Rob:  Well today, we focus on our economy.  Times are tough; and, well, they could be getting tougher.  We begin with a new economic forecast for Oklahoma’s two major metro areas where times are tough, but there are also some bright spots.  Joining me now is Mark Snead, author of the study and director of the Applied Economic Research Center at Oklahoma State University.  Well before we talk about our two major metro areas, Oklahoma City and Tulsa, let’s visit a little bit about the state.  How are we doing?
Mark Snead:  We’re, you know relative to the nation, we continue to far outperform national conditions.  That’s never been the problem.  But we’ve been slowing along with the nation, and we’re finally beginning to see some of the early impacts of this national recession.  They are moving into Oklahoma.  And, we’re beginning to see unemployment increase.  We’re beginning to see certain industries show weakness.  So, the earliest stages are here.
Rob:  Is the boost that we got from both oil and gas, has that kind of disappeared?
Snead:  It doesn’t just disappear instantly, but it does change very quickly.  And we’ve reached that price level.  Our concern was roughly $45 for oil and roughly 5 or $6 for natural gas.  We’ve gone below both of those levels.  And that’s the point at which we believe that instead of having a boost to the state economy, we shift direction, and it actually restricts state growth.  So, yes, it has; and in fact, it may actually be slowing growth overall at the moment.
Rob:  And on the bright side, it looks like we’re not seeing the tremendous impact that housing’s had in other parts of the country.
Snead:  That is true.  We’ve still ignored most of the housing recession.  What we’re seeing in Oklahoma, our prices are still strong.  Average prices continue to rise; they’re above inflation; they’re well above national numbers which are declining.  You’re seeing slowing volume; that’s the only sign that it’s a slow down.  But what you would describe it as is, is a normal economic slowing, slowing the number of houses sold, nothing like this national collapse in housing, is driving the data.  So, it’s just a normal slow down.
Rob:  So, can I assume that maybe we won’t see the inflation in 2009 that we saw in 2008?
Snead:  Very much so.  You’re very right about that, very unlikely.
Rob:  Let’s talk a little bit, and let’s focus on Oklahoma City now.  What are the bright spots there?
Snead:  A number of them.  It is probably the strongest core area of the state.  Most industries are still adding jobs, but there is weakness.  There’s early signs of weakness in manufacturing, temporary employment; we’ve seen the unemployment rate rise.  But nevertheless, it is the most vulnerable because of the concentration of oil and gas.  So, it is probably the strongest at the moment, but is of greater concern over the next 12 to 18 months.
Rob:  And still seeing job growth, however so slight?
Snead:  Well, actually over the past 12 months, Oklahoma City has added a tremendous number of jobs.  Statewide, Oklahoma’s added more jobs than every other state, other than Texas, the past 12 months.  So, we’re just easing into where we’re probably seeing very small job increases.  But I don’t think it’s clear yet that we’re actually seeing declining job numbers in Oklahoma City.  I don’t think it’s clear that, that’s the case yet.
Rob:  Let’s look north to the Tulsa metro area.  How are they doing?
Snead:  You know largely, nearly every area of the state that has energy has the same story behind it.  Tulsa is weakening; it is slowing.  I think you can still argue that they’re adding a small number of jobs, and growth is sort of coming to a halt, but nevertheless, many industries are still adding jobs.  You are seeing job losses again in the early cyclical sectors, manufacturing, temporary employment, some of the personal services sectors; you’re seeing job losses there.  But nevertheless, given overall national conditions, Tulsa also is somewhat defying the trend and is performing quite well, but slowing; and we think they probably will have flat job growth in 2009, both Oklahoma City and Tulsa.
Rob:  Is it fair to say, the last time we saw some job loss in the manufacturing sector, we never saw it come back.  Could that happen again?
Snead:  Well, you know, that was largely the 2001, two, three, slowdown.  The manufacturing sector, as you’re saying, it was decimated.  We were, in the job numbers, Oklahoma was 49th out of 50 states in the whole period; and largely it was manufacturing; it was hit harder than any other sector.  I don’t necessarily expect that to happen to that degree this time.  But there’s another factor offsetting this, and that’s the weak dollar.  And we believe that essentially everything produced in America is now roughly 40 or 50 percent cheaper after the decline on the dollar.  And we think that there’s probably tremendous momentum, potential, for Oklahoma manufacturing in the next five years.
Rob:  With some exports, then?
Snead:  Absolutely.  
Rob:  Now what about commodity prices?  We saw that rapid rise in 2008.  We’ve seen a decline now.  Where do you think they’re heading?
Snead:  Well, it was scary when the Ag complex exploded.  You know the energy complex exploded.  Literally, every raw commodity saw a tremendous surge.  But in the exact opposite direction, nearly every complex has sold off, and at almost at least as much or more.  Energy is probably the case where it has sold off below the pre-spike levels.  But nevertheless, we are, we seem to be heading back to some normal level of commodity prices, driven more closely by economic conditions and not speculation.
Rob:  So take me out through 2009.  Do you see it getting better, or do you see it getting worse?
Snead:  In Oklahoma, I think it’s clear that we will weaken through 2009.  I don’t think there’s much doubt about that.  There’s a bottom coming somewhere.  At the moment, our best guess is the end of 2009.  And job losses always lag the initial stages of the recovery.  It will not surprise us at all to see job losses into the first or second quarter of 2010.  So, Oklahoma moving into this, we’re in the early stages of it.  And if energy prices stay down, 2009 is not really our risk year; 2010 is potentially a very serious risk year for Oklahoma.
Rob:  And then that risk price is what; $45 for oil?
Snead:  We think that’s about it; about $45 for oil and about 5.50 for natural gas.  And as I say, we are at or below that and have been for the past month.
Rob:  And this is a natural gas state.
Snead:  That is correct.
Rob:  So, we’re probably as concerned about that, or more concerned about that, than we should be oil?
Snead:  Oil matters, there’s no doubt about it; but natural gas is critical,  and all of the supply being produced in the shale fields, not just in Oklahoma but around the country, are putting tremendous downward pressure on prices.  It’s, it is, it’s not looking very positive on the energy side.  We will not have an energy boost next year unless some other unseen event pushes energy prices right back up into, you know, the plus-45 range.
Rob:  All right, well as always, great analysis; appreciate you’re watching it for us.  Mark Snead with Oklahoma State University.