Transcript Oklahoma*s Response to the Current Economic Situation

Rural Oklahoma and
the National Recession
Dave Shideler
Larry D. Sanders
Presented to the Stillwater League of Women Voters
March 9, 2010
Oklahoma State University
Agricultural Economics
Rural Development
The “microwave” briefing on the
economy…
1. Recession is technically
over, but…
2. Inflation, deflation and
unemployment fears…
3. Some cautious optimism,
but it won’t be back to
“normal” for a long time.
4. Oklahoma’s economy may
get worse, but not as bad as
the US
5. OK: Oil, Natural Gas, Ag key
roles in improvement,
especially for rural OK.
6. 3/9/2010
Watch for double-dip
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So, the economy’s in the tank.
What’s the solution?
• Output = Consumption +
Investment + Govt.
spending + Net exports
– Consumption is down,
but…
– Investment is down
– Net exports down,
but…
– Government spending
is propping up the
economy
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US Economy is Rebounding?
US Bureau of Economic Analysis, http://www.bea.gov/newsreleases/national/gdp/gdp_glance.htm,
accessed March 2, 2010 at 2:20 pm
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US Unemployment Rate
Monthly, 1980: Jan. 2010
9.7%
[OK:
6.8%,
Dec ‘09]
http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?data_tool=latest_numbers&series_id=LNS14000000
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Total compensation, US, 12-mo. change,
all workers
A cartoon about demand-side economics. From "'Right to
Work' Laws--Low Wage Scheme," Economic Outlook, January
1955,
CIO Education Department.
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http://www.flickr.com/photos/higbie/2554254376/
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LABOR STATISTICS
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State, Metro, and Nonmetro
Unemployment Rates
9
8
7
6
5
4
3
2
1
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2007
2008
Metro
Nonmetro
2009
State
SOURCE: Bureau of Labor Statistics, April 2009; http://data.bls.gov/PDQ/outside.jsp?survey=la
*February 2009 Data Considered Preliminary
County Unemployment Rates
Source: Bureau of Labor Statistics, March 4, 2010 http://data.bls.gov/map/servlet/map
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Percent Change in Unemployment
Since the Beginning of the Recession
Source: Bureau of Labor Statistics, March 4, 2010 http://data.bls.gov/map/servlet/map
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Percent Change in Unemployment Rates,
December 2008-December 2009
Source: Bureau of Labor Statistics, March 4, 2010 http://data.bls.gov/map/servlet/map
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RETAIL SALES
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Percent Change in Retail Sales,
December 2007-February 2010
SOURCE: Oklahoma Tax Commission
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Percent Change in Retail Sales,
February 2009-February 2010
SOURCE: Oklahoma Tax Commission
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Bank Card Delinquency Rate, September 2009
Delinquency rates are defined as the percentage of bank card accounts that are 60 or more days behind in payments; national
delinquency rate was 1.8%.
SOURCE: Federal Reserve Bank of New York, http://www.newyorkfed.org/mortgagemaps/, accessed January 8, 2010 at 4:30 pm
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Bank Card Delinquency Rate of Change,
September 2008 – September 2009
Rate of change in delinquency rates is defined as the percentage change in the percent of total bank card accounts
that are 60 or more days behind in payments between September 2008 and September 2009; national delinquency
rate dropped by 0.1%.
SOURCE: Federal Reserve Bank of New York, http://data.newyorkfed.org/creditconditionsmaps/, accessed 1/8/10
at 4:30 pm
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Mortgage Delinquency Rate of Change,
September 2008- September 2009
Rate of change in delinquency rates is defined as the percentage change in the percent of total mortgages that are 90 or
more days behind in payments between September 2008 and September 2009; national delinquency rate of change was
2.1%.
SOURCE: Federal Reserve Bank of New York, http://www.newyorkfed.org/mortgagemaps/, accessed 1/08/10 at 2:00 pm
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MINING & AGRICULTURE
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Agriculture & the Macroeconomy
1. Nominal interest rates & loanable funds matter:
Commercial ag is capital-intensive
2. Value of the $: agriculture is trade-dependent
3. Nonfarm employment: most farm family income
comes from off-farm
4. Macroeconomic uncertainty: increased need for
effective risk management tools in agriculture
5. Macroeconomic policy impact on Federal budget:
much of primary crop agriculture relies on federal
support
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OK STATE BUDGET & OUTLOOK
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Source: Oklahoma Policy Institute
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State Agency Budgets ‘10 – ‘12
• Most agencies are being cut 7.5% this year. Rainy
Day Fund and ARRA funds will be used to keep
the cuts from being deeper.
• An additional 12%, across of board reduction, will
likely be needed to stay within available funds for
FY ’11 (even using RDF and ARRA).
• In FY ‘12, the $774 million in RDF and ARRA used
in FY ‘11 are not available.
Source: Oklahoma Policy Institute
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Economic Meltdown Fallout: Where are we headed?
• US economy is vulnerable
to the following forces in
2010-2012:
– Deflationary trend:
Falling wages, retail
prices & spending,
leading to both lower
local government tax
revenue and fewer
employment
opportunities
– Potential inflation
– Persistent
unemployment
– Increase in oil prices
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So, where’s the aspirin???
• For unemployment,
retirement accounts,
and general economic
stagnation, it may be
years before we see
much recovery
• Couple that with the
likelihood of a “doubledip” economic cycle in
the next 1-3 years
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Questions?
Dave Shideler
(405) 744-6170
[email protected]
http://rd.okstate.edu
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