Oklahoma Economic Outlook 2016

by Dan Rickman

Regents Professor of Economics and Oklahoma Gas and Electric Services Chair in Regional Economic Analysis

http://economy.okstate.edu/

U.S. Real Gross Domestic Product Growth (%):

IHS Global Insight Forecast

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4

U.S. Real GDP-Pess U.S. Real GDP-Base

U.S. Potential GDP Growth (%): Population and Labor Force Growth Constraints (IHS Global Insight, Inc.)

0.53

2.4 2.0

-5

-4

-3

-2

-1

0

1

2

3

4

5

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

200

1

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

201

3

201

4

20

15

20

16

20

17

20

18

20

19

20

20

20

21

20

22

20

23

20

24

202

5

Nonfarm Emp Population Civilian Labor Force Potential GDP-Smoothed

Oil Prices (IHS Global Insight, Inc.): West Texas Intermediate Oil ($/bbl)

40.4

50.1

53.1 56.8

30

40

50

60

70

80

90

100

2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3 2017Q4

WTI-Pess WTI-Base

Natural Gas Prices (IHS Global Insight, Inc.): Henry Hub Natural Gas ($/mmBtu)

2.5

2.7

2.9

3.1

3.3

3.5

3.7

3.9

4.1

2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3 2017Q4

PNGHH-Pess PNGHH-Base

October 2014-2015 BLS Nonfarm Employment Growth Rates (%)

North Dakota

West Virginia

Louisiana

Oklahoma

Wyoming

New Mexico

Illinois

Alaska

Mississippi

Kansas

Vermont

Pennsylvania

Minnesota Montana Maine

Delaware

Missouri

New Hampshire

District of Columbia

Alabama

Nebraska

Rhode Island

Virginia

New Jersey

Iowa

Ohio

Connecticut

Arkansas

Kentucky

Texas

Tennessee

New York Wisconsin South Dakota

Michigan

Hawaii

Maryland

Indiana

Colorado

North Carolina

Georgia

Arizona

Massachusetts

Oregon

South Carolina

California

Washington

Florida

Nevada Utah

Idaho

-3.00 to 0.90 0.90 to 1.44 1.44 to 2.17 2.17 to 4.79

0.1

0.4

0.2

-2.0

-1.8

0.8

U.S. = 1.9

Oklahoma Rotary Rig Count (Baker Hughes)

78 82

50

70

90

110

130

150

170

190

210

230

Oklahoma Rig Count

Oklahoma Energy Production: Deseasonalized (2000:1=1)

0.5

0.7

0.9

1.1

1.3

1.5

1.7

1.9

2.1

Natural Gas Oil

U.S. and Oklahoma Mining Employment (Annualized %Change)

-12

-10

-8

-6

-4

-2

0

2

4

6

8

2000Q

2

2000Q

4

2001Q

2

2001Q

4

2002Q

2

2002Q

4

2003Q

2

2003Q

4

2004Q

2

2004Q

4

2005Q

2

2005Q

4

2006Q

2

2006Q

4

2007Q

2

2007Q

4

2008Q

2

2008Q

4

2009Q

2

2009Q

4

2010Q

2

2010Q

4

2011Q

2

2011Q

4

2012Q

2

2012Q

4

2013Q

2

2013Q

4

2014Q

2

2014Q

4

2015Q

2

2015Q

4

2016Q

2

2016Q

4

2017Q

2

2017Q

4

US Mining OK Mining

US and Oklahoma Nonfarm Employment Growth Rates

(Deseasonalized Annualized % change)

