Rural Oklahoma andthe National Recession

Dave ShidelerLarry D. Sanders

Presented to the Stillwater League of Women VotersMarch 9, 2010

Oklahoma State UniversityAgricultural 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. Watch for double-dip23/9/2010

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 RateMonthly, 1980: Jan. 2010

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http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?data_tool=latest_numbers&series_id=LNS14000000

9.7%[OK:6.8%,Dec ‘09]

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. http://www.flickr.com/photos/higbie/2554254376/

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LABOR STATISTICS

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State, Metro, and Nonmetro Unemployment Rates

SOURCE: Bureau of Labor Statistics, April 2009; http://data.bls.gov/PDQ/outside.jsp?survey=la*February 2009 Data Considered Preliminary

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 Dec2007 2008 2009

0

1

2

3

4

5

6

7

8

9

Metro Nonmetro State

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County Unemployment Rates

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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

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Source: Bureau of Labor Statistics, March 4, 2010 http://data.bls.gov/map/servlet/map

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Source: Bureau of Labor Statistics, March 4, 2010 http://data.bls.gov/map/servlet/map

Percent Change in Unemployment Rates, December 2008-December 2009

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RETAIL SALES

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SOURCE: Oklahoma Tax Commission

Percent Change in Retail Sales, December 2007-February 2010

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SOURCE: Oklahoma Tax Commission

Percent Change in Retail Sales, February 2009-February 2010

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Bank Card Delinquency Rate, September 2009

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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-dependent3. Nonfarm employment: most farm family income

comes from off-farm4. 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 support3/9/2010

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OK STATE BUDGET & OUTLOOK

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25Source: 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 “double-dip” economic cycle in the next 1-3 years

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Questions?

Dave Shideler(405) 744-6170dave.shideler@okstate.eduhttp://rd.okstate.edu

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