Oklahoma’s economy surges but moderation expected

Jim Mitchell
OSU News Bureau
Oklahoma State University
(405) 744-9782
06/28/05

Oklahoma’s economy is accelerating more rapidly than expected due to low interest rates and inflation, higher revenue collections, and a strong housing market. All those factors have helped trigger a surge in demand for workers in most industries, according to Dr. Mark Snead, economist in the Spears School of Business at Oklahoma State University.

“Oklahoma’s economy is on pace to slightly exceed our initial 2005 forecast and is closely tracking national economic conditions, which likely peaked in the last three to six months,” says Snead. “We look better than anticipated for the first quarter but we also expect things to slow slightly to a more moderate pace of growth for the rest of the year,” he adds.

Snead’s statistics show that employment was up 2.8 percent in Oklahoma for the first quarter of 2005 with more than 10,000 new jobs added in the period while personal income increased by an average 7.1 percent in the last year.

“The only factors currently weighing on our economy are the underperformance of the Tulsa market compared to the rest of the state, the ongoing manufacturing slump and stubbornly high energy prices. Fortunately, because we’re an energy producing state, those higher prices are an offsetting source of stimulus to Oklahoma’s economic growth,” says Snead.

Snead expects the state’s energy companies to add another 2,200 jobs by the end of 2005 after adding about that number of new positions last year. That will soften losses in industries sensitive to high energy prices such as vehicle and parts dealers, equipment manufacturers and gasoline stations.

Spurred on by revenue growth and a need to catch up from leaner years, state and local governments have been among the biggest contributors to job growth since March of 2003, according to Snead. Other major industry sectors with expanding payrolls include oil and gas, financial services, and professional, scientific & technical services. 

While housing in Oklahoma is expected to continue its steady price increase, it remains more affordable here than other regions, says Snead. His statistics show housing prices were up an average 4.9 percent in 2004 and he’s forecasting 3.8 percent higher costs for this year. That compares favorably to national rates which increased 8.1 percent last year alone and are expected to follow up with a more moderate 3 percent increase this year.

Oklahoma’s major metro areas continue to follow very different paths when it comes to job growth. Snead is forecasting that Oklahoma City will add more than 11,000 jobs before the end of the year, with a 2.1 percent rate of grow, which will exceed his original forecast of 1.9 percent. “The job growth in Oklahoma City is broad based and nearly every major industry sector is on pace to post a job gain in 2005. I expect especially large gains in state and local government as well as leisure and hospitality,” says Snead.   

On the other hand, Tulsa continues to suffer from weak economic growth compared to the rest of the state and is expected to add only 2,200 jobs in 2005. Weakness in the Tulsa area’s manufacturing sector continues to act as a drag on local economic activity.  Snead predicts that weakness in manufacturing will continue to remain a factor at both national and state levels as low cost foreign competitors limit export potential.  While Snead is forecasting 1.3 percent growth for real manufacturing output in Oklahoma, he expects the state to finish 2005 at more than 15 percent below its 2000 manufacturing output level.

For more details on the latest economic forecast, go to http://economy.okstate.edu.

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