What Makes Oklahoma City Recession-Proof?
SCOTT SIMON, host:
Is Oklahoma smarter or just a little luckier than every other state right now? The recession is bad everywhere, but it's a little less bad in Oklahoma. The unemployment rate in Oklahoma City is still below 7 percent - eighth-lowest in the nation - housing values are actually up. Oklahoma City has the second-lowest foreclosure rate in the country.
Over in New York City, well-known financial institutions went broke. Just one bank closed in Oklahoma. Now, it's tempting to give credit to the recent boon in oil prices, and indeed Oklahoma City is still a place where you can see an occasional oil derrick in a parking lot.
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SIMON: The sound of Oklahoma City's future could be more like this�
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SIMON: �and that silence may be golden. It's a vacuum pump - the Edson(ph) Vacuum System, to be exact - made by an Oklahoma City company called Orthocare that develops new tech prosthetic devices. Silence is one of their signatures, says their national sales manager, Jim Lagerstrom.
Mr. JIM LAGERSTROM (National Sales Manager, Orthocare): That's one thing as an amputee. If there's any moving parts, any noise, any clunking, any sound, you know, it can be disturbing. You know, you definitely don't want to be that person in a quiet room making noise and not being able to shut it off.
SIMON: Mr. Lagerstrom tests new products for his company too. He lost a leg 39 years ago in a snowmobile accident, but has won medals in downhill skiing in three Paralympic Games and competed in five.
Mr. LAGERSTROM: I also play hockey. I'm an accomplished hockey player too. And I played in the 2004 World Championship Hockey Team Tournament.
SIMON: Orthocare also has offices in Seattle and Washington, D.C., but it's moving all of its production to Oklahoma City. They say it helps to have their designers close to the production line. And the market for their technology is not restricted to amputees. Some of the technology they develop can be applied to robotic devices to be used in environments like fires, toxic zones or bomb disposal work that would be dangerous for human beings.
Oklahoma City keeps a kind of Old West identity. It's still a city where a nice dinner usually means a steak and people go to work in cowboy boots - even if they work at a keyboard. Just this month, ForbesSmallBusinessMagazine.com pronounced Oklahoma City the top spot in the country for entrepreneurs to try to start a new business.
What makes Oklahoma such congenial territory? Well, a 5.5 percent state income tax rate may be one reason. But Paul Risser, who runs a state endowment designed to encourage cutting-edge businesses and gave one of its first grants to Orthocare also cites the state's historic spirit.
Mr. PAUL RISSER: There's sort of a willingness in the state of Oklahoma to try and make things happen. And I think it's in part because of this frontier spirit still in Oklahoma. We think about frontier maybe in the old sense, but the frontier today is really innovation and technology.
SIMON: There's some other more traditional reasons too that keep Oklahoma's unemployment rate relatively low. No business is immune to recession but Oklahoma City is fortunate to have industries that are often the last to be affected. It's the state capital, so it brims with state employees who are hard to fire without political consequences.
And the state's largest employer, Tinker Air Force Base, is in town. After a General Motors plant closed down a few years ago, the county bought the plant so that Tinker could expand. Regardless of the domestic economy, international events keep the U.S. military a growth industry.
Oklahoma also has a history that may have deterred local business leaders from some of the rash enthusiasms that attracted other lenders during the last generation.
The Dust Bowl Depression of the 1930s - a disaster of drought and overgrazing the turned prairie into powdery soil and sent Oklahomans out of state like ants scurrying for work, for food, wrote John Steinbeck in "The Grapes of Wrath." Few people alive today can remember the dust bowl, but no one growing up in Oklahoma doesn't feel a personal stake in that history.
Larkin Warner is a professor emeritus of economics at Oklahoma State University.
Professor LARKIN WARNER (Economics, Oklahoma State University): That image that resulted particularly from Steinbeck's book has continued to haunt us. The whole nation was full of poor, rural Oklahomans that got the heck out during the Great Depression. Surprise. I mean, the image of Oklahoma, it just didn't rise out of nowhere.
