OKLAHOMA Economic Indicators

July 2018

OKLAHOMA ECONOMIC INDICATORS

Oklahoma Employment Security Commission Richard McPherson, Executive Director

Economic Research and Analysis Division

Lynn Gray, Director & Chief Economist

Prepared by Monty Evans, Senior Economist

Will Rogers Memorial Office Building Labor Market Information Unit, 4th Floor N

P.O. Box 52003 Oklahoma City, OK 73152-2003

Phone: (405) 557-5369 Fax: (405) 525-0139

E-mail: lmi1@oesc.state.ok.us

July 2018

This publication is issued and is part of the activities of the Oklahoma Employment Security Commission as authorized by the Oklahoma Employment Security Act. An electronic copy has been deposited

with the Publishing Clearinghouse of the Oklahoma Department of Libraries.

Equal Opportunity Employer/Program

Auxiliary aids and services are available upon request for individuals with disabilities

July 2018 Page 1

TABLE OF CONTENTS

SPECIAL REPORT: Oklahoma Industry and Occupational Projections: 2016 to 2026 ......... 2

U.S. Real Gross Domestic Product and Quarterly Change .................................................. 6

Oklahoma’s Real Gross Domestic Product and Quarterly Change ..................................... 8

Industry Share of Oklahoma’s Economy. ............................................................................ 9

Metropolitan Area Contribution to State Real GDP ......................................................... 10

Leading Index for Oklahoma ............................................................................................. 11

U.S. and Oklahoma Unemployment Rates ....................................................................... 12

Oklahoma Initial Claims for Unemployment Insurance .................................................... 13

U.S. and Oklahoma Nonfarm Payroll Employment .......................................................... 14

Oklahoma Employment Change by Industry. ................................................................... 15

U.S. and Oklahoma Manufacturing Employment. ............................................................ 16

Purchasing Managers’ Index (Manufacturing) ................................................................. 17

Oklahoma Active Rotary Rigs and Cushing, OK WTI Spot Price ........................................ 19

Oklahoma Active Rotary Rigs and Henry Hub Natural Gas Spot Price. ............................ 21

U.S. Total Residential Building Permits. ............................................................................ 23

Oklahoma Total Residential Building Permits................................................................... 24

U.S. and Oklahoma Real Personal Income. ....................................................................... 25

Industry Contribution to Oklahoma Personal Income ...................................................... 26

U.S. Adjusted Retail Sales ................................................................................................. 27

Oklahoma Total Adjusted Retail Sales. ............................................................................. 28

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SPECIAL REPORT: Oklahoma Industry and Occupational Projections: 2016 to 2026

Introduction Every other year, the Oklahoma Employment Security Commission produces long-term industry and occupational employment projections with the base year of the projections decade being an even-numbered year. The goal is not necessarily to predict the exact level of employment ten years in the future, but rather to determine overall trends that can be used for career and policy planning. Employment projections help to facilitate career exploration by high school students and their teachers and parents, college students, career changers, and career development and guidance specialists. Employment projections are also widely used by policymakers and education and training officials to make decisions about education and training policy, funding, and program offerings. Additionally, other state agencies, researchers, and academics use the projections to understand trends in the economy and labor market.

Industry Projections Our 2016 to 2026 industry employment forecast for Oklahoma predicts that total payroll employment will grow 7.4 percent over the decade, adding approximately 130,840 jobs to the state's economy. All but two of Oklahoma's industry supersectors are anticipated to grow in the coming years, (see Table 1).

In the goods-producing industries, employment growth in construction is projected to lead, adding 10,600 jobs (13.7 percent), almost all of which are anticipated to be in specialty trade contractors (5,400 jobs) and heavy and civil engineering construction (3,560 jobs). Natural resources and mining employment is expected to grow at a rate of 15.5 percent, adding 9,250 jobs almost all of which are in support activities for mining (4,840 jobs) and oil and gas extraction (3,050 jobs). Manufacturing employment is projected to decline during the 2016-26 decade, shedding 4,030 jobs (-3.1 percent), led by job losses in machinery (-1,330 jobs), plastics and rubber products (-770 jobs), and fabricated metal product manufacturing (-690 jobs).

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Supersector 2016 2026 Change % ChangeTotal Employment 1,771,750 1,902,590 130,840 7.39

Natural Resources and Mining 59,870 69,120 9,250 15.45Construction 77,380 87,980 10,600 13.69Manufacturing 128,680 124,650 -4,030 -3.13Trade, Transportation, and Utilities 306,720 322,920 16,210 5.28Information 21,120 21,160 50 0.22Financial Activities 78,740 83,320 4,590 5.82Professional and Business Services 181,120 197,870 16,750 9.25Education and Health Services 393,450 429,850 36,390 9.25Leisure and Hospitality 186,620 212,790 26,170 14.02Other Services (Except Government) 67,560 67,400 -160 -0.24Government 170,560 176,670 6,120 3.59¹Includes Self Employed and Unpaid Family Workers

Table 1: Oklahoma Long-Term Industry Employment Projections, 2016-2026

Source: Employment Projections Program, Oklahoma Employment Security Commission, Economic Research & Analysis Division

For the services-providing industries, employment in education & health services, (including state and local government education and hospitals), is forecast to provide the largest gains adding approximately 36,390 jobs (9.3 percent) with health care & social assistance accounting for more than three-fourths of the growth and adding a projected 28,010 jobs. Almost two-thirds of the job growth in health care & social assistance is expected to be in the ambulatory health care services and hospitals sectors.

Leisure & hospitality employment is projected to increase by 26,170 jobs (14.0 percent) from 2016 to 2026 with nearly two-thirds of the projected job gains in food services & drinking places (16,430 jobs).

Professional & business services employment is expected to add 16,750 jobs (9.3 percent) in the 2016-2026 timeframe. Nearly half of the job growth in this industry is led by gains in the professional, scientific, and technical services sector which is projected to add 7,700 jobs (11.1 percent). Administrative and support services is expected to contribute another 7,840 jobs (8.7 percent).

The broad trade, transportation & utilities supersector is forecast to add 16,210 jobs (5.3 percent) between 2016 and 2026 with more than half of the employment growth in retail trade (8,930 jobs). Transportation & warehousing is expected to add 4,820 jobs (9.1 percent) and wholesale trade employment gaining 1,530 jobs (2.6 percent). Utilities employment is forecast to grow at a 8.0 percent rate adding 920 jobs.

