Survey: State, regional economies are slowing

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  •  Data from multiple sources indicate the economy of Oklahoma and many other areas of the country have slowed.
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OKLAHOMA CITY – Data from multiple sources indicate the economy of Oklahoma and many other areas of the country have slowed.

A survey last month of business supply managers indicates a slump in economic growth still grips nine Midwest and Plains states, including Oklahoma. The Creighton University Mid-America Business Conditions Index – a leading economic indicator for a region that stretches from Minnesota to Arkansas – slipped further below growth neutral, hitting 49.1 in September, compared with 49.3 in August and 52.0 in July.

“The trade war and the global economic slowdown have cut regional growth to approximately two-thirds that of the U.S.,” said economist Ernie Goss, who oversees the survey conducted at the Omaha, Neb., university. “Based on the last two months of surveys of manufacturing supply managers, both the U.S. and mid-America economies are likely to move even lower in the months ahead.”

TRADE TALKS, TARIFFS CAUSE FOR CONCERN

Approximately 44% of supply managers indicated that tariffs and trading issues were the greatest economic challenge for their company in the next 12 months. Similarly, the Institute for Supply Management (ISM), an association of purchasing managers, reported Oct. 3 that its non-manufacturing index slipped in September to 52.6 from 56.4 in August. Readings above 50 signal growth, but last month’s figures are the lowest since August 2016.

The Mid-America Business Conditions survey results are compiled into a collection of indices that range from 0 to 100. Survey organizers say any score above 50 suggests growth in the economy over the next three to six months. The Business Conditions Index is a mathematical average of indices for new orders, production or sales, employment, inventories and delivery lead time.

The survey encompasses Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, Oklahoma, North and South Dakota. The Creighton Economic Forecasting Group has conducted the monthly survey of supply managers in those states since 1994. On a positive note, Oklahoma’s overall index rose almost one full point in September, to 50.1, compared to 49.2 in August. Index components were new orders at 49.2, production or sales at 49.4, delivery lead time at 56.7, inventories at 47.5 and employment at 47.8.

ENERGY SECTOR SLOWDOWN

Growth in the state’s energy sector and related industries has slowed for much of this year. Gross production taxes on oil and natural gas generated $73.8 million for Oklahoma’s state treasury in September 2019, a decline of $31.5 million, or 29.9%, from September 2018. Compared to August 2019 reports, gross production tax collections are down by $2 million, or 2.7%, State Treasurer Randy McDaniel said.

The biggest decline in jobs in Oklahoma in recent years occurred in the mining sector, driven by the downturn in oil prices as well as by historic efficiency gains in the energy sector, the Oklahoma Economist reported. “Business pullbacks among the state’s durable-goods and nondurable-goods manufacturing sectors offset improving growth among the state’s non-manufacturing sector,” Goss said. Overall growth in the Oklahoma economy will remain positive but slower in the final quarter of 2019, he predicted.

State government revenue growth slowed in September to nearly a standstill, McDaniel reported. Gross receipts to the treasury increased just 0.3% from the same month a year ago, the smallest amount in two and a half years. Gross receipts in September 2019 reached $1.16 billion, which was $3.8 million more than receipts in September 2018, McDaniel said.

BUSINESS CONFIDENCE ‘WEAK’

Across the region, economic optimism, as captured by the business confidence index, rose slightly last month. It hit 47.7, compared with August’s 45.0. “I expect business confidence to depend heavily on trade talks with China and passage of the nation’s trade agreement with Canada and Mexico,” Goss said.

Companies shrank inventories of raw materials and supplies last month, the Creighton University report said. “This is yet another signal of weak business confidence as manufacturers reduce their inventories of raw materials and supplies based on an anemic sales outlook,” Goss said. Regional trade numbers remained far below growth neutral last month. The index for new export orders sank to 36.2 in September, down from 39.6 in August, and the import index increased slightly to 42.4 from 42.3 in August.

Companies that were surveyed last month by ISM expressed concerns about tariffs. Economists say a drop in the employment measure of ISM’s index to 50.4, its lowest level since February 2014, is a particular cause for concern.“ The most concerning part of the survey was on the employment side, where the index dropped from 53.1 to 50.4, just barely indicating growth,” a note from Contingent Macro Research said.

OKLAHOMA JOB GROWTH LANGUID, LABOR PARTICIPATION RATE LOUSY

According to the U.S. Bureau of Labor Statistics, Oklahoma’s 61% labor participation rate is among the 10 worst in the nation. The participation rate means 39% of job-eligible citizens are not actively looking for work. Job growth in the Sooner State this year has slowed to well below the national rate, the Oklahoma Economist produced by the Federal Reserve Bank of Kansas City reported last month.

“Except for a few months in early 2018, Oklahoma’s year-of-year rate of employment growth now has been lower than the nation’s in every month since April 2013,” the Economist related. “This recent sluggishness followed a decade in which state job growth outpaced the nation nearly 90% of the time,” the Economist noted.

From mid-2013 through mid-2019 Oklahoma employment grew just 4%, “even as national employment grew 11%,” the Economist reported; besides mining, the state’s manufacturing sector also has lost jobs. In addition, in recent years more residents moved to other states than moved in – especially those with college degrees – the Oklahoma Economist lamented.

Oklahoma reportedly has 147,500 unfilled jobs. A state group called “Oklahoma Works Together” has since January been developing strategies and recommendations to connect employers and employees. For instance, Oklahoma Works Together hopes to establish statewide industry councils in critical labor-deficient areas such as engineering, nursing, IT and rural medicine.