 Liabilities

13 Recent Trends in the Oklahoma Economy

14 Oklahoma outpaced the U.S. and all but three other states in 213 GDP growth Percent Change in Real GDP by State, 213 Source: U.S. Bureau of Economic Analysis

15 Employment continues to rise and is back to or above pre-recession levels in the state Level of Payroll Employment Through July Index: Jan-8= OKC Metro Oklahoma Non-Metro OK U.S. Tulsa Metro Jan-8 Jan-9 Jan-1 Jan-11 Jan-12 Jan-13 Jan Source: U.S. Bureau of Labor Statistics

16 Unemployment is low in most of the state, especially northwest and south central Oklahoma County Unemployment Rates June 214 Source: OK Employment Security Commission

17 In OKC, hospitality and constr. jobs are up, but federal, mfg., prof. jobs are down Job Growth by Industry July Percent change year-over-year 14 U.S. 12 OK 1 OKC Total Constr. Hospitality Finance Edc. & Health Trade & Transp. State & Local Govt. Energy Mfg. Fed. Govt Prof. & Bus. Services Source: Bureau of Labor Statistics

18 Overall, lower-paying jobs in OKC are now growing faster, but trends are still healthy Source: Baker Hughes Oklahoma City Metro Employment Growth 6 Percent change, year-over-year Actual Weighted by 213 Annual Industry Pay Jul-9 Jul-1 Jul-11 Jul-12 Jul-13 Jul-14

19 Oil drilling has picked back up in OK, suggesting energy jobs may rise further Source: Baker Hughes Oklahoma Active Drilling Rig Count Seasonally Adjusted 25 Number of rigs 25 2 Oil Natural Gas Aug-9 Aug-1 Aug-11 Aug-12 Aug-13 Aug-14

20 Longer-Term Trends in the Oklahoma Economy

21 Oklahoma per capita income relative to the nation is approaching early 198 s highs Oklahoma Per Capita Income as a percent of national average 12 Percent 1982: 99% 213: 93% : 53% Source: U.S. Bureau of Labor Statistics

22 And for the first time, Oklahomans have as much stock market wealth as the nation Real Per Capita Stock Market Wealth, Oklahoma vs. United States $135, Inflation-adjusted (213 dollars) $12, $15, $9, U.S. Oklahoma $75, $6, $45, $3, $15, $ Source: U.S. Bureau of Economic Analysis

23 The OK energy sector s share of personal income is now as high as in the early 198 s Energy Sector Share of Personal Income 16 Percent US mining - old series US mining - new series OK mining - old series OK mining - new series Source: U.S. Bureau of Labor Statistics

24 Many counties in the state have experienced sizable re-concentration in oil and gas Annual Percent Change in Mining Employment Source: U.S. Census Bureau

25 All of northwest Oklahoma, along with some other spots, is now especially concentrated Mining Share of Total Employment 212 Source: U.S. Census Bureau

26 Oil and gas states grow faster than the nation over time, but are more volatile Growth and Volatility of State Employment, Percent Average Annual Growth Standard Deviation in Growth U.S. Oil & Gas States (8) AK TX ND NM WY OK MT LA States Where Oil & Gas Is > 2.5 Times Bigger Than In the Nation Source: U.S. Bureau of Labor Statistics

27 Energy s rise in OK contrasts with US growth in education, health, and business services 1 Percent Change in Personal Income Share by Industry, U.S. OK Mining Constr. Edc. & Health Farm Transp. & Utilities Prof. & Bus. Services Hospitality Finance Info. Govt. Trade Mfg Source: U.S. Bureau of Economic Analysis

28 Since 22, jobs requiring high school or less have done much better in Oklahoma City Annual Employment Growth by Education/Training Required for Jobs Percent U.S. Actual OKC Metro Total, All Occupations Less than high school -.2 High school diploma Associate's degree or vocational award Bachelor's degree Graduate or professional degree Source: Bureau of Labor Statistics

29 Energy-related jobs made up a sizable portion of fast-growing, low education OKC jobs Examples of OKC metro jobs requiring high school education or less, that grew more than 1 percent from Education required Jobs Added Roustabouts, Oil and Gas Less than high school 9 Legal Secretaries High school diploma or equivalent 8 Rotary Drill Operators, Oil and Gas Less than high school 55 Derrick Operators, Oil and Gas Less than high school 52 Electrical and Electronic Equipment Assemblers High school diploma or equivalent 41 Surveying and Mapping Technicians High school diploma or equivalent 25 Pipelayers High school diploma or equivalent 24 Source: U.S. Bureau of Labor Statistics

30 This has kept the middle of the pay scale from dropping as much as in the country 2.5 Percent Annual Employment Growth by Average Pay of Occupations U.S. Actual OKC Metro Total, All Occupations Bottom quintile (<$2K in 22) 2nd-lowest quintile ($2-24K in 22) Middle quintile ($24-32K in 22) 2nd-highest quintile ($32-47K in 22) Top quintile (>$47K in 22) Source: Bureau of Labor Statistics

31 Summary U.S. economic growth rebounded in Q2, and the outlook appears favorable Oklahoma s economy continues to grow solidly, with low unemployment Oklahoma s reliance on oil and gas is back to historic highs, presenting risks and benefits to the state and to OKC

32 Questions and Links For more information about the Oklahoma City Branch of the Federal Reserve Bank of Kansas City, visit our website at: For more information about the Oklahoma economy, subscribe to the quarterly Oklahoma Economist at:

CRA Roundtable August 19, Megan Williams

CRA Roundtable August 19, Megan Williams CRA Roundtable August 19, 214 Megan Williams Associate Economist and Manager, Oklahoma City Branch Federal Reserve Bank of Kansas City www.kansascityfed.org/oklahomacity The U.S. Economy and Monetary Policy