The financial activities supersector is forecast to add 4,590 jobs (5.8 percent) between 2016 and 2026 with gains in both finance & insurance (4,010 jobs) and real estate and rental & leasing (580 jobs).

Government employment, (excluding casinos, casino hotels, education and hospitals), is projected to grow 3.6 percent adding 6,120 jobs during the 2016-2026 period with all the growth at the local government level which is expected to add 8,690 jobs (10.1 percent). Federal and state government are both expected to lose employment in the 2016-2026 round.

Information is forecast to add a scant 50 jobs (0.2 percent) over the 2016 to 2026 decade.

Other services (except government) is expected to decline by 160 jobs for a 0.2 percent loss between 2016 and 2026.

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Occupational Projections Turning to occupational projections, several economic trends surfaced in the 2016-2026 round of projections. Health care, influenced by an aging population, is expected to see continued strong growth during the coming decade; construction continues to be on the rebound from the recession; and the need is increasing for replacement workers due to baby boomer retirements.

According to the Oklahoma Employment Security Commission’s occupational employment projections, a solid 212,860 total annual openings are projected from 2016 to 2026, with 13,080 of these being new jobs created during this period. The remaining 199,770 total job openings are due to the need to replace workers who retire or leave their occupations for other reasons.

In terms of absolute job gains, every major occupational group except production is expected to add jobs over the decade between 2016 and 2026. Service occupations are expected to see the largest gain in employment adding 46,810 jobs. Management, business, and financial occupations are projected to add 16,190 jobs followed by construction and extraction occupations which should add 12,630 jobs over the decade, (see Table 2).

The fastest growing occupations for the 2016 to 2026 period are in construction & extraction occupations at 13.2 percent. Employment in computer, engineering & science occupations is projected to grow at 11.3 percent. Service occupations, which include healthcare support and personal care & service occupations, follow at a 11.2 percent rate of growth. Management, business, and financial occupations are expected to grow 8.8 percent. Healthcare practitioners and technical occupations are forecast to grow at an 8.7 percent rate, (see Table 2).

The occupational groups with the most job openings due to growth and replacement needs remained similar to previous projections rounds. Service occupations are projected to have 59,890 total annual openings followed by office & administrative support occupations which should have 30,060 total annual openings. Sales & related occupations are expected to have 26,230 total annual openings between 2016 and 2026, (see Table 2).

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Aggregate Occupational Group 2016 2026Numeric

ChangePercent Change

Annual Total

OpeningsTotal, All Occupations 1,771,750 1,902,590 130,840 7.39 212,860

Management, Business, and Financial Occupations¹ 196,000 212,190 16,190 8.83 18,260Computer, Engineering, and Science² 72,400 79,500 7,100 11.27 6,230Education, Legal, Community Service, Arts, and Media³ 168,230 181,990 13,760 7.01 16,530Healthcare Practitioners and Technical⁴ 112,170 121,940 9,770 8.71 7,190Service Occupations⁵ 365,430 412,240 46,810 11.20 59,890Sales and Related Occupations 179,730 189,740 10,010 5.57 26,230Office and Administrative Support Occupations 269,830 270,300 470 0.17 30,060Farming, Fishing, and Forestry Occupations 12,370 12,880 500 4.07 1,910Construction and Extraction Occupations 95,640 108,270 12,630 13.20 11,900Installation, Maintenance, and Repair Occupations 78,870 85,260 6,390 8.10 8,240Production Occupations 110,230 109,220 -1,010 -0.92 12,080Transportation and Material Moving Occupations 110,860 119,080 8,220 7.41 14,340

⁵Major occupational groups 31-0000 through 39-0000 in the 2010 Standard Occupational Classification (SOC).Source: Employment Projections program, Oklahoma Employment Security Commission, Economic Research & Analysis Division

Table 2: Oklahoma Occupational Employment Estimates & Projections, 2016-2026

Notes: ¹Major occupational groups 11-0000 through 13-0000 in the 2010 Standard Occupational Classification (SOC). ²Major occupational groups 15-0000 through 19-0000 in the 2010 Standard Occupational Classification (SOC). ³Major occupational groups 21-0000 through 27-0000 in the 2010 Standard Occupational Classification (SOC). ⁴Major occupational group 29-0000 in the 2010 Standard Occupational Classification (SOC).

Only a handful of occupations are expected to decline between 2016 and 2026. These occupations are focused in manufacturing, due to international competition and the adoption of new productivity-enhancing technologies, such as robots. These production occupations include various machine and tool setters, assemblers, and operators.

Also, technological changes are expected to continue to negatively affect the employment of several office and administrative support occupations. Employment declines are projected for data entry keyers, word processors and typists, computer operators, switchboard operators, and executive secretaries and administrative assistants.

Occupations focused in postal jobs are also projected to decline in the 2016-2016 decade as the federal postal system continues to cut back employment.

More Information Detailed forecast tables are available at: https://ok.gov/oesc/Labor_Market/Industry_and_Occupational_Employment_Projections/index.html

There you will find industry and occupational projections for the current 2016-2026 round as well as the 2016-2018 short-term industry and occupational projections as well as 2014-2024 long-term projections for Oklahoma’s metropolitan and non-metropolitan areas.

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Definition & Importance Gross Domestic Product (GDP)—the output of goods and services produced by labor and property located in the United States—is the broadest measure of economic activity. It is also the measure that is most indicative of whether the economy is in recession. In the post-World War II period, there has been no recession in which GDP did not decrease in at least two quarters, (the exceptions being during the recessions of 1960-61 and 2001).

The Bureau of Economic Analysis (BEA), U.S. Department of Commerce releases GDP data on a quarterly basis, usually during the fourth week of the month. Data are for the prior quarter, so data released in April are for the 1st quarter. Each quarter's data are revised in each of the following two months after the initial release.

Background There are four major components to GDP: 1. Personal consumption expenditures: Individuals purchase durable goods (such as furniture and cars), nondurable goods (such as clothing and food) and services (such as banking, education and transportation).

