U.S. and Oklahoma
Economic Outlook
Megan Williams
Associate Economist, Oklahoma City Branch
Federal Reserve Bank of Kansas City
www.kansascityfed.org/oklahomacity
• The “Fed” consists of three main entities:
• Board of Governors: 7 members appointed by U.S. President
• Federal Reserve Banks: 12 total; semi-independent by design
• Federal Open Market Committee: 19 members; 12 voting
• As with most central banks, the Fed’s primary
responsibilities fall within four general areas:
• Lender of last resort – provide liquidity in times of crisis
• Monetary policy – promote full employment and low inflation
• Bank regulation – ensure safety and soundness of banks
• Financial services – bank for banks, bank for federal govt.
Overview of the
Federal Reserve System
Federal Reserve Districts
and Office Locations
• History, staff, and functions
• Branch office opened in 1920; currently have about 35 staff
• Functions include economic research, bank examinations, public outreach
• 2011 branch board of directors
• Steve Agee (chairman), Dean, Oklahoma City Univ. Business School, OKC
• Jim Dunn, Chairman, Mill Creek Lumber and Supply Co., Tulsa
• Jacque Fiegel, Senior EVP and COO, Coppermark Bank, OKC
• Rose Washington Rentie, Executive Director, TEDC Creative Capital, Tulsa
• Doug Tippens, President and CEO, Bank of Commerce, Yukon
• K. Vasudevan, Chairman, Service and Technology Corp., Bartlesville
The Oklahoma City Branch of the
Federal Reserve Bank of Kansas City
The U.S.
Economy
-10
-8
-6
-4
-2
0
2
4
6
2006 Q3 2007 Q3 2008 Q3 2009 Q3 2010 Q3 2011 Q3
Real GDP growth picked up somewhat
in Q3, but still remains moderate
U.S. Real Gross Domestic Product
Percent change from the previous period, SAAR
Source: U.S. Bureau of Economic Analysis, FOMC
1.3 0.7
4.2
10.3
3.6
-0.9
2.0 2.3 1.6
14.8
4.3
-0.1
-2
0
2
4
6
8
10
12
14
16
Total GDP Consumer spending
Residential investment
Business investment
Exports Government spending
2011 Q2
2011 Q3
Growth in Components of Real GDP
Percent change from the previous period, SAAR
Source: U.S. Bureau of Economic Analysis
Business investment was strong, exports
grew further, and consumers spent more
25
30
35
40
45
50
55
60
65
-1000
-800
-600
-400
-200
0
200
400
600
Nov-06 Nov-07 Nov-08 Nov-09 Nov-10 Nov-11
Private Employment (left axis)
ISM Manufacturing Index (right axis)
ISM Non-Manufacturing Index (right axis)
Change from previous month, thousands
Source: Institute for Supply Management, Bureau of Labor Statistics
U.S. Private Payroll Employment and Business Indexes
Employment growth has been modest but
business indexes remain expansionary
Index
But financial stress continues to rise in
Europe, and is beginning to spread beyond
3-month EURIBOR-OIS & LIBOR-OIS Spreads
Source: Bloomberg
Percentage points
0
0.5
1
1.5
2
2.5
3
3.5
4
0
0.5
1
1.5
2
2.5
3
3.5
4
Jan-07 Aug-07 Mar-08 Oct-08 May-09 Dec-09 Jul-10 Feb-11 Sep-11
LIBOR
EURIBOR
November 2, 2011 FOMC Statement
“To support a stronger economic recovery and to help ensure that
inflation, over time, is at levels consistent with the dual mandate,
the Committee decided today to continue its program to
extend the average maturity of its holdings of securities as
announced in September…
“The Committee is maintaining its existing policies of reinvesting
principal payments from its holdings of agency debt and
agency mortgage-backed securities in agency mortgage-
backed securities and of rolling over maturing Treasury
securities at auction… The Committee also decided to keep
the target range for the federal funds rate at 0 to 1/4 percent
and currently anticipates that economic conditions--including low
rates of resource utilization and a subdued outlook for inflation over
the medium run--are likely to warrant exceptionally low levels for
the federal funds rate at least through mid-2013…
“Voting against the action was Charles L. Evans, who supported
additional policy accommodation at this time.”
The Oklahoma
Economy
Source: U.S. Bureau of Labor Statistics
Employment Growth, Year-over-Year (percent) October 2011
There is considerable variation in economic
strength across the nation and region
3.0
0.3 0.0 1.4
0.6
2.0
1.8
-6
-5
-4
-3
-2
-1
0
1
2
3
4
-6
-5
-4
-3
-2
-1
0
1
2
3
4
Oct-06 Oct-07 Oct-08 Oct-09 Oct-10 Oct-11
Year-over-year percent change
Source: U.S. Bureau of Labor Statistics
Payroll Employment
After a milder recession than the nation,
Oklahoma has been adding jobs rapidly
OK
U.S.
Percent change year-over-year
Source: Bureau of Labor Statistics
Employment Growth October 2011
Most Oklahoma sectors have grown solidly
in 2011, led by energy and manufacturing
-4
-2
0
2
4
6
8
10
12
14
Total Energy Mfg Const Prof & Bus Svcs
Leis & Hosp
Finance Educ & Health
Trade, Transp.
& Utilities
State & Local Govt
Info
U.S.
OK
Unemployment Rate Seasonally Adjusted
Percent
Source: Bureau of Labor Statistics
Yet state unemployment has risen, as
discouraged workers resume job hunting
0
2
4
6
8
10
12
0
2
4
6
8
10
12
Oct-06 Oct-07 Oct-08 Oct-09 Oct-10 Oct-11
OK
U.S.
May: 5.3%
October: 6.1%
Percent
Source: U.S. Bureau of Labor Statistics
Change in Employment Since January 2008 Seasonally Adjusted
Oklahoma employment is now essentially
back to pre-recession levels, except in Tulsa
-4.7
-1.1
-0.1
-3.8
0.1
-5.0
-4.0
-3.0
-2.0
-1.0
0.0
1.0
U.S. OK OKC Metro
Tulsa Metro
Rest of State
Percent
Source: FDIC
Noncurrent Loans as a Share of Total Loans Commercial Banks
Problem loans are still elevated, but OK
banks remain in better shape than the U.S.
0
1
2
3
4
5
6
0
1
2
3
4
5
6
Q3 2001 Q3 2002 Q3 2003 Q3 2004 Q3 2005 Q3 2006 Q3 2007 Q3 2008 Q3 2009 Q3 2010 Q3 2011
U.S.
OK
0
5
10
15
20
25
30
35
40
0
5
10
15
20
25
30
35
40
District NE KS MO Mtn States (CO, NM,
WY)
OK
Q1 2011
Q2 2011
Q3 2011
Source: FRBKC Agricultural Credit Survey
Tenth District Non-Irrigated Cropland Values Percent Change, Year-over-year
Surging farmland prices pose a potential
risk, particularly in the upper Mid-West
Percent
0
30
60
90
120
150
0
3
6
9
12
15
Nov-06 Nov-07 Nov-08 Nov-09 Nov-10 Nov-11 Nov-12
WTI Oil
Brent Oil
Natural Gas
$/MMBTU $ per Barrel
Source: Bloomberg
Energy Prices
Energy prices are always OK’s biggest risk,
and prices have moved quite a bit recently
The U.S. economy is growing
moderately but is facing headwinds
from Europe
Oklahoma’s growth has been very
strong in 2011, and fundamentals
remain fairly solid
Summary