NewsOK: Oklahoma City News, Sports, Weather & Entertainment

The economic impact of COVID-19 could be worse, and you can thank an Oklahoman for that

People eat outside at Louie’s Grill & Bar at Lake Hefner in Oklahoma City. The coronavirus pandemic has impacted various types of retail activities. [Sarah Phipps/The Oklahoman]
People eat outside at Louie’s Grill & Bar at Lake Hefner in Oklahoma City. The coronavirus pandemic has impacted various types of retail activities. [Sarah Phipps/The Oklahoman]

Nothing like a financial crisis demonstrates how a central bank can be used to attempt to blunt its impact.

Since March, the spread of COVID-19 and a resulting shutdown presented sizable challenges for the U.S. economy.

Earlier this year, Congress provided substantial dollars to help support the nation’s businesses, and the Federal Reserve Bank stepped forward to help using various programs.

The bank cut its policy rate to near zero, dropped banks’ reserve requirements to zero through temporary regulatory adjustments, boosted open market purchases and more.

Some of these programs were resurrected by the Federal Reserve Bank after they were created during the Great Recession of 2007-2008.

However, in a recent update issued by the Oklahoma City Branch of the Federal Reserve Bank of Kansas City, Economist and Branch Executive Chad Wilkerson reported those holdovers aren’t being used as much during the current crisis as they were a decade ago.

But other entirely new programs geared toward offering specific reliefs to help support the economy during the current crisis are pretty popular.

Oklahoman businesses’ participation in the Paycheck Protection Program, for example, exceeds national averages for numbers of businesses with fewer than 500 employees participating and the national average for percent of payroll covered by the loans — something Wilkerson attributes to the hard work that community banks put in to acquire that assistance for their customers.

“This is a different crisis than what we saw in 2007-2008,” Wilkerson said. “This one is much more affecting our hospitality industry, hotels, restaurants or any kind of in-person recreational activity that is indoors.

“The financial system itself is in better shape than it was during the Great Recession, but having that experience helped in rolling out what we are doing today, given that we saw evidence they worked out well at the time.”

A century of service

During a financial crisis that began in 1893, there was no central bank after two previous ones created by Congress early in the nation’s history and after the War of 1812 had been allowed by political leaders to close.

That 1893 collapse, which spread throughout the U.S. from overseas, ultimately created a downturn lasting four years that impacted both banks and their customers.

In 1907, private bankers were forced to step in to try to stabilize a Wall Street-sparked crisis that led to a yearlong contraction, forcing banks and businesses across the country to declare bankruptcy.

Under the leadership of the U.S. Senate’s Banking Committee Chairman, Sen. Robert L. Owen, D-Oklahoma, Congress created the Federal Reserve Bank in 1913 when it adopted the Federal Reserve Act.

Owen, Wilkerson explained, was a Muskogee banker who also had been the registered agent serving the Five Civilized Tribes within the state before becoming one of Oklahoma’s first two senators in 1907.

Owen toured European central banks after the 1907 crisis, and with his help, Congress created a system designed to serve the whole country, not just the nation’s financial centers, Wilkerson explained.

Since then, the Federal Reserve has served as the nation’s longest-lasting iteration of a central bank.

To be sure, it continues to exist as a work in progress that deals with each economic crisis uniquely, tailoring responses to current events based upon past experiences that were both good and bad.

The bank, for instance, gets mixed marks for its handling of the economy during the Great Depression.

On the other hand, steps it undertook to stabilize the nation’s economy during the Great Recession of 2007-2008 likely minimized that economic disruption significantly.

Its Congressionally mandated goals are to use monetary policies to maximize employment, to stabilize prices and to moderate long-term interest rates.

These days, it also supervises and regulates banks and provides financial services to depository institutions, the U.S. government and foreign official institutions.

The Federal Reserve Bank of Kansas City is one of 12 semi-independent regional branches that provide the reserve’s services to various regions of the country.

Over time, Oklahomans’ dealings with the Federal Reserve system have occurred through its Oklahoma City branch, which opened its office in the city 100 years ago this month.