2. Investment: Private housing purchases are classified as residential investment. Businesses invest in nonresidential structures, durable equipment and computer software. Inventories at all stages of production are counted as investment. Only inventory changes, not levels, are added to GDP.

3. Net exports: Equal the sum of exports less imports. Exports are the purchases by foreigners of goods and services produced in the United States. Imports represent domestic purchases of foreign-produced goods and services and are deducted from the calculation of GDP.

4. Government: Government purchases of goods and services are the compensation of government employees and purchases from businesses and abroad. Data show the portion attributed to consumption and investment. Government outlays for transfer payments or interest payments are not included in GDP.

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The four major categories of GDP—personal consumption expenditures, investment, net exports and government—all reveal important information about the economy and should be monitored separately. This allows one to determine the strengths and weaknesses of the economy.

Current Developments The U.S. economy grew at the fastest pace in nearly four years in the 2nd quarter, boosted by strong consumer spending and a surge of export products sent to market ahead of retaliatory tariffs set go into effect. Real gross domestic product (GDP) increased at an annual rate of 4.1 percent in the 2nd quarter of 2018, according to the "advance" estimate released by the Bureau of Economic Analysis (BEA). In the 1st quarter, real GDP increased at a revised 2.2 percent.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, surged to a 4.0 percent annual growth rate in the 2nd quarter, following a weak 0.5 percent rate in the 1st quarter. Spending on durable goods, such as automobiles, jumped 9.3 percent in the 2nd quarter, after sinking 2.0 percent in the 1st quarter. Nondurable goods outlays were revised grew 4.2 percent. Spending on services, such as health care and insurance, increased 3.1 percent following a 1.0 percent gain in the previous quarter. Personal consumption expenditures (PCE) contributed 2.69 percentage points to 2nd quarter GDP, compared to a 0.36 percentage point contribution in the previous quarter.

Business investment grew at a solid 7.3 percent pace in the April to June period as spending on structures surged 13.3 percent. Outlays on equipment grew 3.9 percent, while expenditures on intellectual property products climbed 8.2 percent. Nonresidential fixed investment added 0.98 percentage point to 2nd quarter GDP growth.

Inventory building by businesses declined in the 2nd quarter as inventories dropped $27.9 billion. The change in private inventories subtracted 1.0 percentage point from 2nd quarter GDP growth after adding 0.27 percentage point in the previous quarter.

Housing, which has struggled this year, contracted at a 1.1 percent rate after an even larger 3.4 percent drop in the 1st quarter. Residential investment subtracted 0.04 percentage point to 2nd quarter GDP growth after detracting 0.14 percent in the 1st quarter.

Exporters of soybeans and other products rushed to get their shipments to market in the 2nd quarter before the tariffs go into effect. Exports rose at a 9.3 percent rate in the 2nd quarter, while imports grew at only a 0.5 percent rate. The narrowing trade gap added 1.06 percentage points to 2nd quarter GDP growth.

Government outlays increased 2.1 percent in the 1st quarter, as federal government spending grew 3.5 percent boosted by a 5.5 percent rise in national defense spending. Spending by state and local governments increased 1.4 percent in the 2nd quarter. Government consumption expenditures and investment contributed 0.37 percent to 2nd quarter GDP growth.

Real GDP increased at a revised 2.2 percent in 2017 (that is, from the 2016 annual level to the 2017 annual level), compared with a revised increase of 1.6 percent in 2016.

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Definition & Importance The U.S. Bureau of Economic Analysis (BEA) recently released prototype statistics of quarterly gross domestic product (GDP) by state for 2005–2013. These new statistics provide a more complete picture of economic growth across states that can be used with other regional data to gain a better understanding of regional economies as they evolve from quarter to quarter. The new data provide a fuller description of the accelerations, decelerations, and turning points in economic growth at the state level, including key information about changes in the distribution of industrial infrastructure across states.

Current Developments U.S. real gross domestic product (GDP) by state—a measure of nationwide growth calculated as the sum of GDP of all states and the District of Columbia—increased in 48 states and the District of Columbia in the 1st quarter of 2018, according to the Bureau of Economic Analysis (BEA). The percent change in real GDP in the 1st quarter ranged from 3.6 percent in Washington to -0.6 percent in North Dakota.

Overall growth in real GDP by state decelerated to a 1.8 percent pace in the 1st quarter from 2.7 percent the 4th quarter of 2017. Real estate and rental and leasing along with information services were the leading contributors to the increase in real GDP nationally in the 1st quarter, according to the BEA.

In the 1st quarter of 2018, the pace of Oklahoma’s real GDP slowed after accelerating in the previous quarter. Oklahoma’s real GDP grew at a 1.7 percent rate in the 1st quarter, ranking the state 22nd among all other states and the District of Columbia. Statewide GDP was at a level of $176.5 billion (in constant 2009 dollars) in the 1st quarter, up $0.7 billion from the 4th quarter’s level of $175.8 billion.

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Durable goods manufacturing increased 7.2 percent nationally and contributed to growth in every state and the District of Columbia in the 4th quarter. This industry was the leading contributor to the increases in real GDP in five of the ten fastest growing states. In Oklahoma, durable goods manufacturing contributed 0.53 percentage point to 4th quarter GDP.

Construction increased 8.4 percent nationally and contributed to growth in 49 states and the District of Columbia. In addition to Texas, this industry also made a notable contribution to the increase in real GDP in Oklahoma, where it added 0.49 percentage point to overall GDP in the 4th quarter.

Professional, scientific, and technical services increased 4.2 percent nationally and contributed to growth in every state and the District of Columbia. Professional, scientific, and technical services contributed 0.02 percentage point to 4th quarter GDP growth in Oklahoma.

Mining increased 10.0 percent nationally–the fifth consecutive quarter of growth. In addition to Texas, this industry made notable contributions to the increases in real GDP in Oklahoma (1.62 percent) and Alaska (1.19 percent).

Agriculture, forestry, fishing, and hunting decreased 1.7 percent nationally–the fifth consecutive quarterly decline. This industry subtracted from growth in all the Plains states including Oklahoma where it shaved 0.47 percent from 4th quarter GDP.

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Definition & Importance Metropolitan Statistical Areas (MSAs) are county-based definitions developed by the Office of Management and Budget for federal statistical purposes. A metropolitan area is defined as a geographic area consisting of a large population nucleus together with adjacent communities having a high degree of economic and social integration with the nucleus.