-8

-6

-4

-2

0

2

4

2008Q

1

2008Q

3

2009Q

1

2009Q

3

2010Q

1

2010Q

3

2011Q

1

2011Q

3

2012Q

1

2012Q

3

2013Q

1

2013Q

3

2014Q

1

2014Q

3

2015Q

1

2015Q

3

2016Q

1

2016Q

3

2017Q

1

2017Q

3

2018Q

1

2018Q

3

2019Q

1

2019Q

3

2020Q

1

2020Q

3

2021Q

1

2021Q

3

2022Q

1

2022Q

3

2023Q

1

2023Q

3

2024Q

1

2024Q

3

2025Q

1

2025Q

3

US Nonfarm Emp OK Nonfarm Emp

0.22%

0.76%

0.94%

0.00%

0.10%

0.20%

0.30%

0.40%

0.50%

0.60%

0.70%

0.80%

0.90%

1.00%

1,650

1,660

1,670

1,680

1,690

1,700

1,710

2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3 2017Q4

Difference OK Nonfarm Emp-Pess OK Nonfarm Emp-Base

Pessimistic Scenario: Oklahoma Nonfarm Employment

t

h

o

u

s

a

n

d

s

Oklahoma Nonfarm Employment Growth Rate Comparison: No

Decline in Energy Prices

-2

-1.5

-1

-0.5

0

0.5

1

1.5

2

2.5

3

1,630

1,640

1,650

1,660

1,670

1,680

1,690

1,700

1,710

2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4

OK %Chg-2014:3 Energy OK %Chg-Decline

U.S. %Chg OK Nonfarm Employment-2014:3 Energy

OK Nonfarm Employment-Decline

t

h

o

u

s

a

n

d

s

p

e

r

c

e

n

t

2014-2016 % Growth Oklahoma Sector Employment

0.70

-25

-20

-15

-10

-5

0

5

10

15

Min

ing

Ele

ctr

ical

Eq

uip

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t…

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over

nm

ent

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on

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Em

plo

ym

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Oth

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Du

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s…

Con

tract

Con

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n

Fab

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etals

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g

Non

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Wh

ole

sale

Tra

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sport

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& P

ub

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tili

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on

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state

Pro

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Man

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ctu

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ail

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Act

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ies

Mgt

of

Com

pan

ies

& E

nte

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Ad

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., S

up

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Wast

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gt.

Ed

uca

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Care

& S

oci

al

Ass

ista

nce

Acc

om

m., F

ood

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Local

Gov

ern

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Fed

eral

Gover

nm

ent

Red: Energy Dominated; Purple: U.S. Industry Dominated; Blue: No Energy Influence

Sector Change in Oklahoma Employment (%): 2016

-11.2

0.12

3.6

-12 -10 -8 -6 -4 -2 0 2 4 6

Mining

Other Durable Goods Manufacturing

Machinery Manufacturing

Information

Fabricated Metals Manufacturing

State Government

Mgt of Companies & Enterprises

Electrical Equipment Manufacturing

Other Nondurable Goods Manufacturing

Real Estate

Federal Government

Plastics and Rubber Manufacturing

Food Manufacturing

Transportation Equipment Manufacturing

Transportation & Public Utilities

Other Services

Retail Trade

Nonfarm Employment

Financial Activities

Wholesale Trade

Local Govt

Admin., Support, & Waste Mgt.

Health Care & Social Assistance

Leisure

Professional, Scientific, and Technical

Educational Services

Construction

Sector Change in Oklahoma Employment (Jobs): 2016

-6,141

2,005

3,193

-8,000 -6,000 -4,000 -2,000 0 2,000 4,000

Mining

Machinery Manufacturing

Other Durable Goods Manufacturing

State Government

Fabricated Metals Manufacturing

Information

Mgt of Companies & Enterprises

Federal Government

Transportation & Public Utilities

Real Estate

Other Nondurable Goods Manufacturing

Other Services

Food Manufacturing

Plastics and Rubber Manufacturing

Transportation Equipment Manufacturing

Electrical Equipment Manufacturing

Retail Trade

Financial Activities

Educational Services

Wholesale Trade

Admin., Support, & Waste Mgt.

Professional, Scientific, and Technical

Nonfarm Employment

Local Govt

Leisure

Construction

Health Care & Social Assistance

Oklahoma Population Growth Rates (%)

P

o

p

u

l

a

t

i

o

n

E

m

p

l

o

y

m

e

n

t

-2

-1.5

-1

-0.5

0

0.5

1

1.5

2

2.5

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

Actual Growth Rate Predicted Growth Rate Relative Oklahoma Nonfarm Emp Growth

Oklahoma Unemployment Rate and Nonfarm Employment Growth (%)

U

n

e

m

p

l

o

y

m

e

n

t

4.27 4.36

-4

-3

-2

-1

0

1

2

3

0

1

2

3

4

5

6

7

8

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Unemployment rate Nonfarm Employment Population

Oklahoma Personal Income Growth (%)

4.66 4.38

2.88

2.24

2.96

2.19

-2

-1

0

1

2

3

4

5

6

7

8

Total Personal

Income

Wages and Salaries Dividends, Interest

& Rent

Nonfarm

Proprietor Income

Other Labor

Income

Transfer Payments

2013 2014 2015 2016

Oklahoma Total Nonfarm Employment Growth Rates (%)

0.35

1.66

0.12

-1.69

-5

-4

-3

-2

-1

0

1

2

3

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Tulsa OKC OK ROS

Thank you for your attention

2016 Oklahoma Economic Outlook Conference

December 8, 2015 | Oklahoma City

Follow us as we live tweet the event: @OSUCEPD #2016EconOutlook

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Text questions to: 405-515-9618