Rob:  Well, each year OSU’s Center for Applied Economic Research releases an annual economic outlook, and this year’s forecast was far from rosy.  Russell Evans is the center’s director.
Russell Evans:  Well every recession leaves a scar.  The great depression left a scar that lasted several generations.  The question is, how deep and how long?  How deep is the scar from this recession, and how long will that scar last?
Rob:  Joining me now in the studio with that answer and much more is the director for the Center for Applied Economic Research, Russell Evans.  Well, first question, is the worst behind us?
Russell:  The worst is behind us.  But, dealing with a recession is a bit like having the flu in that after the worst is behind you, it’s still some time before you feel better.  The economic recession is behind us, the national recovery is under way, but it will be some time before, in Oklahoma and around the nation we feel, we feel healthy again.
Rob:  Now we’ve seen unemployment just continually tick up.  Will these higher numbers, will they be just part of our foreseeable future?
Russell:  Yes, at least through 2010, and probably into the early part of 2011.  All indications are that a national recovery will proceed slowly, that it will proceed in a manner that doesn’t generate a lot of jobs nationally; and that will certainly trickle down and affect the states, Oklahoma among them.  So yeah, I suspect unemployment rates will continue to trickle upwards just a hair, before they trickle down just a hair at the end of 2010.  We’ll end the year roughly where we started, perhaps with slightly lower unemployment rates, and then look forward to 2011 for any big, any big drops in unemployment rates.
Rob:  Now am I correct in assuming that some of the jobs that are leaving us, they’re probably not going to come back, but maybe others will develop in their place?
Russell:  Yeah.  Well, we do see some trends in terms of the jobs that are taking place, the jobs that are leaving, and just changes in the labor force makeup.  We see in Oklahoma, for example, a general substitution of capital machines for labor in the manufacturing process.  I suspect that manufacturing employment will continue to fall, even as manufacturing remains a central part of the state.  We will see in Oklahoma education jobs, we’ll see healthcare jobs, continue to increase consistent with national trends; largely driven by demographics and retirements of our, of our baby boomers.  We’ll see those jobs come back, and we’ll also continue to see a real, a particularly interesting movement which is a substitution of full-time labor for temporary labor.  And so we continue to see firms hiring from temporary employment services and getting more and more of their workforce off the temporary payrolls.  And so we’ll continue to see that number go up which will cloud, will actually cloud our understanding just a bit as it becomes harder to distinguish exactly whose being hired to do what.
Rob:  So as we see more temporary employees and probably jobs without benefits, could it be that we may have a workforce that may be more under-employed if not unemployed?
Russell:  Well that’s certainly one of the issues that we continue to look at as economists, and this isn’t unique to Oklahoma.  Nationwide we see this trend where firms are increasingly slow to hire full-time workers with benefits, and are instead going to temporary employment agencies to hire their workforce.  We have stories of employers who are laying off workers, then going back and hiring those same workers through a temporary employment office.  It’s part of the trend that’s going on nationally, and certainly that’s a concern, is the benefits that they will receive and the extent to which they, you know, they face increased hardships because of their temporary status.
Rob:  Did we learn this past year just how important our oil and gas sector is to our economy?
Russell:  Well, you know, we talked for years about Oklahoma being a more diversified economy, and certainly we have diversified away from, away from the oil and gas industry in terms of the raw numbers of employment and output; but there’s no doubt that Oklahoma remains a commodity driven state.  We are an Ag state; we are an energy state; we are still a manufacturing state; and any time we go through a recession, we see such a precipitous decline in energy prices.  You’re going to see that translate into lower state tax revenues, lower state income.  You’re going to feel the effects of a significant fall in oil and gas prices as the oil and gas industry recovers from it.
Rob:  Yeah, and as we do see those prices hopefully tick back up, will it take a while to feel that positive impact?
Russell:  We, it will take a while, though we suspect that it will tick back up.  At this point we still, we still look around the globe and see that there’s a significant amount of development in economic activity still ongoing and still forecasted to take place in the coming years.  We suspect that China and India and much of our Southeast Asia will continue to grow, and grow rather aggressively; and they will need energy as they do so.  And so, we’ve had this recession that’s really the result of a financial crisis, a credit crisis, as much as anything else.  And as we recover from that financial crisis, and economic activity rebounds, energy demands should rebound.  And I suspect Oklahoma and Oklahoma’s oil and gas producers will fare nicely.  I think that they’re still, I think we’re still, in positive territory in this energy cycle, the last, you know, two and half years, these intervening two and half years notwithstanding.
Rob:  Now I want to ask you about natural gas, it seems like it has become so important to our state’s economy and with all the new fields and all the new explorations going on, it seems like it will only grow?
Russell:  Yeah, I suspect that’s the case and certainly natural gas is much better organized in terms as a lobby than they’ve ever been; and I suspect that their representation in Washington DC will get stronger.  I think they’re fairly well funded and I suspect that they’ll continue to lobby effectively for the sorts of reforms that would benefit the natural gas industry.  We’ve certainly seen, we’ve seen behavior that suggests that producers expect positive outcomes there.  We’ve seen Devon sell a lot of their offshore oil holdings to focus on some onshore natural gas production.  We’ve seen Exxon Mobile recently acquire XTO Energy, also an onshore producer of natural gas.  Those things, at least anecdotally suggest that some big producers feel that natural gas could serve as a bridge fuel to a, to a sort of different energy paradigm, that we may substitute a way for some meta fossil fuels and towards natural gas; and it looks like the players are getting in place for that possibility.  And so there’s a lot of good indications that the natural gas sector in Oklahoma will grow and continue to be a real strong contributor to the state’s economy.
Rob:  Well it’s certainly going to be an interesting year.  As you look out into 2010, are there any big hurdles?  Are there any big things that could maybe change all this for us?
Russell:  Yeah, you know, in terms of hurdles, a lot of them are beyond our control in Oklahoma.  Again, we are largely a commodity state and Ag producers and energy producers really rely on and need stable prices.  Whether you’re a farmer or an oil and gas producer, you need to be able to look out into next year, and the next year, and have some idea what the price is going to be for your product.  Certainly you face enough uncertainty with weather and geological formations, there’s enough uncertainty in those industries without complicating things with fall to prices.  What we need in Oklahoma is some idea to look forward and have a relative idea of what those commodity prices are going to be.  We need a global economic recovery that’s steady, that’s predictable, that’s reliable so that our oil and gas prices can continue to trend and take upward in a predictable and sustainable fashion.  We need to see that our Ag prices are going to continue to hold steady and even trend up in a predictable sustainable fashion so that we can plan for the future and we can recover as the rest of the nation does.
Rob:  Well we certainly appreciate your insights; Russell Evans with the Center of Applied Economic Research at Oklahoma State University.