Nationally, metropolitan statistical areas represent approximately 90 percent of total GDP. In Oklahoma, the three MSAs of Oklahoma City, Tulsa and Lawton accounted for roughly 75 percent of total state GDP in 2010.

Current Developments Real gross domestic product (GDP) increased in 267 out of 382 metropolitan areas in 2016, according to the U.S. Bureau of Economic Analysis (BEA). Real GDP for U.S. metropolitan areas grew 1.7 percent in 2016, led by growth in professional and business services; information services; and finance, insurance, real estate, rental, and leasing

Natural resources & mining declined 5.3 percent in 2016 and subtracted from GDP growth in 169 metropolitan areas including three of the four MSAs in Oklahoma, (Enid MSA being the exception), where this industry shaved 2.24 from statewide metropolitan area GDP growth.

In 2016, all four of Oklahoma’s metropolitan areas experienced negative growth. Tulsa MSA’s real GDP contracted at a rate of 3.3 percent to $57.5 billion and ranked 362nd (out of 382 metro areas). Oklahoma City MSA shrank 2.2 percent to $65.7 billion and ranked 354th. Enid MSA fell 1.2 percent to $3.1 billion and ranked 315th. Lawton MSA declined 0.7 percent to $4.4 billion in 2015 and ranked 304th among U.S. metro areas.

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Definition & Importance The Federal Reserve Bank of Philadelphia produces leading indexes for each of the 50 states. The indexes are calculated monthly and are usually released a week after the release of the coincident indexes. The Bank issues a release each month describing the current and future economic situation of the 50 states with special coverage of the Third District: Pennsylvania, New Jersey, and Delaware.

The leading index for each state predicts the six-month growth rate of the state's coincident index. In addition to the coincident index, the models include other variables that lead the economy: state-level residential housing permits (1 to 4 units), state initial unemployment insurance claims, delivery times from the Institute for Supply Management (ISM) manufacturing survey, and the interest rate spread between the 10-year Treasury bond and the 3-month Treasury bill.

Current Developments Oklahoma’s leading index, a six-month forecast of the state’s coincident index, expanded in June, registering the biggest monthly jump in over a year. The state’s leading index soared 3.41 percent in June after an upwardly-revised 2.15 percent reading in May. The index level for April was revised up to 2.54 percent from the previous estimate of 2.38 percent, according to the latest figures from the Federal Reserve Bank of Philadelphia.

From March 2015 through March 2016, Oklahoma’s leading index was in negative territory for five out of 13 readings. However, the state’s economy has turned around. Since April 2016, the leading index returned to positive readings for the past 25 months. Overall, Oklahoma’s leading index for June suggests expansion in the state’s economy into the 4th quarter of 2018.

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Definition & Importance The Bureau of Labor Statistics Local Area Unemployment Statistics (LAUS) program produces monthly estimates of total employment and unemployment from a national survey of 60,000 households. The unemployment rate measures the percentage of people who are without work and is calculated by dividing the estimated number of unemployed people by the civilian labor force. The result expresses unemployment as a percentage of the labor force.

The unemployment rate is a lagging indicator of economic activity. During a recession many people leave the labor force entirely. As a result, the jobless rate may not increase as much as expected. This means that the jobless rate may continue to increase in the early stages of recovery because more people are returning to the labor force as they believe they will be able to find work. The civilian unemployment rate tends towards greater stability than payroll employment on a monthly basis and reveals the degree to which labor resources are utilized in the economy.

Current Developments The U.S. unemployment rate declined in July, following an increase in June. The unemployment rate edged down by 0.1 percentage point to 3.9 percent in July, according to the Bureau of Labor Statistics (BLS). The labor force participation rate—the share of working-age Americans who are employed or looking for work—was unchanged over the month at 62.9 percent.

Oklahoma’s seasonally adjusted unemployment rate fell to 3.9 percent in June. Over the year, Oklahoma’s seasonally adjusted unemployment rate has declined by 0.4 percentage point compared to June 2017.

In May, jobless rates declined over the month in 56 of Oklahoma’s 77 counties, increased in seven counties and unchanged in 14 counties. Latimer County had the state’s highest county unemployment rate at 7.5 percent, while Beaver County had the lowest unemployment rate at 2.3 percent. Unemployment rates in June were lower than a year earlier in all of Oklahoma’s 77 counties.

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Definition & Importance Initial unemployment claims are compiled weekly by the U.S. Department of Labor, Employment and Training Administration and show the number of individuals who filed for unemployment insurance benefits for the first time. This particular variable is useful because it gives a timely assessment of the overall economy.

Initial claims are a leading indicator because they point to changes in labor market conditions. An increasing trend signals that layoffs are occurring. Conversely, a decreasing trend suggests an improving labor market. The four-week moving average of initial claims smooths out weekly volatility and gives a better perspective on the underlying trend.

Current Developments The number of Americans filing initial claims for state unemployment benefits rose in the last week of July. In the week ending July 28, the advance figure for seasonally adjusted initial claims was 218,000, an increase of 1,000 from the previous week's unrevised level of 217,000, according to the Department of Labor. The less volatile 4-week moving average was 214,500, a decrease of 3,500 from the previous week's unrevised average of 218,000.

Both initial and continued claims for jobless benefits in Oklahoma showed little change in July. For the file week ending July 21, initial claims for unemployment insurance benefits were at a level of 1,239, down 146 from the previous week and 111 over the month. For the same file week ending, the less volatile four-week moving average declined 28 from the previous week to 1,369 but was up 20 over the month.

For the same file week ending July 21, continued claims for unemployment insurance benefits dropped by 156 from the previous week to a level of 13,468. Over the month, continued claims rose 38 from 13,430 reported on June 23.

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Definition & Importance Nonfarm payroll employment data is produced by the Current Employment Statistics (CES) program of the Bureau of Labor Statistics (BLS). The CES Survey is a monthly survey of approximately 140,000 nonfarm businesses and government agencies representing approximately 440,000 individual worksites. The CES program has provided estimates of employment, hours, and earnings data by industry for the nation as a whole, all States, and most major metropolitan areas since 1939. In order to account for the size disparity between of U.S. and Oklahoma employment levels, we have indexed the data with January 2001 as the start value.

