Correction: An information box with this story originally contained an incorrect figure for the November 2016 unemployment rate. It has been corrected.
Tulsa’s unemployment rate is up. Black Friday sales tax receipts came nearly half a million dollars behind what the city of Tulsa expected. The state is facing another budget deficit. So how did we get here?
In 2014, oil reached heights of more than $100 a barrel. Inventories and drilling went up. Then it dropped hard and fast, sending Oklahoma’s economy into a tailspin.
Here’s why it matters: Oil and natural gas along with manufacturing are Oklahoma and the Tulsa metropolitan area’s key exports — among the most efficient ways for the area to bring in an outside dollar. It pays to be the heat exchanger capital of the world, and those two industries are intertwined, economists say, so trouble in energy spills over to the industries it birthed.
Lynn Gray, director of research with Oklahoma Employment Security Commission, described falling oil prices as the “engine” behind the job cuts that surfaced in the energy sector in late 2015.
“It has an outsized influence on your employment,” Gray said. “When that one industry is hit, with not quite a crippling blow, laying off workers. That one industry has an outsized share of our economy.”
Tulsa Regional Chamber’s Bob Ball said the economy in Oklahoma, and other energy producing states, often runs counter to nation’s economy overall because of that concentration of energy and related manufacturing.
After the bottom fell out of the energy industry, economists and lawmakers started bandying about the term “recession.”
It’s not just a term that’s used when things are bad. Certain things have to happen. A recession happens when the
measurement of economic output — gross domestic product — declines for six months, or two consecutive quarters.
Oklahoma saw its output decline from the middle of 2014 to the first quarter of 2016, according to the Bureau of Economic Analysis. Data from the third and fourth quarter of 2016 isn’t yet available.
The state’s GDP declined by 5.67 percent from the first quarter of 2015 to the second quarter of 2016. That’s about $11 billion less in output. Nearly all of that decline came from the energy sector, which toppled from the largest private component of state GDP in early 2015 to the fourth-largest at the end of the second quarter 2016, according to data.
That dip helped push Oklahoma’s output down. The state GDP is now closer that of Iowa, a smaller state, than slightly larger South Carolina and Kentucky.
Recovering some of the lost output will take continued recovery in energy or growth in other sectors. And that means “exports.”
Economists like Gray and Ball have a funny way of measuring whether something is an export industry. It’s a called a location quotient — a measure of how much more of a share workforce an industry has in an area compared to the national average.
For Tulsa, Ball said, the leaders among those are manufacturing, particularly heat exchangers and oil field supplies.
“What’s really sickening about these numbers is what’s happened to the share of manufacturing in the state,” University of Oklahoma economist Robert Dauffenbach said. “It has fallen on a consistent basis.”
Dauffenbach calculated manufacturing made up more than 13 percent of the wages Oklahomans earned in 1998. In 2016, it was 7.9 percent.