Hundreds of layoffs at Chesapeake Energy Corp. on Tuesday will ripple through the Oklahoma City area economy, which has managed to escape the worst of the recent recession with a robust energy sector.
Local economists said Chesapeake's announcement of about 640 job losses at its Oklahoma City headquarters will begin to show up in employment statistics and income data later this year. But the effects will be relatively minor in the long-term.
Chad Wilkerson, branch executive and economist at the Oklahoma City branch of the Federal Reserve Bank of Kansas City, said the layoffs represent about one-tenth of 1 percent of total employment of about 600,000 in the Oklahoma City metropolitan area.
“But if there are reductions in local spending from laid-off workers, this will have a larger spillover effect on the rest of the local economy,” Wilkerson said.
The Chesapeake layoffs, along with a series of smaller layoffs at the company in the last several weeks, are among the largest in the last decade for the Oklahoma City area.
General Motors Corp. closed its factory in 2006 with the loss of 2,400 jobs and hundreds more at area suppliers. Dayton Tire (1,600 jobs) and AOL's call center (900 jobs) also had large layoffs that year as they closed their Oklahoma City operations. In 2003, food distributor Fleming Cos. shuttered its Oklahoma City office with more than 480 job losses, and telecom equipment maker Celestica laid off its last 450 employees at a longtime Oklahoma City factory.
Steve Agee, dean of the Meinders School of Business at Oklahoma City University, said he understood Chesapeake's business rationale for making the job cuts. That still doesn't make it easier for the affected employees, he said.
Agee said Chesapeake's cuts will be painful in the short-term but won't devastate the Oklahoma City economy, which is helped by dynamic energy sector. Hopefully other energy companies in the area will be able to offer jobs to many of the affected employees, he said.
“This is the transition (Chesapeake) is going through as they really try to focus on their core assets,” Agee said. “People forgot about GM and Dayton (Tire) after a few years. As hard as this is right now, a year from now, it will have worked itself through the system.”
Bob Dauffenbach, director of the Center for Economic and Management Research at the University of Oklahoma, said the Chesapeake layoffs and continued uncertainty over the partial shutdown of the federal government remain a concern for the Oklahoma City area, he said.
Energy jobs typically pay much higher salaries than most other sectors of the economy. Dauffenbach estimated each Chesapeake job loss would be multiplied through the local economy two or three times.
“Oklahoma City has certainly had a huge beneficial effect from energy and all that is going on there,” Dauffenbach said.
“The Chesapeake jobs and income losses will not be an easy blow to absorb,” he said.