Payroll employment is one of the most current and reliable indicators of economic conditions and recessionary trends. Increases in nonfarm payrolls translate into earnings that workers will spend on goods and services in the economy. The greater the increases in employment, the faster the total economic growth.

Current Developments U.S. payroll growth slowed in July, weakened by reductions in transportation, utilities and government employment. Total nonfarm payroll employment rose by 157,000 in July, compared with an average monthly gain of 203,000 over the prior 12 months, according to the Bureau of Labor Statistics (BLS). Job gains were broad based led by professional and business services (+51,000 jobs), manufacturing (+37,000 jobs), health care (+34,000 jobs), and construction (+19,000 jobs). Average hourly earnings for all employees on private nonfarm payrolls rose 7 cents to $ 27.05.

Oklahoma nonfarm employment added a seasonally-adjusted 3,900 jobs (0.2 percent) in June, to a level of 1,690,700 while May’s estimate was upwardly revised to 1,686,800. Eight of Oklahoma’s 11 supersectors added jobs over the month as professional and business services (+3,100 jobs) posted the largest monthly gain. Leisure and hospitality (-2,300 jobs) reported the largest over-the-month job loss followed by construction (-400 Jobs).

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Definition & Importance Employment growth by industry identifies the types of jobs being created in the state. Conversely, industries with a declining employment trend indicate those which are becoming less important in the state’s economy. There may also be industries which behave more cyclically, growing during expansion and decreasing in times of economic slowdown or contraction. These changes are crucial in that they help to recognize the types of jobs being lost by individuals. Anticipating what will happen in recovery helps identify whether those jobs will return or what types of new jobs will be created. Consequently, key information for planning re-employment, retraining, and other workforce and economic development programs is contained within these data. For this analysis, we are using CES non-seasonally adjusted annual averages to compare year-over-year employment changes.

Current Developments Statewide annual average employment growth gained steam in 2017, as the mining sector added jobs after 20 consecutive months of declines (from January 2015 to August 2016). Total nonfarm employment gained a non-seasonally adjusted 8,700 jobs for a 0.5 percent growth rate. For comparison, 14,600 jobs were lost in 2016 for a -0.9 percent decline.

In 2017, six out of Oklahoma’s 11 statewide supersectors recorded job gains. Professional & business services led all other supersectors adding 3,900 jobs (2.1 percent). Mining & logging and other services both gained 3,800 jobs each. Leisure & hospitality improved by 2,700 jobs (1.6 percent). Education and health services grew by 900 jobs (0.4 percent) and financial activities added 400 jobs (0.5 percent) over the year.

The largest annual average over-the-year job losses were seen in the broad trade, transportation and utilities supersector which lost a non-seasonally adjusted 2,900 jobs (-0.9 percent) as retail trade lost 4,600 jobs (-2.5 percent) but was offset by a 1,800 job gain in transportation, warehousing & utilities. Government shed 2,200 jobs (-0.6 percent) with most of the losses coming from state (-1.6 percent) and local government (-0.5 percent).

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Definition & Importance Manufacturing employment data is also produced by the Bureau of Labor Statistics’ Current Employment Statistics (CES) program. Manufacturing and production are still important parts of both the U.S. and Oklahoma economies. During the 2007-09 recession, employment in manufacturing declined sharply. Although manufacturing plunged in 2008 and early 2009 along with the rest of the economy, it is on the rebound today while other key economic sectors, such as construction, still suffer. In Oklahoma, manufacturing accounts for one of the largest shares of private output and employment in the state. In addition, many manufacturing jobs are among the highest paying jobs in the state. In order to account for the size disparity between the U.S. and Oklahoma employment levels, we have indexed the data with January 2001 as the starting value.

Current Developments U.S. factory hiring surged to the highest level in seven months in July with durable goods manufacturers accounting for nearly all the increase. Manufacturing added 37,000 jobs in July, according to the Bureau of Labor Statistics (BLS). Durable goods accounted for most of the change, including job gains in transportation equipment (+13,000), machinery (+6,000), and electronic instruments (+2,000). Over the past 12 months, manufacturing has added 327,000 jobs.

Oklahoma manufacturing employment gained a seasonally-adjusted 300 jobs (0.2 percent) over the month in June. Once again, durable goods accounted for all of the manufacturing job growth in June as non-durable goods manufacturing shed a seasonally-adjusted 200 jobs over the month.

Over the year, statewide manufacturing employment expanded by a seasonally-adjusted 3,100 jobs (2.4 percent) as job gains in durable goods manufacturing were offset by job losses in non-durable goods (-1,700 jobs).

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Definition & Importance Economists consider the Institute for Supply Management’s Purchasing Managers’ Index (PMI™) a key economic indicator. The Institute for Supply Management (ISM®) surveys more than 300 manufacturing firms on employment, production, new orders, supplier deliveries, and inventories. The ISM® manufacturing index is constructed so that any level at 50 or above signifies growth in the manufacturing sector, which accounts for about 12 percent of the U.S. economy. A level above 43 or so, but below 50, indicates that the U.S. economy is still growing even though the manufacturing sector is contracting. Any level below 43 indicates that the economy is in recession.

For the region, since 1994, the Creighton Economic Forecasting Group at Creighton University has conducted a monthly survey of supply managers in nine states (including Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma and South Dakota), to produce leading economic indicators for the Mid-America economy using the same methodology as the national survey by the ISM®.

Current Developments The pace of U.S. manufacturing activity slowed in July amid a tightening labor market and supply chain issues due to import tariffs. The July PMI® registered 58.1 percent, a decrease of 2.1 percentage points from the June reading of 60.2 percent, according to the latest ISM Manufacturing Report On Business®. Of the 18 manufacturing industries surveyed 17 industries, led by textile mills and producers of electrical equipment and appliances & components, reported growth in July.

The ISM's supplier deliveries gauge declined 6.2 points to 62.1 in July, after jumping to a 14-year high of 68.2 in June. July’s Production Index eased back to 58.5 (from 62.3 in June), while inventories of raw materials rose to 53.3, reflecting intentional stockpiling to avoid shortages. The survey's New Orders Index also slowed slightly but remains robust at a reading of 60.2.

