POSTED ON OCTOBER 27, 2010:
Is the Nightmare Over?
The spooks are still out there, but if you listen to these guys, your money is good in the greater Tulsa Metro
The answer is a simple and straightforward one from the perspective of the National Bureau of Economic Research, the Cambridge, Mass.-based nonpartisan research organization that serves as the official arbiter on matters of economic cycles in this country. The NBER maintains the U.S. economy emerged from the recession in June 2009.
But is the recession over in Tulsa? The picture here isn't quite so clear, according to a handful of local government and business leaders.
Many of those quizzed for this story responded initially by drawing a deep breath, chuckling uncomfortably--or both. Most were not ready to declare the recession over in Tulsa, but they were willing to concede that, at worst, the economy is very close to bottoming out.
Mike Kier, the city's finance director, responded with a firm "Maybe" in response to the question.
"It's hard to do more than that," he said.
Kier said he tends to concentrate mostly on Tulsa's sales tax receipts in regard to measuring the strength of the economy. And what he sees there still gives him reason for concern.
"We've yet to have two months of increased sales tax (revenue) consecutively," he said. "But if we're not actually at the bottom, we're very close."
In this calendar year, Kier said, Tulsa's sales tax receipts have been better than the same period a year earlier three times -- in May, August and October. But until he starts seeing those increases every month, Kier won't have a better feeling about the state of the local economy.
That's not to say he's not seeing some positive trends.
"When you look at the sales tax declines which were over 14 percent in November and December of 2009, the declines have gotten less and less," he said. "And if we took the first four months of the fiscal year -- July through October -- we've seen almost a 1-percent increase in sales tax for that four-month period."
As more data becomes available, Kier said he expects that trend to continue. But the city needs to see a little more of an upside before victory can be declared against the recession, he said.
"If we're in a recovery, it's not much of one," he said. "It's a muted recovery."
Kier acknowledged there are other figures -- the unemployment rate, new jobs and construction permits -- that are also valid measuring sticks for determining the economy's performance. But he said he tends to concentrate on sales tax receipts because of their importance in funding the operations of city government.
Jim Smith, the fiscal officer for Tulsa County, also places a great deal of emphasis on sales tax receipts, leading to his conclusion that the economy "has probably bottomed out."
The county's sales tax receipts for July through October were up 1.34 percent over the same period a year earlier -- not robust growth, but growth nonetheless.
Yet, there are wide variations in sales tax receipts among the various communities that make up the metropolitan area, he noted. While the city of Tulsa is up 0.96 percent in sales tax receipts for that period, Broken Arrow is up 6.71 percent and Collinsville is up 18.4 percent. On the other hand, he said, Sand Springs is down 4.71 percent.
And layoffs continue to be a drain on the economy, he said.
"Until we quit hearing about job losses, we're not out of the recession," he said. "But those have slowed down. So maybe that's a sign."
Smith said the county is in a different position than the city in that so much of its operating funds come from ad valorem taxes, rather than sales taxes. That makes the county's budget considerably less volatile than the city's. But that doesn't mean ad valorem taxes are immune to economic changes, he said.
"Those have been growing a reduced rate the last couple of years and probably will for quite a while," he said.
Tulsa County Assessor Ken Yazel said Tulsa County's property valuation increased 1.84 percent this year -- "Nothing to scream 'Whooppee' about," he noted, especially compared to the strong growth of the period preceding the recession.
"But it's nice and encouraging to see that it's holding up," he said.
Yazel emphasized he is not an economist and didn't care to venture an opinion about whether the local economy has emerged from the recession. But he did say he believes that modest growth in valuation is likely to continue.
"I see nothing on that horizon that would indicate anything other than that," he said.
In terms of residential home sales, Yazel said fewer homes are selling throughout the county these days, but the ones that are moving seem to be holding their value.
"So we're very blessed in this country to have survived better than some," he said. "If there's a national (upward) trend, I guess we'll get in there with it."
The most positive response came from Mike Neal, president and CEO of the Tulsa Metro Chamber.
