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This Too Shall Pass

Job loss in the oil and gas sector is likely to continue in the coming months, adversely affecting Oklahoma’s economy.
This Too Shall Pass

This Too Shall Pass

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Show Details

Show 1601: This Too Shall Pass
Air Date: January 3, 2016

 

Transcript

Rob McClendon: Hello, everyone. Thanks for joining us here on “Horizon.” I’m Rob McClendon. Well, as we begin the new year, it may be time to take a breath and remember that when it comes to our economy, this too shall pass. Slumping energy prices have put a pinch on the state’s top industry, and before it’s over we all may feel the pain. Job loss in the oil and gas sector looks to continue in the coming months, and 2016 may be the first year in a long time that the state’s economy trails the national economy. With more, here’s our Blane Singletary.

Blane Singletary: Oklahoma once prided itself as leading the national economy. But today, that’s a different story.

Jim Huntzinger: Well, overall I think the U.S. economy’s doing OK, and 2016 should be another year of 2 to 2.5 percent growth within the economy. We’re gonna struggle a little bit especially early in the year here in Oklahoma because of the downturn in energy prices, but that will pass.

Blane: That’s Jim Huntzinger with the Bank of Oklahoma. It’s that air of uncertainty over energy prices that was a common theme at the 2016 Oklahoma Economic Outlook Conference, headed by OSU economist Dan Rickman.

Dan Rickman: Well, primarily, it’s the losses in the energy sector and all the other sectors that are dependent on the energy sector. So there’s a number of manufacturing sectors that produce equipment for energy extraction and support activities, and so they’ve declined as well as the energy sector.

Blane: This has cost Oklahoma jobs and has economists like Rickman mentioning the dreaded R-word: recession.

Rickman: If you’re looking at employment, you can call what we’ve had a recession. Over the course of 2015 so far, we’ve had enough quarters of decline in employment that we’d consider that a recession.

Blane: While Oklahoma’s unemployment rate has remained relatively flat, that could be because people who have lost their jobs are choosing to find work elsewhere.

Rickman: One of the parts or components of population growth is migration of people from other areas in the country, and that usually occurs when our economy is growing stronger than those in the other parts of the country. But right now we’re lagging behind the rest of the country, so we should not expect to end migration. More likely, we’re going to expect people moving out who have lost jobs in these sectors.

Blane: But it’s not all doom and gloom for 2016. Again, Jim Huntzinger.

Huntzinger: We’ve really done a good job of bringing people back into the workforce. Unemployment peaked at 10 percent. We’re now down to 5 percent, and it probably won’t be but just a few months until we have a 4 percent handle on the unemployment rate. So we’ve done a good job of putting people back to work, creating jobs. So I think the brightest spot in the U.S. economy is the employment picture.

Blane: A national trend with a positive local impact.

Rickman: A number of sectors are growing that correspond to the national economy. So there are growth forces in the state. They’ve just been offset by the declines in the energy sector, but once the energy sector stabilizes, then the state will return to overall growth.

Blane: A stronger national economy also means higher interest rates. The Federal Reserve raised interest rates by a quarter percent in December. That means it will cost more to borrow money.

Huntzinger: Well, I think 2016 from a market perspective is gonna be a struggle for the markets. Interest rates are gonna be rising, and equity markets are gonna be very volatile. That doesn’t mean it goes down forever or up forever; it’s just going to be very tough to get a consistent feel about how well the equity market is going.

Blane: From higher interest rates to lower energy prices, 2016 may be a challenging year in Oklahoma, but Huntzinger says we should never forget how we got here.

Huntzinger: We’ve diversified our economy a ways, but oil and gas and energy in general is still an important factor to drive growth. I embrace it. Why be ashamed of that? I mean, there is a little more volatility that comes along with having a major energy sector. But it is what it is; we’re lucky to have it, I think, over a longer period of time. We’re in one of those down periods right now -- what makes it difficult for the energy companies -- but it’ll pass, and we’ll get back into a period where energy prices are rising again.

Rob: Well, if there is a silver lining to this rather gloomy forecast, it is our nation’s gross domestic output. The GDP looks to continue a slow but steady growth of about 2 percent next year. Now, when we return, we continue our economic outlook for 2016, by heading outside the city lights.