Trouble Coming to OKC?

[king183]

More people are sounding the alarm of a double-dip recession and all the fundamentals I see sure make it appear likely: lower consumer confidence/spending, stubborn unemployment, a major drop in manufacturing and durable good orders. I really hope we don't have another recession, but if we do, I'm getting more concerned for Oklahoma and OKC because I don't think we'll withstand a new one like we did the previous one.

The last recession was fairly mild for OKC due to our relatively stable home prices and our energy companies doing well. Over the past week, however, energy prices have plummeted. Oil is below $90 and natural gas is below $4. This is good for the consumer because it lowers gasoline prices and heating costs in the winter, but it's bad for our major energy employers. Right now, consumers are saving any extra income they get, as contrasted to the energy companies reinvesting, hiring, and spending it on all types of projects.

What do you guys think? Am I off here? Is OKC headed for trouble, along with the rest of the nation? If the economy re-enters a recession that means lower MAPS 3 revenue, lower regular sales tax revenue, and possibly the freezing of many commercial and residential projects. If there is another recession, I hope we can weather it as well as we did the last, but I'm not so sure we can.

[ou48A]

Your concerns are very well founded IMHO.

+ we have a massive drought and extreme temps that are also taking money out of the state’s economy.

[Pete]

I've never understood all the recession phobia. If you live financially smart and frugal and don't experience an unfortunate health emergency then exactly what so catastrophic is going to happen?

It's very different in areas with high costs of living. You can burn through savings super fast just trying to stay on top of your mortgage and with high home prices, they can drop rapidly and then you can't sell and get your money out.

It's very different here in California and lots of other places... You literally can't buy a home without extending yourself, so a hiccup can be tough to fight through.

[MikeOKC]

It's very different here in California and lots of other places... You literally can't buy a home without extending yourself, so a hiccup can be tough to fight through.

Very good point. That is certainly true and it bothers me that lists like the one I just posted don't take the micro-economics of cities into account.

[BBatesokc]

It's very different in areas with high costs of living. You can burn through savings super fast just trying to stay on top of your mortgage and with high home prices, they can drop rapidly and then you can't sell and get your money out.

It's very different here in California and lots of other places... You literally can't buy a home without extending yourself, so a hiccup can be tough to fight through.

Oh, i see that. I was speaking specifically to Oklahoma though (as defined in the question). That is one reason I probably wouldn't live in an area where I had to over extend simply to survive. But many people do and do fine. I find Oklahoma to be a recession destination. I've met many people who moved here from places like California because of the cost of living. A couple I just met recently bought a condo in Deep Deuce. He was a laborer barely making it in Cali and liquidated and moved here and says he feels like a king.

[OKCisOK4me]

I need to go get some gas NOW!

[BBatesokc]

I can't speak for OKC, but I've never understood all the recession phobia. If you live financially smart and frugal and don't experience an unfortunate health emergency then exactly what so catastrophic is going to happen? Yes, job loss is a major burden, but not something most families who plan ahead cannot weather. Don't live beyond (or even at) your means, don't carry over credit card or vehicle debt, keep an emergency fund and both spouses working and everyone should be fine. I'm not preaching, I just don't understand living any other way.

On a bigger scale would that mean OKC's growth is slowed? Probably. But it will most likely mean so is the rest of the country.

[Pete]

Our largest employers are quite diverse, and all are expanding, most rapidly. People forget that OKC not only prospered during this latest recession but did so after losing the entire GM plant! One of the largest employers just completely went away and the city never missed a beat.

Our economy is certainly tied to oil & gas but there has been a big change in that industry of late: 9/11 has made local exploration a priority forever. Things might trend down a bit but I don't think you'll see the bottom fall out of the locals the way it happened in the 80's.

I really think the employment base is pretty solid. Even if one area takes a bit of a hit, I think we'll be okay. The cost of living is still very low there and people don't need to make a ton of money just to hang onto their homes.

[MikeOKC]

Let's hope this list of "Top Ten Sickest Housing Markets" is wrong:
http://247wallst.com/2011/08/03/amer...ing-markets/2/

[dmoor82]

If by Trouble you mean another or worse recession comes along I think OKC will again fair alot better than most of the country and even possibly see some high population gains here from Coastal people who thought about moving this last recession but didnt and this might push many over the edge,they might not be able to afford anything and move here for jobs and low cost of living!