"The recession is over in Tulsa," he wrote in an e-mail. "Have we experienced losses? Yes. Has it been as devastating as the rest of the country? No. As I travel around the country meeting with other chamber and business professionals, I see and experience first hand how our regional economy continues to show resilience and outperform our peer cities. That is not to say we are climbing quickly in recovery, but gradual signs of recovery, including employment, are beginning to show."
Neal said he senses that a prolonged period of reluctance by businesses to invest in new or expanded ventures is coming to an end. That perception is perhaps supported by an announcement last week by Google officials that they are resuming work on a $600 million data center at the Mid-America Industrial Park in Pryor after suspending progress on the project two years ago. The data center is expected to employ 100 people when it is finished.
Neal said in the past week alone, six or seven companies have indicated plans to expand in the comings months or year.
"We've seen businesses interested in relocating or expanding holding out until they feel more comfortable and see an upswing in the economy, but now those businesses and projects that have been on hold are coming to fruition," he wrote. "The Tulsa Metro Chamber currently has 61 economic development projects in the pipeline at various stages."
Yet even that rosy outlook came with several notes of caution by Bob Ball, the chamber's economist and economic research manager. Ball said there is evidence that Tulsa and the United States have been growing in shipments and sales of goods and services for some time, even as employment fell throughout 2009, both locally and nationally. Employment continued to fall through the first quarter of 2010, showing sustainable -- albeit small -- gains only after March, according to Ball.
He also said an assessment by economy.com indicates the probability of another recession striking the United States in the next six months is 33 percent, which he described as a relatively high probability.
But Ball found plenty of reasons to be encouraged, as well. Two excellent signs of a turnaround in the local economy, he said, were the Google announcement and a report by the AMR Corporation -- the parent company for American Airlines, a major Tulsa employer -- that it had posted a profit of $143 million for the third-quarter of 2010. That profit was the company's first in three years, according to Ball.
Other positive signs, according to Ball, include an increase in manufacturing activity in the first quarter of 2010, accompanied by 20-percent growth in temporary employment, including workers in manufacturing and supporting professional services. That figure serves as a good indication that increased revenues are requiring more employees.
"Temp employment is the first step toward permanent hiring," he wrote, noting that Tulsa accounts for approximately one-third of all manufacturing employment in the state.
Finally, Ball said, there is anecdotal evidence that employees are changing jobs within the local economy -- behavior that is not typical if the workforce expects a flat-growth or contracting economy.
Gary Soderstrom, president of the Home Builders Association of Greater Tulsa, said he expects the numbers in his sector of the economy to decline in the wake of the expiration of a program offering federal tax credits for home buyers.
"Those kept us pumped up until June, but, typically, once a program like that ends, you hit a lull," he said.
Soderstrom said local home sales are running 7.7 percent behind last year's figures at this point, but he believes Tulsa is faring better than much of the rest of the country, based on what he heard from others at the board meeting of the National Association of Home Builders in New York City earlier this month.
One of the most positive signs, Soderstrom said, is that the local foreclosure rate is much lower here than elsewhere. As a result, Tulsa doesn't have a huge stock of homes sitting empty that will continue to be a drag on the economy long after other sectors are making progress, he said.
"We've struggled, but we're stable," Soderstrom said.
Not many new homes are being started in Tulsa, he said, and the sales that are occurring are taking place mostly within that existing inventory, he said.
"I've got five houses right now, but I've got three of them sold," Soderstrom said of his personal business. "If you ask me, things are getting better."
That assessment comes with a rather sizable caveat, he noted.
"My business is totally dependent on the banking side of things," he said, adding that if another credit crisis develops, it certainly will impact home sales. "That's our Achilles heel."
Tulsa City Councilor John Eagleton said that while he believes Tulsa has not quite pulled out of the recession, he noted the community is seeing modest economic improvement in a number of areas.
"Because this was a worldwide recession, this will be an extremely slow recovery," he said, noting it might be several years before that recovery is complete.
Eagleton believes the proper approach to taxation and spending by the federal government could accelerate that recovery, though, noting that dramatic improvement could come in as little as 45 days if the proper incentives are placed before the business community.
