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.

[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!

[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.

[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.

[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."

[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]

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.

[Roadhawg]

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

[soonerguru]

I think OKC is getting ready for a massive economic boom.

As far as the nation goes, I think we'll have a slow, frustrating (and largely jobless) recovery, but we won't have a full-blown double-dip recession.

My main concern with the spending cuts is that they would have a deleterious effect, but most of them don't kick in for a couple of years or so, so the deal struck by Congress hopefully won't do too much damage.

[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.

[adaniel]

I think OKC is getting ready for a massive economic boom.

As far as the nation goes, I think we'll have a slow, frustrating (and largely jobless) recovery, but we won't have a full-blown double-dip recession.

My main concern with the spending cuts is that they would have a deleterious effect, but most of them don't kick in for a couple of years or so, so the deal struck by Congress hopefully won't do too much damage.

For a normal recession caused by cycles in the economy this recovery has been grueling and slow, but comared to recessions sparked by financial crises we are about on track. I have heard that it will be 2015 before everything thats happening now cleanses itself from the economy. No double-dip officially, but I think for most people it really won't matter.

I think OKC is about as well off as any other metro area in the US right now, I wont say we are in for a "boom". The wild card is energy prices. Oil prices cratered today. I'm not sure thats a bad thing considering the state of the national economy and oil is increasingly a non-factor in OK's economy. Its nat gas that has me worried. Prices are really not that good. Yet I work in the energy sector and I have more work than I can handle. Both me and my boss have wondered out loud how much of the E & P actvity right now is due to legit profit making off of gas production or how much of this is companies playing with investor's and Wall Street's money. I know people rag on CHK for doing this but I can tell you not only are they far from being the only ones but many companies (including a few here in OK) are far worse in this regard. If today's drop is less a correction and more a sign of bigger problems then these companies will start dropping like flies. This will effect retail sales, sales tax, etc. Then OKC will be in deep-doo.

Speaking of, I'm not entirely sure why the market had such a big sell off today. Nothing realy happened today, maybe just a realization that the economy just really isn't that good, the paralysis in DC will get worse with the 2012 election around the corner, and the disaster that is Europe and Japan finally hit investors. But Wall Street has been detached from Main Street for quite some time now. I don't want to even look at my 401K statement but Wall Street will do what Wall Street will do. I'm not worried.

[Easy180]

Sorry to hear that Larry...Hope a quality job lands in your court soon

[Spartan]

adaniel, what it is--the Greek default is looking absolutely certain now, the eurozone is going to be absolutely dragged down by this (I was hoping it would happen while I was there, lol), but this could actually be potentially "good" for the dollar as the euro nearly became the major world currency (China kept the dollar alive as the world's reserve currency, but Russia and others were putting their economies behind the euro). Portugal and Spain could also still default, and the debt crisis has Italy now, too.

So it's this huge axis of "middle-upper income" countries like Portugal, Greece, Russia, Spain, etc that are at the epicenter of this impending financial doom and gloom, but the U.S. is extremely integrated with these countries also, unfortunately. I'm surprised that Washington hasn't been asked to contribute to the Greek bailout. Germany has been bearing the sole responsibility for Greece for the last year, and that's not entirely fair--but I think Athens would also rather work out its budget woes with Frau Merkel rather than the Tea Party (or they would at least riot a lot less).

This is the kind of stuff that can bring about a world depression, so to say its implications for us are serious would be an understatement. Even OKC is highly integrated with eurozone countries; was having lunch the other day with one of my friends from this forum and we talked about how CHK has an important relationship with Norweigan-based Statoil, and also many Dutch oil companies (such as Dutch Royal Shell) and other huge conglomerates do a lot of work with CHK and Devon, and all of our other oil companies. Even Gazprom, the Moscow-based gas monopoly, works with CHK, BP, and other corporations with a U.S. presence on some high-profile exploration projects in the tundra. Gazprom supplies all of Europe's natural gas. In this way, OKC is very tied to this wave of economic crisis hitting this group of "middle class" European nations.