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The Creighton University Mid-America Business Conditions Index, a leading economic indicator for a nine-state region stretching from North Dakota to Arkansas, fell to a solid level continuing to point to positive, but slower, growth for the next three to six months, according to the latest monthly survey results. The Business Conditions Index, which ranges between 0 and 100, declined to 57.0 from June’s 61.8 and May’s 67.3. This is the 20th straight month the index has remained above growth neutral 50.0.

“The regional economy continues to expand at a healthy pace with manufacturing growth of approximately 2.6 percent over the past 12 months compared to a lower 2.3 percent for the U.S.,” said Ernie Goss, Ph.D., director of Creighton University’s Economic Forecasting Group.

Oklahoma’s Business Conditions Index slipped to 60.6 from June’s 61.1 reading. Oklahoma’s Business Conditions Index has now remained above the 50.0 threshold for the last 12 months. Components of the overall July index were new orders at 57.1, production or sales at 60.5, delivery lead time at 68.9, inventories at 55.4, and employment at 61.1.

“U.S. Census data indicate that Oklahoma exported $561.1 million in agriculture and food products in 2017. This represented 10.4 percent of total 2017 state exports, or the bottom in the nine-state region,” said Goss.

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Definition & Importance Crude oil is an important commodity in the global market. Prices fluctuate depending on supply and demand conditions in the world. Since oil is such an important part of the economy, it can also help determine the direction of inflation. In the U.S. consumer prices have moderated whenever oil prices have fallen, but have accelerated when oil prices have risen. The U.S. Energy Information Administration (EIA) provides weekly information on petroleum inventories in the U.S., whether produced here or abroad.

The Baker Hughes rig count is an important indicator for the energy industry and Oklahoma. When drilling rigs are active they consume products and services produced by the oil service industry. The active rig count acts as a leading indicator of demand for products used in drilling, completing, producing and processing hydrocarbons.

West Texas Intermediate (WTI-Cushing) is a light crude oil produced in Texas and southern Oklahoma which serves as a reference or "marker" for pricing a number of other crude streams and which is traded in the domestic spot market at Cushing, Oklahoma.

Background Oklahoma produces a substantial amount of oil. Excluding federal offshore areas, Oklahoma ranked 6th in the nation in crude oil production in 2017 (at 161,678,000 barrels). Crude oil wells and gathering pipeline systems are concentrated in central Oklahoma. Two of the 100 largest oil fields in the United States are found in Oklahoma.

The city of Cushing, in central Oklahoma, is a major crude oil trading hub connecting Gulf Coast producers to Midwest refining markets. In addition to Oklahoma crude oil, the Cushing hub receives supply from several major pipelines that originate in Texas. Traditionally, the Cushing Hub has pushed Gulf Coast and Mid-Continent crude oil supply north to Midwest refining markets. However, production from those regions is in decline, and an underused crude oil pipeline system has been reversed to deliver rapidly expanding heavy crude oil supply produced in Alberta, Canada to Cushing, where it can access Gulf Coast refining markets. For this reason,

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Cushing is the designated delivery point for the New York Mercantile Exchange (NYMEX) crude oil futures contracts. Crude oil supplies from Cushing that are not delivered to the Midwest are fed to Oklahoma’s five refineries, which have a combined distillation capacity of more than 511,000 barrels per day—roughly 2.7 percent of the total U.S. refining capacity.

Current Developments The U.S. Energy Information Administration (EIA) reports that U.S. refineries are running at near-record levels in July. For the week ending July 6, 2018, the four-week average of U.S. gross refinery inputs surpassed 18 million barrels per day (b/d) for the first time since the EIA began publishing that data series in 1990. U.S. refineries are running at record levels in response to robust domestic and international demand for motor gasoline and distillate fuel oil.

Statewide total crude production climbed in May and remains at record levels in 2018. Oklahoma field production of crude oil in May was at a level of 16,401,000 barrels (bbl), 470,000 bbl (3.0 percent) more than the downwardly-revised April production level of 15,931,000 bbl. For the first five months of 2018, statewide crude production was at a level of 80,354,000 bbl, which is 16,322,000 bbls (25.5 percent) more than the 64,032,000 bbls produced in the first five months of 2017.

Domestic oil prices fell in July on oversupply concerns following a report showing OPEC’s output in July rose to its highest for 2018. West Texas Intermediate (WTI-Cushing) began the month at $73.89/barrel (b) and finished the month at $69.7/b, for a loss of $4.19 per barrel over the month.

The number of rigs drilling for oil and natural gas in the U.S. was up three (3) rigs for the week ending July 27, 2018 raising the total rig count to 1,048 rigs, according to Houston oilfield services company Baker Hughes Inc. Of that total, 861 rigs (82.2 percent) drilled for oil and 186 (17.7 percent) explored for natural gas. Compared to a year ago, the nation’s rig count increased 90 from 958 rigs reported on July 28, 2017.

Oklahoma’s active rig count for the week ending July 27, 2018 was at 147 rigs, down one (1) rig from the previous week’s total, according to Baker Hughes. Oil-directed rigs accounted for 129 active rigs (94 percent) of total rig activity. Over the year, Oklahoma’s rig count was up three (3) from 134 rigs reported on July 28, 2017.

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Definition & Importance The U.S. Energy Information Administration (EIA) provides weekly information on natural gas stocks in underground storage for the U.S., and three regions of the country. The level of inventories helps determine prices for natural gas products. Natural gas product prices are determined by supply and demand—like any other good or service. During periods of strong economic growth, one would expect demand to be robust. If inventories are low, this will lead to increases in natural gas prices. If inventories are high and rising in a period of strong demand, prices may not need to increase at all, or as much. However, during a period of sluggish economic activity, demand for natural gas may not be as strong. If inventories are rising, this may push down oil prices.

The Henry Hub in Erath, Louisiana is a key benchmark location for natural gas pricing throughout the United States. The Henry Hub is the largest centralized point for natural gas spot and futures trading in the United States. The New York Mercantile Exchange (NYMEX) uses the Henry Hub as the point of delivery for its natural gas futures contract. Henry Hub “spot gas” represents natural gas sales contracted for next day delivery and title transfer at the Henry Hub. The settlement prices at the Henry Hub are used as benchmarks for the entire North American natural gas market. Approximately 49 percent of U.S. wellhead production either occurs near the Henry Hub or passes close to the Henry Hub as it moves to downstream consumption markets.