"There's a trillion dollars being held by business at the national level waiting for the economy to turn around," he said.
As for when that turnaround might come, there's a divergence of opinion. Most of those interviewed for this story agree that while Oklahoma is among the final few states to feel the effects of an economic downturn, they are less sure about whether the state will be one of the first or the last to emerge from it.
"A problem is that the recovery is going to be a slow recovery," Kier said. "No big benchmark is usable right now, at least at the national level. We're going to have a hard time generating a lot of growth because of unemployment, which is going to stay high for a long time."
Kier noted that the jobless rate in the Tulsa area reached as high as 8 percent last spring before settling in at 7.7 percent for the last two or three months. That figure actually could begin to grow again once the recovery takes hold, he said, because the current unemployment rate does not count those who have dropped out of the job market to return to school, for instance.
Once the economy begins to expand, he said, many of those people might decide they are better off looking for work than staying in school for another year, and that is likely to lead to a corresponding increase in the unemployment rate.
In general, Kier said, it has been his experience that Oklahoma is "late in and late out" of economic downturns. From 1980 to 1982, he pointed out, there was a significant economic downturn across the rest of the country, but the Oklahoma economy was booming because of a spike in energy prices.
The situation here was so good, in fact, many oil and gas firms had problems hiring enough welders, leading local officials to journey to Rust Belt cities like Buffalo to recruit workers.
And today, ironically, as Tulsa comes to grips with trying to re-coup its place as the thriving city it once was in the early '80s, Buffalo -- a hardworking, blue collar city that had proven itself as a thriving metro area as early as the mid-1880s -- has come back, forging a renaissance downtown and throughout the Niagara Frontier, due to its adherence to civic planning that includes its citizens (with PLANiTULSA-like vision). Indeed, Buffalo has produced the Empire State's most serious candidate for governor.
Just as the national recession was ending, energy prices plummeted, leading to the great 1980s oil bust. Many of those workers who had been lured to Oklahoma with the promise of plentiful jobs were less than thrilled by what they found, Kier said.
"Just about the time they got here, our economy went south," he said. "They had a job for a month or two, then they didn't."
Eagleton said it's difficult to tell whether the local economy will recover faster or slower than the rest of the United States.
"It varies with recession and cause. This particular recession was brought on not by the subprime mortgage market crisis but by a worldwide recession," he said, though he acknowledged there were a lot of ill-advised loans made to people who couldn't afford to pay them back. It's also a much different situation from those economic slowdowns Oklahoma experienced in the 1970s and 1980s that were largely a product of its over-dependence on the oil and gas industry, he said.
In any event, he believes Oklahoma will lag six months to a year behind the rest of the country in the recovery process.
Smith said he agrees that the state typically doesn't begin to experience a recovery until months after the rest of the nation does. But he pointed out the relatively mild nature of the recession here could make things different this time, since Oklahoma didn't fall to the depths of states like California and Florida.
"We were actually still seeing an increase in sales tax (receipts) when the recession was hitting both coasts," he said. "And we didn't bottom out like the coasts have bottomed out. So I don't think the recovery here is going to be quite like it is on the coasts."
Ball's economic forecast for the Tulsa area includes sustained growth in such key industries as health care, professional and business services, which he believes will be seen in data for the end of the third quarter and into the fourth quarter. The aerospace and manufacturing sectors will show gains as well, he believes. But it won't be until the first and second quarters of 2011 that steady growth in employment in all sectors will be seen, he said.
And that progress could be sidetracked by several factors, he said, including the possibility of more economic upheaval in Europe and the kinds of currency policies that are implemented by America's trading partners that could affect Tulsa's disproportionately large export sector.
For his part, Kier said a three-month increase in Tulsa's sales tax receipts would be enough for him to declare the recession over here.
"I'm almost on the verge of saying it right now, but when we're still so up and down, it's hard to be certain," he said.
URL for this story: http://www.urbantulsa.comhttp://www.urbantulsa.com/gyrobase/Content?oid=oid%3A33254