[OKCTalker]

The small business sector is expected to lead the recovery, and Oklahoma has a great climate for that. We have minimal regulation, low labor costs (and cost of living), good worker ethic, some pretty bright people (although not an abundance of them), ample and inexpensive commercial space, good access to capital ($13 million in SBA funds going to i2E was announced this week), and a federal program which eliminates capital gain taxes for investment in companies by 12/31/2011 if the stock is held more than five years. Government budgets appear to be under control, and our unfunded pension liabilities (while not great) could be much worse. (The need to replace the county jail is looming, and that will cost Oklahoma County residents a pretty penny.)

King, your arguments are good ones, but all in all, I'm glad to be here.

[Pete]

Yes, I would strongly consider moving back to OK for semi-retirement, as it's always going to be expensive to live here, even in out-lying areas.


Anyway, back to OKC... I think the low housing prices and rental rates will make any recession a little easier to handle than most places. It's when your income can't cover your basic living costs that things start to head south pretty quickly. Otherwise, you just cut back a bit and weather the storm.

[Spartan]

I think we're getting away from the point. If the energy industry plummets, we are in a huge conundrum. It's that simple. Let's talk about how Chesapeake owns almost all of North OKC now. The downtown office market will absolutely fail if Devon fails. And all those wishing for SandRidge to rebuild what they tore down can tilt at some other windmill. Yes, we have aerospace, we have Hobby Lobby, Sonic, call centers, and a few others. I'm not saying we wouldn't get through it, but the boundless optimism we have right now absolutely vanishes if the oil biz plummets. There is no way to deny this, and I hope that gut check never comes.

[Pete]

Devon is super strong with tons of cash; CHK & SandRidge are different matters.

And if SR was to fail, at least they have renovated the tower and we are no worse off (apart from the demolished buildings) than when Kerr McGee folded it's tent.

[OKCTalker]

Spartan - I'm not seeing "boundless optimism" anywhere. Markets off another 4%+ today, congress can't do anything but fight and continually change the rules on business, and we are heavily-weighted towards energy. That said, Devon isn't failing (they paid CASH for their new building), and if CHK needs to pull in their horns, they'll close satellite operations first and consolidate to the NOKC campus (if they totally tank, that may be the least of our worries).

Far more to be optimistic about than pessimistic. It's happy hour in 20 minutes and tomorrow is Friday - go have a cold one and be thankful for everything we have going for us.

[Spartan]

Larry, I'm sorry, that's terrible. If we could pool together and hire a fact checker here on OKC Talk, no doubt it would be you.

Spartan - I'm not seeing "boundless optimism" anywhere. Markets off .........

Far more to be optimistic about than pessimistic. It's happy hour in 20 minutes and tomorrow is Friday - go have a cold one and be thankful for everything we have going for us.

That's what I mean by boundless optimism. HERE in Oklahoma City, that is. Things have been going extremely well, and as Pete has saliently pointed out, it looks like our own development and our own economy has reached a tipping point of momentum. You know that has happened when bids are out for two projects in the HSC totaling $100M and nobody has even noticed. It would be nice if this gravy train could last.

If the Dow keeps dropping 500 points a day, then it shouldn't take long for serious trouble to find OKC, even if it finds us last. The thing about economic trends is that they generally lag behind here by a year or two. A recession here will hit later, as will a recovery.

[Larry OKC]

We have been blessed by our relatively low unemployment figures, stable housing market etc. And even though sales tax revenue took major hits (consistent double digit decreases), we are slowly getting back to the point we were at before it hit here. We aren't quite there yet.

During rounds of layoffs, I counted myself fortunate to have a job and insurance (even though there was a cut in hours and no raises for 2 years). That recently changed when I didn't make the last round of layoff's and am currently between jobs (was there for 10 years).

Think the saying goes, "The difference between a recession and a depression is when your neighbor loses their job, it is a recession. When you lose yours it is a depression."

[PennyQuilts]

We have been blessed by our relatively low unemployment figures, stable housing market etc. And even though sales tax revenue took major hits (consistent double digit decreases), we are slowly getting back to the point we were at before it hit here. We aren't quite there yet.

During rounds of layoffs, I counted myself fortunate to have a job and insurance (even though there was a cut in hours and no raises for 2 years). That recently changed when I didn't make the last round of layoff's and am currently between jobs (was there for 10 years).

Think the saying goes, "The difference between a recession and a depression is when your neighbor loses their job, it is a recession. When you lose yours it is a depression."

That's rough, Larry. No matter how much you think you are prepared, it is still a shock. Hope this is just a short term deal and something opens up, quickly.

[Larry OKC]

Thanks Spartan, if anyone has a job lead, feel free to send me a private message (Print Graphic Design/Layout last 10 years in the Pre-Press end of things).