Background Oklahoma is one of the top natural gas producers in the nation, ranking 4th among all states in U.S. gross production in 2016, (excluding offshore production), at 2,468,312 million cubic feet (7.6 percent of U.S. gross production). More than a dozen of the 100 largest natural gas fields in the country are found in Oklahoma and proven reserves of conventional natural gas have been increasing in recent years. `

Most natural gas in Oklahoma is consumed by the electricity generation and industrial sectors. About three-fifths of Oklahoma households use natural gas as their primary energy source for

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home heating. Nevertheless, only about one-third of Oklahoma’s natural gas output is consumed within the state. The remaining supply is sent via pipeline to neighboring states, the majority to Kansas, including the natural gas trading hubs in Texas and Kansas.

Current Developments A recent report from the U.S. Energy Information Administration (EIA) noted that over the past decade, natural gas production in the Appalachian region has grown faster than capacity to move the gas into U.S. markets, pushing down local prices. More recently, pipeline infrastructure from Appalachia has increased capacity to deliver Appalachian natural gas to regional market, increasing relative spot prices at Appalachian hubs, and narrowing their price spreads relative to the U.S. natural gas price benchmark Henry Hub in Louisiana.

The EIA also reported that natural gas production in the Appalachian region averaged 22 billion cubic feet per day (Bcf/d) in 2017, an increase of 25% from 2015 average levels. EIA’s latest data indicate that production has continued to increase, and production in the Appalachian region reached 26 Bcf/d in April 2018. Based on 2017 estimates, production in the Appalachian region accounted for almost half of total U.S. dry natural gas production.

Oklahoma natural gas production climbed to the highest monthly level since record-taking began, (in January 1991), in May. Oklahoma natural gas gross withdrawals surged to a level of 243,344 million cubic feet (MMcf), 8,675 MMcf (3.7 percent) more than April’s upwardly-revised level of 234,669 MMcf. Year to date, statewide natural gas production for the first five months of 2018 stood at 1,156,313 MMcf, which is 163,977 MMcf (16.5 percent) more than 992,336 MMcf produced in the first five months of 2017.

U.S. benchmark Henry Hub natural gas spot prices slipped in July, averaging $2.83 per million British thermal units (MMBtu), down 14 cents from the June average of $2.97 MMBtu.

According to oil services company Baker Hughes, for the week ending Friday, July 27, the U.S. natural gas rig count was at 186 rigs, shedding one (1) rig from the previous week. The U.S. natural gas rig count was six (6) units less than the 192 rigs operating on July 28, 2017.

Oklahoma’s natural gas-directed drilling rig count stood at eight (8) units for the week ending July 27, 2018, the same as the previous week. Over the year, the number of statewide rotary rigs exploring for natural gas was down one (1) unit from nine (9) reported for the week ended July 28, 2017.

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Definition & Importance The U.S. Census Bureau and the Department of Housing and Urban Development jointly provide monthly national and regional data on the number of new housing units authorized by building permits; authorized, but not started; started; under construction; and completed. The data are for new, privately-owned housing units (single and multifamily), excluding "HUD-code" manufactured homes. Because permits precede construction, they are considered a leading indicator for the residential construction industry and the overall economy. Most of the construction begins the same month the permit is issued. The remainder usually begins construction during the following three months; therefore we also use a three-month moving average.

While home construction represents a small portion of the housing market, it has an outsize impact on the economy. Each home built creates an average of three jobs for a year and about $90,000 in taxes, according to the National Association of Home Builders. Overall, homebuilding fell to its lowest levels in 50 years in 2009, when builders began work on just 554,000 homes.

Current Developments U.S. residential homebuilding fell to a nine-month low in June and permits declined for a third straight month. Privately-owned housing units authorized by building permits in June were at a seasonally adjusted annual rate of 1,273,000, 2.2 percent below the revised May rate of 1,301,000 and 3.0 percent below the June 2017 rate of 1,312,000, according to the U.S. Census Bureau and the Department of Housing and Urban Development.

Single-family residential permits, which account for the largest share of the housing market, rose 0.8 percent to an 850,000 rate in June, while permits for the construction of apartments fell 7.6 percent to 423,000.

The National Association of Home Builders/Wells Fargo Housing Market Index in July was unchanged from the prior month at 68, matching the lowest level this year.

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Definition & Importance The data services of the Federal Reserve Bank of St. Louis produces series that are seasonally adjusted including monthly state level data on the number of new housing units authorized by building permits. These adjustments are made using the X-12 Procedure of SAS to remove the seasonal component of the series so that non-seasonal trends can be analyzed. This procedure is based on the U.S. Bureau of the Census X-12-ARIMA Seasonal Adjustment Program.

Current Developments Oklahoma homebuilders requested fewer residential permits in June, as statewide permitting activity plunged to its lowest level in nearly a year. Total residential building permitting for June was at a seasonally-adjusted level of 785, down 127 permits (-14.0 percent) from May’s downwardly-revised level of 913, and 195 permits (-19.9 percent) less than the June 2017 estimate of 980 permits, according to figures from the Federal Reserve Bank of St. Louis.

In June, permits for single-family homes were at a seasonally-adjusted level of 734, down 72 permits (-8.9 percent) from the downwardly-revised level of 806 permits in May. Multi-family permitting sank to a seasonally-adjusted level of 51, downs 56 permits, (-52.2 percent), from the downwardly-revised level of 107 units in May. Single-family permitting accounted for 93.5 percent of total residential permitting activity in June while the more volatile multi-family permitting accounted for 6.5 percent.

Year to date, Oklahoma total residential permitting was at a level of 5,268 permits, compared to 5,942 permits (-11.3 percent) for the first six months of 2017.

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Definition & Importance Personal income is a broad measure of economic activity and one for which relatively current data are available. Personal income includes earnings, property income such as dividends, interest, and rent and transfer payments, such as retirement, unemployment insurance, and various other benefit payments. It is a measure of income that is available for spending and is seen as an indicator of the economic well-being of the residents of a state. Earnings and wages make up the largest portion of personal income.

To show the vastly different levels of total personal income for the U.S. and Oklahoma on the same chart, these data have been converted to index numbers. This chart shows a comparison of Oklahoma and U.S. growth in real personal income with 1st quarter 2000 as the base year.

