OKLAHOMA CITY – Manufacturing in the Midwest and the Great Plains, including the Sooner State, sank in November to its lowest level in three years. Trade wars and anemic hiring were blamed, at least in part.
The Mid-America Business Conditions Index, an economic indicator for a nine-state region – Nebraska, Iowa, Kansas, Arkansas, Missouri, Oklahoma, Minnesota, plus North and South Dakota – slipped into negative growth for the third time in four months. The index slumped from 52.6 in October to 48.6 in November.
Survey organizers say any score above 50 “indicates an expansionary economy over the course of the next three to six months,” while a score below that suggests a decline.
“Slow global growth and trade skirmishes and wars are negatively affecting growth among manufacturers in the region,” wrote Dr. Ernie Goss, director of the Economic Forecasting Group at Creighton University in Omaha, Neb., which has produced the index since 1994.
EMPLOYMENT INDEX LOWEST IN 4 YEARS
The November employment index plummeted in November to 37.2, its lowest level in four years, from 50.0 in October.
The availability of workers “continues to constrain job growth in the region,” Goss wrote. Oklahoma manufacturers of durable and non-durable goods are experiencing job losses, he reported.
Nevertheless, “Despite the negative impact of the trade war on jobs, 60% of supply managers in our survey support continuing, or even expanding, trade restrictions and tariffs on imports from China,” Goss said.
Oklahoma’s Business Conditions Index dropped into negative growth territory in November for the second consecutive month. Components of the November index were employment at 36.6, new orders at 43.6, production or sales at 44.5, delivery lead time at 60.9, and inventories at 53.6.
OIL/GAS FORECAST ‘WEAK’
Mark Snead, president and chief economist of Region- Track, an Oklahoma City based research firm that specializes in regional economic forecasting and analysis, told the Tulsa Regional Chamber earlier this month that he predicts oil patch drilling will bottom out in the fourth quarter and the oil/gas industry will experience a moderate rebound next year.
Snead noted Halliburton’s announcement Dec. 2 that it will shutter its El Reno campus, where 808 people are on the payroll, and move most of its Oklahoma operations to Dun- can; the company said layoffs are unavoidable. “We value every employee, but unfortunately we are faced with the difficult reality that reductions are necessary as we work to align our operations to reduced customer activity,” said Erin Fuchs with External Affairs.
“The Halliburton announcement is going to be fairly typical, we think, over the next couple of quarters,” Snead said. However, he continued, “The concern really for the state ... is none of the energy price forecasts at this point are suggesting any kind of meaningful bounce in natural gas or crude oil prices in either ’20 or ’21. The outlook is just particularly weak.”
The health of the energy industry will act as a “fairly meaningful restraint” on job growth, Snead predicted. Between 2003 and 2018, approximately half of all private investment in Oklahoma occurred in the mining and pipeline sectors, he said. Approximately 10% to 20% of all earnings statewide “come from the oil and gas cluster,” he added.
STATE, NATIONAL RIG COUNTS DOWN
Oklahoma’s oil/gas rig count on Dec. 6 totaled 50, compared to the 140-rig peak logged in January and the 141 rigs that were operating in the Sooner State in December 2018, records of the Baker Hughes energy service firm reflect.
Amid a global oil glut, U.S. energy companies reduced the number of operating oil rigs for the seventh week in a row, Baker Hughes reported on Dec. 6. On that date the U.S. rig count stood at 799, which was 276 fewer than the number of rigs operating in this nation a year ago.
Monthly gross receipts to the state Treasury in November were less than collections from the same month a year ago, primarily because of a decline in sales taxes and oilfield tax payments, State Treasurer Randy McDaniel announced on Dec. 5. Gross production tax receipts were “considerably lower for a third consecutive month,” he said.
EMPLOYMENT, CONSUMPTION INDEXES BOTH SHRINK
Supply managers in companies throughout the Midwest expanded their inventories “in anticipation of higher tariffs in the weeks and months ahead,” Goss reported. However, “Despite the negative impact of the trade war on jobs, 60% of supply managers in our survey support continuing, or even expanding, trade restrictions and tariffs on imports from China,” Goss wrote.
The Institute for Supply Management® also reported that economic activity in the manufacturing sector contracted in November – yet the overall economy grew for the 127th consecutive month.
The ISM’s Purchasing Managers Index® registered 48.1% for November, the fourth consecutive month of contraction after almost three years of growth in the manufacturing sector.
“This marks eight straight months of softening or contraction in manufacturing,” said Timothy R. Fiore, chairman of the ISM Manufacturing Business Survey Committee. The Employment Index registered 46.6%, a decrease of 1.1% from the October reading, and consumption shrunk also, “due primarily to lack of demand,” Fiore said.