Data key

Each of the reserve’s regional banks and their branches also regularly research economic activities within each of their areas, gathering data for the bank’s Beige Book and Federal Reserve Economic database and publishing regular reports on their research through each bank’s website.

The Oklahoma City branch and its team, for example, routinely evaluate the energy, agriculture, aviation and transportation segments of Oklahoma’s economy and how those impact its 4 million residents. They publish their reports regularly at kansascityfed.org/oklahomacity.

While that data often only catches the interest of economists, it provides the regional bank and broader Federal Reserve with a crucial foundation of information used by the central bank to formulate the plans it uses to achieve its mandates.

In July, the Oklahoma City branch published an economic update for the state that revealed more than a few items of interest.

Beyond the Paycheck Protection Program data, the update also reported that:

• Seven years of growth in jobs was lost by Oklahoma’s economy in March and April, followed by a slight improvement in May.

“Discouraging would be another word you could use, when describing how quickly those jobs went away,” Wilkerson said.

• Oklahoma had 5% fewer jobs available in June than it did the same month in 2019.

• As of May, Oklahoma had lost a smaller percentage of overall jobs than the rest of the nation, though job eliminations in its energy sector were much higher.

• In July, more than 40% of respondents to a Household Pulse Survey reported job-related income loss and reported they were putting off getting medical care. About 25% of respondents worried about their housing security, while about 10% reported not having enough food to meet their needs.

• While foot traffic to Oklahoma businesses rose between March’s collapse and June, it eased off somewhat in July.

The economic update also provided useful information about spending patterns, housing prices, office space vacancies, agricultural incomes and commodity pricing and various types of data on the energy industry.

“Oklahoma’s economy was already slowing in late 2019 and early 2020, due largely to difficulties in the state’s important energy sector,” the update concludes. “The state’s economic and energy sector outlooks continue to depend on how the virus evolves and affects consumer and business activity.”

Related Photos
<strong>People walk along the Promenade during a Night Market at Scissortail Park in downtown Oklahoma City. [Doug Hoke/The Oklahoman]</strong>

People walk along the Promenade during a Night Market at Scissortail Park in downtown Oklahoma City. [Doug Hoke/The Oklahoman]