[Pete]

OKC's economy is somewhat counter-cyclical to the rest of the country. High energy prices are good for us and bad for everyone else.

But even through the worst recession in decades, oil prices have gone way up and pretty much stayed there. They might come down some but as I mentioned before, there will always be a strong demand for domestic oil & gas.


Also, what happened elsewhere isn't likely to ever be as severe in OKC because there has already been a massive financial and foreclosure shakeout. Those areas are actually stronger than a couple of years ago and trending up which makes it unlikely any downturn in the local economy would coincide with another national financial crisis.

[MikeOKC]

But even through the worst recession in decades, oil prices have gone way up and pretty much stayed there. They might come down some but as I mentioned before, there will always be a strong demand for domestic oil & gas.

Our energy base sometimes keeps me awake at night. The fact is that the world is desperately working to find alternatives to energy that doesn't require killing ourselves by the burning of fossil fuels. Not everyone is as enthusiastic about the energy industry as some like Jim Cramer on CNBC (who I think would shine Aubrey McClendon's shoes every morning if asked). The simple fact is that Oklahoma City is one discovery away from disaster and implosion without diversification, and that only dribbles our way. We've hooked our wagon to a dying industry. It's not a matter of 'if' but 'when.' People around here don't like to hear talk like this for obvious reasons, but the truth is staring at us in the face and we continue to move ahead as if oil & gas has anything but a short-term future. I hate to sound pessimistic, but what I'm writing isn't wild fancy - read Ray Kurzweil and others who fully expect an alternative energy that will develop almost overnight and will leave the burning of fossil fuels to the history books. Where does that leave Oklahoma City?

[ljbab728]

Our energy base sometimes keeps me awake at night. The fact is that the world is desperately working to find alternatives to energy that doesn't require killing ourselves by the burning of fossil fuels. Not everyone is as enthusiastic about the energy industry as some like Jim Cramer on CNBC (who I think would shine Aubrey McClendon's shoes every morning if asked). The simple fact is that Oklahoma City is one discovery away from disaster and implosion without diversification, and that only dribbles our way. We've hooked our wagon to a dying industry. It's not a matter of 'if' but 'when.' People around here don't like to hear talk like this for obvious reasons, but the truth is staring at us in the face and we continue to move ahead as if oil & gas has anything but a short-term future. I hate to sound pessimistic, but what I'm writing isn't wild fancy - read Ray Kurzweil and others who fully expect an alternative energy that will develop almost overnight and will leave the burning of fossil fuels to the history books. Where does that leave Oklahoma City?

Mike, at some point you will be correct about fossil fuels, but that is hardly imminent. It will likely be decades, if not centuries before that occurs.
Of course OKC could use more diversity in it's economy and I think we're working in that direction and I sleep very well at night without worrying about it,.

[MikeOKC]

Mike, at some point you will be correct about fossil fuels, but that is hardly imminent. It will likely be decades, if not centuries before that occurs.
Of course OKC could use more diversity in it's economy and I think we're working in that direction and I sleep very well at night without worrying about it,.

Centuries? Read some good books on the exponential growth of technology and how that is leading towards singularity. And I mean 'exponential' in its correct definition and not as it's tossed around as meaning only 'huge.' In the opinion of people that I respect very much in my industry, the technological growth will lead to a harnessed energy source that will render fossil fuels obsolete within 20 years. Think of the Internet - what were your thoughts on that in 1991? The Internet has almost put newspapers out of business, bookstores, it's changed the way we transact business (it's turned your travel business upside down), changed the way we communicate, on and on and did anyone dare believe all of this change in just 20 years? The next great technological 'leap' will send us into energy sources only dreamt of today.

[ljbab728]

Centuries? Read some good books on the exponential growth of technology and how that is leading towards singularity. And I mean 'exponential' in its correct definition and not as it's tossed around as meaning only 'huge.' In the opinion of people that I respect very much in my industry, the technological growth will lead to a harnessed energy source that will render fossil fuels obsolete within 20 years. Think of the Internet - what were your thoughts on that in 1991? The Internet has almost put newspapers out of business, bookstores, it's changed the way we transact business (it's turned your travel business upside down), changed the way we communicate, on and on and did anyone dare believe all of this change in just 20 years? The next great technological 'leap' will send us into energy sources only dreamt of today.

Mike, we can agree to disagree then. Get back to me in 20 years and we'll discuss who was right. I remember similar discussions about imminent changes in the way we live back in the 60's and 70's that basically never happened.

[Roadhawg]

After today I don't even want to go look at my 401K....