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
GDP growth rebounded considerably in the second quarter, including in housing Growth in Components of Real GDP 15 Percent change from the previous period, SAAR 1 5 2.6 4. Q4 213 Q1 214 Q2 214 3.3 1.2 2.5 7.5 5.7 1.6 5.5 9.5 9.5 1.6-5 -2.1-5.3-5.2 -.8-1 -7.9-9.2-15 Total GDP Consumer spending Residential investment Business investment Exports Government spending Source: U.S. Bureau of Economic Analysis, Macroeconomic Advisors
And monthly data on U.S. business activity continued to rise in July U.S. Private Payroll Employment and Business Indexes 6 Change from previous month, thousands Index 65 4 6 2 55 5-2 45-4 4-6 -8 Private Employment (left axis) ISM Manufacturing Index (right axis) ISM Non-Manufacturing Index (right axis) 35 3-1 25 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
U.S. 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 1 8 8 6 6 4 4 2 2 1983 1986 1989 1992 1995 1998 21 24 27 21 213 216 Sources: U.S. Bureau of Labor Statistics, FOMC
Inflation remains low and is expected to stay relatively subdued through 216 6 Percent change, year-over-year PCE Inflation Index 6 5 5 4 3 Jun. FOMC Forecast Ranges in Yellow Long Term 4 3 2 2 1 1 1983 1986 1989 1992 1995 1998 21 24 27 21 213 216 Sources: U.S. Bureau of Labor Statistics, FOMC
Most members of the Fed s monetary policy body expect higher interest rates by 215 12 Percent Federal Funds Rate Year-end target 12 1 1 8 Long Term 8 6 4 Jun. FOMC Forecast Ranges in Yellow (12) (3) 6 4 2 (1) 2 1983 1986 1989 1992 1995 1998 21 24 27 21 213 216 Note Number of participants who project the initial increase will occur in the specified year in parenthesis Sources: Federal Reserve Board, FOMC
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 5 4 3 2 Short term lending, targeted lending programs, and rescue operations 3 2 1-1 Treasury securities Currency Reserves 1-1 -2-2 -3 Other -3-4 Liabilities -5 22 24 26 28 21 212 214-4 -5
The Oklahoma Economy Current and Long Term Trends
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
Employment continues to rise and is back to or above pre-recession levels in the state Level of Payroll Employment Through July 214 18 Index: Jan-8=1 18 16 16 14 12 OKC Metro Oklahoma 14 12 1 98 96 Non-Metro OK U.S. Tulsa Metro 1 98 96 94 94 92 Jan-8 Jan-9 Jan-1 Jan-11 Jan-12 Jan-13 Jan-14 92 Source: U.S. Bureau of Labor Statistics
Unemployment is low in most of the state, especially northwest and south central Oklahoma County Unemployment Rates June 214 Source: OK Employment Security Commission
In June, hospitality and mfg. were up most from 213, while govt. and services lagged Oklahoma Job Growth by Industry July 214 16 Percent change year-over-year 14 U.S. 12 OK 1 OKC Tulsa 8 6 4 2-2 -4-6 Total Hospitality Mfg. Edc. & Health Constr. Finance Trade & Transp. Energy State & Local Govt. Prof. & Bus. Services Fed. Govt Source: Bureau of Labor Statistics
Along with energy employment, Oklahoma oil drilling has picked back up Source: Baker Hughes Oklahoma Active Drilling Rig Count Seasonally Adjusted 25 Number of rigs 25 2 Oil Natural Gas 2 15 15 1 1 5 5 Aug-9 Aug-1 Aug-11 Aug-12 Aug-13 Aug-14
Oklahoma housing permits remain stronger than in the nation, and stabilized recently Single-Family Housing Permits Seasonally adjusted 16, Number of permits, 3-month moving avg. 1,6 14, 12, U.S. (left axis) OK (right axis) 1,4 1,2 1, 1, 8, 8 6, 6 4, 4 2, 2 Jun-4 Jun-5 Jun-6 Jun-7 Jun-8 Jun-9 Jun-1 Jun-11 Jun-12 Jun-13 Jun-14 Source: U.S. Census Bureau
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% 12 1 1 8 8 6 6 4 1932: 53% 4 2 2 1929 1935 1941 1947 1953 1959 1965 1971 1977 1983 1989 1995 21 27 213 Source: U.S. Bureau of Labor Statistics
And for the first time, Oklahomans have as much stock market wealth as the nation Real Per Capita Stock Market Wealth, 1975-213 Oklahoma vs. United States $135, Inflation-adjusted (213 dollars) $12, $15, $9, U.S. Oklahoma $75, $6, $45, $3, $15, $ 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 21 23 25 27 29 211 213 Source: U.S. Bureau of Economic Analysis
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 16 14 12 US mining - old series US mining - new series OK mining - old series OK mining - new series 14 12 1 1 8 8 6 6 4 4 2 2 1958 1963 1968 1973 1978 1983 1988 1993 1998 23 28 213 Source: U.S. Bureau of Labor Statistics
Oil and gas states grow faster than the nation over time, but are more volatile Growth and Volatility of State Employment, 1963-213 5.5 5. 4.5 Percent Average Annual Growth Standard Deviation in Growth 4.9 4. 3.5 3.6 3.5 3. 2.5 2. 1.9 1.8 2.7 2.4 2.9 2.2 2.4 2.4 1.8 2.1 2.3 2.3 2. 1.92. 1.8 2.5 1.5 1..5. 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
Energy s rise in OK contrasts with US growth in education, health, and business services 1 Percent Change in Personal Income Share by Industry, 1999-213 8 6 U.S. OK 4 2-2 -4-6 Mining Constr. Edc. & Health Farm Transp. & Utilities Prof. & Bus. Services Hospitality Finance Info. Govt. Trade Mfg Source: U.S. Bureau of Economic Analysis
Since 22, jobs requiring high school or less have done much better in Oklahoma City 2.5 2. Annual Employment Growth by Education/Training Required for Jobs 22 212 Percent U.S. Actual 22-12 OKC Metro 22-12 2. 2. 1.5 1.3 1.5 1.6 1. 1.1 1..5.3.3.6.4. -.5 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
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 22-212 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
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 22 212 2. 2. 1.5 1. 1.5 1.3 1.1 1. 1..9.9.5.3.3. -.5 U.S. Actual 22-12 -.2-1. OKC Metro 22-12 -.9-1.5 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
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 both benefits and risks to the state
Questions and Links For more information about the Oklahoma City Branch of the Federal Reserve Bank of Kansas City, visit our website at: http://www.kansascityfed.org/oklahomacity/ For more information about the Oklahoma economy, subscribe to the quarterly Oklahoma Economist at: www.kansascityfed.org/publications/research/oke For Oklahoma economic data, see the new economic databooks: https://www.kansascityfed.org/research/indicato rsdata/regionaldatabook/index.cfm