<figure><img src="//cdn2.newsok.biz/cache/r960-3bb801dd9d8365230f72d9788b79f091.jpg" alt="Photo - People walk along the Promenade during a Night Market at Scissortail Park in downtown Oklahoma City. [Doug Hoke/The Oklahoman] " title=" People walk along the Promenade during a Night Market at Scissortail Park in downtown Oklahoma City. [Doug Hoke/The Oklahoman] "><figcaption> People walk along the Promenade during a Night Market at Scissortail Park in downtown Oklahoma City. [Doug Hoke/The Oklahoman] </figcaption></figure><figure><img src="//cdn2.newsok.biz/cache/r960-d81bd6aee244d3f519b34b6f4264b6f0.jpg" alt="Photo - U.S. Sen. Robert L. Owen in 1914. [PROVIDED/ OKLAHOMA CITY BRANCH OF THE FEDERAL RESERVE BANK OF KANSAS CITY] " title=" U.S. Sen. Robert L. Owen in 1914. [PROVIDED/ OKLAHOMA CITY BRANCH OF THE FEDERAL RESERVE BANK OF KANSAS CITY] "><figcaption> U.S. Sen. Robert L. Owen in 1914. [PROVIDED/ OKLAHOMA CITY BRANCH OF THE FEDERAL RESERVE BANK OF KANSAS CITY] </figcaption></figure><figure><img src="//cdn2.newsok.biz/cache/r960-4b3a6c9c9c9bbb24aacd0e6dc6b3c5a2.jpg" alt="Photo - A sign on Johnnie’s Charcoal Broiler in Oklahoma City tells potential guests its dining room is open. [Bryan Terry/The Oklahoman] " title=" A sign on Johnnie’s Charcoal Broiler in Oklahoma City tells potential guests its dining room is open. [Bryan Terry/The Oklahoman] "><figcaption> A sign on Johnnie’s Charcoal Broiler in Oklahoma City tells potential guests its dining room is open. [Bryan Terry/The Oklahoman] </figcaption></figure><figure><img src="//cdn2.newsok.biz/cache/r960-ce54d4e7b23259556d2f1c61a16f48c3.jpg" alt="Photo - Nick Gunzelman helps customers at Syrup in downtown Norman. The Federal Reserve Bank has created tools to help businesses stay open. [Sarah Phipps/The Oklahoman] " title=" Nick Gunzelman helps customers at Syrup in downtown Norman. The Federal Reserve Bank has created tools to help businesses stay open. [Sarah Phipps/The Oklahoman] "><figcaption> Nick Gunzelman helps customers at Syrup in downtown Norman. The Federal Reserve Bank has created tools to help businesses stay open. [Sarah Phipps/The Oklahoman] </figcaption></figure><figure><img src="//cdn2.newsok.biz/cache/r960-0cd415deed71614a7c5a72ddabf605d6.jpg" alt="Photo - Wilkerson " title=" Wilkerson "><figcaption> Wilkerson </figcaption></figure><figure><img src="//cdn2.newsok.biz/cache/r960-11e29d873b531dd662591b21414023e4.jpg" alt="Photo - The Money Museum at the Oklahoma City Branch of the Federal Reserve Bank of Kansas City. The museum can be toured by appointment, officials say. [PROVIDED/OKLAHOMA CITY BRANCH OF THE FEDERAL RESERVE BANK OF KANSAS CITY] " title=" The Money Museum at the Oklahoma City Branch of the Federal Reserve Bank of Kansas City. The museum can be toured by appointment, officials say. [PROVIDED/OKLAHOMA CITY BRANCH OF THE FEDERAL RESERVE BANK OF KANSAS CITY] "><figcaption> The Money Museum at the Oklahoma City Branch of the Federal Reserve Bank of Kansas City. The museum can be toured by appointment, officials say. [PROVIDED/OKLAHOMA CITY BRANCH OF THE FEDERAL RESERVE BANK OF KANSAS CITY] </figcaption></figure><figure><img src="//cdn2.newsok.biz/cache/r960-1989ff0781e98bc15800aba5e852dc84.jpg" alt="Photo - U.S. Sen. Robert L. Owen in 1921. [PROVIDED/OKLAHOMA CITY BRANCH OF THE FEDERAL RESERVE BANK OF KANSAS CITY] " title=" U.S. Sen. Robert L. Owen in 1921. [PROVIDED/OKLAHOMA CITY BRANCH OF THE FEDERAL RESERVE BANK OF KANSAS CITY] "><figcaption> U.S. Sen. Robert L. Owen in 1921. [PROVIDED/OKLAHOMA CITY BRANCH OF THE FEDERAL RESERVE BANK OF KANSAS CITY] </figcaption></figure><figure><img src="//cdn2.newsok.biz/cache/r960-8fe4d26d7804e14ad8ac2246e7d18315.jpg" alt="Photo - People eat outside at Louie’s Grill &amp; Bar at Lake Hefner in Oklahoma City. The coronavirus pandemic has impacted various types of retail activities. [Sarah Phipps/The Oklahoman] " title=" People eat outside at Louie’s Grill &amp; Bar at Lake Hefner in Oklahoma City. The coronavirus pandemic has impacted various types of retail activities. [Sarah Phipps/The Oklahoman] "><figcaption> People eat outside at Louie’s Grill &amp; Bar at Lake Hefner in Oklahoma City. The coronavirus pandemic has impacted various types of retail activities. [Sarah Phipps/The Oklahoman] </figcaption></figure>
Jack Money

Jack Money has worked for The Oklahoman for more than 20 years. During that time, he has worked for the paper’s city, state, metro and business news desks, including serving for a while as an assistant city editor. Money has won state and regional... Read more ›

Comments