Current Developments Both U.S. household spending and incomes grew at a solid rate in June while May’s spending estimate was revised higher. Personal income increased $71.7 billion (0.4 percent) in June according to estimates by the Bureau of Economic Analysis (BEA). Disposable personal income (DPI) increased $65.3 billion (0.4 percent) and personal consumption expenditures (PCE) increased $57.1 billion (0.4 percent). Real DPI increased 0.3 percent in June and Real PCE increased 0.3 percent. The PCE price index increased 0.1 percent. Excluding food and energy, the PCE price index increased 0.1 percent.

Spending on durable goods was flat in June following a 0.4 percent gain in May. Nondurable goods purchases slipped 0.1 percent after rising 1.1 percent the previous month. Household spending on services, by far the largest consumer category, accelerated 0.6 percent in June after rising 0.3 percent in May.

The ‘core’ personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred inflation measure and excludes the volatile food and energy components, increased at an annual rate of 2.2 percent for a second straight month—the strongest back-to-back gains in six years.

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Definition & Importance Quarterly estimates of state personal income are seasonally adjusted at annual rates by the Bureau of Economic Analysis (BEA). Quarterly personal income estimates are revised on a regular schedule to reflect more complete information than the data that were available when the estimates were initially prepared and to incorporate updated seasonal factors.

Current Developments State personal income increased 4.3 percent at an annual rate in the 1st quarter of 2018, after increasing 4.7 percent in the 4th quarter of 2017, according to estimates by the Bureau of Economic Analysis (BEA). Personal income increased in all states and the District of Columbia. The percent change in personal income across all states ranged from 7.4 percent in Washington to 2.0 percent in Idaho.

Oklahoma’s personal income grew at a 4.0 percent rate, to a level of $173.8 billion, ranking the state 37th among all states in the 1st quarter of 2018. For the 4th quarter of 2018, Oklahoma’s personal income was revised upward to 2.1 percent (from the previous 0.2 percent estimate).

For the nation, earnings increased 4.7 percent in the 1st quarter of 2018, after increasing 4.6 percent in the 4th quarter of 2017. Earnings growth ranged from an increase of 9.5 percent in Washington to 0.0 percent in Idaho, and was the leading contributor to growth in personal income in most states. Oklahoma’s net earnings grew 4.9 percent, contributing 3.0 percentage points to personal income growth in the 1st quarter of 2018.

In Oklahoma, earnings in mining, quarrying, and oil and gas extraction (0.54 percentage point), health care and social assistance (0.44 percentage point), and durable goods manufacturing (0.42 percentage point) were the leading contributors to earnings growth in the 1st quarter of 2018.

Federal civilian and military earnings increased $6.0 billion and $3.4 billion dollars, respectively, due to pay raises that took effect in the 1st quarter. In Oklahoma, federal civilian and military earnings contributed 0.22 and 0.15 percentage point, respectively to 1st quarter earnings growth.

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Definition & Importance Retail sales measure the total receipts at stores that sell merchandise and related services to final consumers. Sales are by retail and food services stores. Data are collected from the Monthly Retail Trade Survey conducted by the U.S. Bureau of the Census. Essentially, retail sales cover the durables and nondurables portions of consumer spending. Consumer spending accounts for roughly two-thirds of the U.S. GDP and is therefore essential to Oklahoma’s economy. Retail sales account for around one-half of consumer spending and economic recovery calls for consumption growth.

Current Developments U.S. consumer spending rose for a fifth straight month in June, driven by strong gains in automobile sales and other discretionary spending items. Advance estimates of U.S. retail and food services sales for June 2018, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $506.8 billion, an increase of 0.5 percent from the previous month, and 6.6 percent above June 2017, according to the U.S. Census Bureau. Total sales for the April 2018 through June 2018 period were up 5.9 percent from the same period a year ago. The April 2018 to May 2018 percent change was revised from +0.8 percent to +1.3 percent.

Receipts at automobile dealerships were very strong again climbing 0.9 percent in June, after advancing 0.8 percent in May. Receipts at service stations rose 1.0 percent on higher gasoline prices. Excluding autos and gasoline, retail sales advanced 0.3 percent in June. Sales at restaurants and bars increased 1.5 percent and sales at building material stores increased 0.8 percent in June. Spending at hobby, musical instrument and book stores declined 3.2 percent while receipts at clothing stores fell 2.5 percent.

The less volatile “core” or retail-control group sales which are used to calculate gross domestic product, and strips out automobiles, gasoline, building materials, and food services sales were flat in June after an upwardly revised 0.8 percent increase in May.

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Definition & Importance The Center for Economic and Management Research (CEMR) Price College of Business, at the University of Oklahoma produces the Oklahoma Monthly Retail Sales Series containing monthly estimates of retail sales for Oklahoma, the Oklahoma City, Tulsa and Lawton Metropolitan Statistical Areas and 48 selected cities in Oklahoma. The series is based on sales tax collection data provided by the Business Tax Division, Oklahoma Tax Commission (OTC). In order to take out monthly volatility, we have used a six-month moving average.

Current Developments Statewide retail spending slumped in June, pulled down by service station sales. Total adjusted retail trade for June was at a level of $3.42 billion, a 1.7 percent decline from May’s level of $3.48 billion. Over the year, total adjusted retail sales were 2.6 percent more than the revised June 2017 level of $3.33 billion. Excluding gasoline sales, total retail sales for June increased 0.2 percent over the month.

Total durable goods sales rose 0.3 percent in May as automobile accessories & repair sales gained 0.7 percent while sales at electronics & music stores grew 1.0 percent. Losses were in used merchandise (-0.3 percent); miscellaneous durable goods and furniture (-0.02 percent). Receipts at lumber and hardware stores were flat in June.

Nondurable goods purchases sank 2.4 percent in June as the volatile estimated gasoline sales category dropped 13.4 percent over the month. Other declining nondurable goods categories in June were drugstores (-0.7 percent) and food stores (-0.2 percent). Advancing nondurable categories in June were general merchandise stores (0.4 percent); apparel (0.3 percent); and eating & drinking places (0.1 percent). Miscellaneous non-durable goods and liquor store sales were both flat for the month.

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