UNCERTAIN

Data shows rebound in retail traffic as lockdown eases

The Kansas City Fed discusses Oklahoma's economic uncertainties as it continues to deal with the COVID-19 pandemic

Oklahomans haven't been shy about returning to retail establishments.

Data released Wednesday by the Oklahoma City branch of the Federal Reserve Bank of Kansas City reflects that foot traffic rates at retail establishments within the state returned top reCOVID- 19 pandemic levels by mid-June.

However, data also shows Oklahoma's unemployment rate remains stubbornly high, making it difficult to determine when meaningful recovery forth estate' s economy will arrive.

“So far, in terms of reopenings and foot traffic counts, Oklahoma is rebounding much more quickly than the rest of the nation,” said Chad Wilkerson, an Oklahoma City branch vice president and economist who helped compile the report.

“But with the surge in cases we have had the past two weeks, I don' t know what that means for that part of the recovery ,” Wilkerson said.

“That remains to be seen.”

'Unprecedented'

The data is contained in the bank's latest installment of i ts Oklahoma Economist feature.

The article notes that 2020 has been an extremely difficult year, both for the economies in Oklahoma and the nation.

“The economic downturn caused by the response of businesses, consumers and governments to the onset of COVID-19 has been unprecedented in speed and scale, pushing unemployment rates well into double digits ,” it states.

As businesses closed and consumer demand dropped in April and May, many firms furloughed or l aid off workers.

Through May, the most recent state data available, jobs in Oklahoma were down over 7% from year-ago levels, slightly less than in the entire nation. Unemployment in the state had risen to more than 12%.

By May, all industries in the state except for the federal government had shed jobs, year-over-year.

“Job cuts were severe especially in the leisure and hospitality industry( hotels and restaurants ), falling more than 20% from yearago levels in April before recovering slightly in May,” it states.

Moreover, a decline in oil prices that began even before the coronavirus reached U.S. shores made a tough situation even worse for Oklahoma, given the predominant role the energy industry plays in the state's economy.

In early March, the average price for a barrel of West Texas Intermediate crude oil was less than $50, with prices headed lower as Saudi Arabia and Russia flooded world markets with under priced barrel store claim market shares t hey previously had lost to U.S. producers.

By mid- March, oil prices were below the average price that firms in the Federal Reserve's 10 th District predicted were needed to be profitable for new drilling — around $45.

Then as C OVID-related travel concerns and restrictions severely curtailed gasoline and jet fuel demand, oil prices collapsed to under $20 by late April.

Consequently, drilling and completion work in Oklahoma all but halted.

In May 2019, Oklahoma's energy industry had 50,400 jobs. This May, only 36,100 were available.

Progressive change

The Economist notes that Oklahoma' s first COVID19 case was reported March 10. Within weeks, the averaged aily number of new cases approached 100, with all nonessential businesses across the state closing their doors on April 1.

In Oklahoma, new cases per capital eve led off in April at well-below national averages, leaving demands for hospital beds for COVID patients relatively low.

Overtime, businesses within the state were allowed to reopen.

However, new daily pandemic cases in Oklahoma began to grow marked ly again in mid-June.

That trend, Wilkerson said, creates some uncertainty about future potential effects the pandemic will have on economic ac ti vities ,“depending on how those trends evolve and how businesses, consumers and governments respond.”

But as of mid-June, Oklahoma' s economy appeared to be recoverin gm ore quickly than the nation's.

While the state's retail foot traffic was back then to prepandemic levels, it remained off by more than 10% nationally, data the Economist obtained and evaluated from SafeGraph shows.

As for leisure and hospitality establishments, the Economist estimated foot traffic rates ww for those in Oklahoma had returned to about 83% of prepandemic levels, compared to about 70% nationally.

The Economist also noted foot traffic at Oklahoma' s manufacturing and office establishments was much closer in mid-June to prepandemic levels than the nation's.

Unemployment issues

The Economist notes Oklahoma's economy hasn't shown much of an improvement when it comes to unemployment levels.

Numbers of claims as a share of the state' s labor force have exceeded the nation' s since late April, it observed.

The ongoing energy crisis is having a big impact on the recovery as well, Wilkerson adds.

While the U.S. Energy Information Administration (EIA) expects supply to now lag demand incoming quarters, helping to reduce the remaining elevated inventories and eventually push prices up to profitable levels by late 2021, Wilkerson worries Oklahoma could be one of the last states to see a broad return of energy industry activities.

“What concerns me the most are the forecasts for world oil production and demand rates ,” he said. “Productivity in our fields isn't as good as it is in other places, and as companies were cutting back earlier in Oklahoma than they were elsewhere as they made decisions about marginal wells.

“I assume we won't be the first place where new drilling occurs as we come out of this. It is going to be a challenge.”