THE soft underbelly of a strong Oklahoma economy is starting to show.
Hailed as relatively resistant to the last recession, the economy here has felt the stings of a downturn but not its most devastating effects. Home prices and employment have consistently fared better than national trends. Oklahoma typically lags going into a recession and lags coming out. The fortunes of the energy industry are more important to our economic well-being than weaknesses in manufacturing or financial services or whatever is dragging down the national economy at any given time.
Now the energy sector, still vibrant overall, is under stress with restructuring at two firms headquartered here, SandRidge and Chesapeake. The latter is thinning its employee ranks dramatically as part of a fiscal wellness prescription. Yet other local energy firms continue to hire.
U.S. Foods is closing one of its Oklahoma City facilities and letting go 176 workers. Scattered reports of smaller layoffs seem to be coming with more frequency, overrunning the expansion announcements of not so long ago. The effects of sequestration and the government shutdown also are alarming, given the high number of federal employees in central Oklahoma. An ongoing shrinkage of the military is particularly concerning statewide.
Still, the latest news on the state revenue front isn't bad. State Treasurer Ken Miller said in early October that gross tax receipts reached a new high for the third consecutive month, aided by the strength of gross production taxes for oil and natural gas. On the other hand, sales tax receipts in Oklahoma City and Tulsa have been anemic, an indication that people either have less money to spend or are being more cautious when spending.
As the holiday shopping season approaches following major layoffs at Chesapeake, sales tax receipts are likely to show further weakness relative to year-ago levels. Chad Wilkerson, regional economist for the Oklahoma City branch of the Federal Reserve Bank of Kansas, said last month that the Oklahoma economy has lost some momentum over the past year. But it's still in good shape compared with many other parts of the country.
We often urge leaders to fashion policy that rewards hard work and success. Strides have been made in the past few years, with tax policy, lawsuit reform, workers' comp system reform and others. These alone won't cushion the state from downturns, but being business-friendly is critical. It's part of the reason the latest recession didn't strike a harder blow on Oklahoma. The energy industry is an even bigger reason.