SIMON: In the 1980s, the collapse of the Penn Square Bank, a small Oklahoma City bank that made high-risk loans to energy companies, set off a national banking crisis. Tom Hoenig was vice president of bank supervision of the Federal Reserve Bank of Kansas City then.
Mr. TOM HOENIG (President, Bank Supervision, Federal Reserve Bank of Kansas City): In that period, banks failed, businesses failed. There wasn't this too big to fail environment there; investors did lose things. It's a hard lesson, but it is a lesson that people remember and maybe they will weather this cycle more successfully than they did the cycle in the '80s, because of those hard and somewhat harsh lessons.
SIMON: Mr. Hoenig says that harsh lesson Oklahoma banks learned 25 years ago was: Don't make risky loans, which is what so many other banks did to foment the collapse of the housing industry across the country last year. And Oklahoma banks no longer invest all their assets in oil and natural gas, even when they promise the greatest return.
So we asked Tom Hoenig: I've heard talk about a bumper sticker that was once popular in Oklahoma.
Mr. HOENIG: Give me a second chance and I won't blow it.
SIMON: Please, God, give us another oil boom?
Mr. HOENIG: Yes. And I won't...
SIMON: Well, if I could get you to say it.
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Mr. HOENIG: I can't remember it exactly...
SIMON: What I'm told is it was: Please, God, give us another oil boom and we promise not to piss it away.
(Soundbite of laughter)
Mr. HOENIG: I do remember that bumper sticker and I wouldn't call this an oil boom. They didn't plunge into oil when it got to $140 a barrel. They didn't go and begin to speculate that it would go to 200. They were much wiser in this instance than they were in that earlier one.
SIMON: Fifteen years ago, oil and natural gas contributed 25 percent of the state's revenue. Now, it's down to just 12 or 13 percent, according to Steve Agee, an oil company executive who's also a professor of economics at Oklahoma City University.
Professor STEVE AGEE (Director, Economic Research and Policy Institute, Oklahoma City University): We have diversified quite a bit since the last contraction we've had, which is good for our state obviously.
SIMON: Of course, you are still president and COO of Agee Energy, aren't you?
Professor AGEE: Yes.
SIMON: And past chairman of the Oklahoma Energy Resources Board.
Professor AGEE: That's correct.
SIMON: And I believe, board member of the Oklahoma Independent Petroleum Association and all of that?
Professor AGEE: Right.
Professor AGEE: Right.
SIMON: Well, which is a way of asking, it's interesting that you would be talking about greater diversification of the Oklahoma City economy. It would seem that you would benefit by reliance on energy.
Professor AGEE: Well, I'm not saying that the energy industry has shrunk. I'm just saying that the Oklahoma economy has grown, so the energy industry benefits from our state growth and from the, you know, national growth and from worldwide demand for both oil and natural gas. So as we diversify our economy, that helps our energy sector as well.
SIMON: So while Oklahoma City may statistically seem so much better off than the rest of the country right now, Oklahomans know that their present economic good fortune may be as fragile as sunny skies over an Oklahoma prairie. Clouds can roll in at any moment. Larkin Warner says�
Prof. WARNER: I was talking with somebody the other day who said, you know, if we have a warm winter and that price of natural gas stays very, very low, you know, hold on. So, we're hoping for a cold winter.
SIMON: And there may be some reason for hope in Oklahoma. The "Farmer's Almanac" says temperatures this winter will be below normal, with higher than usual snowfall for most of the United States.
Next week, we'll examine the local pastime in Oklahoma: weather. One man who predicts storms.
Unidentified Man #1: We have floods. We have droughts. We have ice storms. We have hail storms. On an average year, we have about 50 tornadoes. Back in '99, we had over 60 in one day.
SIMON: And another who runs after them.
Unidentified Man #2: In Oklahoma, the storms usually go from southwest to northeast, so we have to go east to north, east to north to stay up with the storms. If there's a road going the direction we want to go, we'll take it, regardless if it's a dirt road or what. If it goes through, we're going to take it.
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