April 2024 Beige Book Interview – Arkansas and Oklahoma

Matuschka Lindo Briggs: Thanks for joining us for our economic snapshot where we discuss in eight minutes or less what's happening across the state, as shared by businesses and industry contacts in the little Rock zone of the eighth district. The information we share in this podcast is received from contacts outside the Federal Reserve System, and is not a commentary on the views of Federal Reserve officials.

I’m Matuschka Lindo Briggs, the regional executive. Joining me today is one of my Fed System colleagues, Chad Wilkerson, the regional executive of the Oklahoma City branch for the federal Reserve Bank of Kansas City.

Chad, thanks for joining me.

Chad Wilkerson: Matuschka, it's great to join you for this today and talk about how things are going in our neighboring states. I'm looking forward to hearing what might be similar or different in the trends we're seeing.

Lindo Briggs: Yes, we've talked several times of getting our boards together because our states butt-up together, and we have a lot of similar anecdotal information. I believe our regions have a lot in common. I think listeners will enjoy hearing what is going on in your area and comparing economic conditions. Tell us a little bit about your district.

Wilkerson: Sure. So, my coverage area is a state of Oklahoma, which is part of the 10th Federal Reserve District that stretches all the way out to the Rocky Mountains. I think of Oklahoma as having four main economic areas. There's each of the two large cities, Oklahoma City and Tulsa, then there's eastern Oklahoma, most of which looks a lot like western Arkansas, right across the border. So, a lot of timber, food processing, mixed agriculture, and increasingly a lot of tourism activity. That area is also home in Oklahoma to a number of Native American nations. Obviously. the Cherokee and Choctaw nations indeed make up the entire border with Arkansas. And those two in particular have made sizable investments in rural areas in recent years, especially in health care and tourism.

And then finally western Oklahoma, which, as you know, has a different landscape, it’s where the Great Plains begin, is driven by oil and gas and agriculture and cattle, wheat, cotton.

Lindo Briggs: Yep. I'm familiar with the Plains. I grew up most of my life in Enid, Oklahoma. With one of our similarities being agriculture, I will share what I'm hearing and would love to understand in the ag world what you're hearing and if there are similar sentiments.

So, non-labor costs are continuing to rise exponentially. Increased costs for tractors, vehicles and repairs, parts are a major factor right now. Parts are double and triple what they were 12 to 18 months ago. So basically, if you need a repair, farmers say they are waiting weeks or even months to get a piece of equipment back from a repair shop, meaning you need to have a spare around to get by.

Weather is always a factor, but currently in Arkansas we are experiencing average temperatures and rainfall, so that's not so bad. Not much of a concern yet. And lastly, the major concern is labor, labor, labor. I can't say it enough. In rural areas of Arkansas, they are dealing with an ever-shrinking pool of skilled labor. In many cases, it's not the lack of people, Chad, but the lack of people wanting to do the manual jobs being offered.

We're also hearing the use of H-2a visa labor from Mexico and South Africa, farmers that have used Mexican labor in the past are switching to South African labor, due to the fact that they are more experienced with some of the high-tech equipment on row crop farms today. What are your contacts saying?

Wilkerson: I think a lot of the same. Definitely, labor is a big issue across rural areas, especially in agriculture related industries like food processing or equipment manufacturing or equipment sales, even. It’s extremely difficult to find both people and willing workers, as you mentioned. So, a lot of those places are seeking to automate as many positions as they can or use visa labor when they're able to as well.

In terms of overall conditions, we've seen a little bit of deterioration in some conditions given the lower grain prices. But in Oklahoma, our biggest agriculture industry is cattle, and those prices remain high. So that's helping out overall. Weather is always a wildcard like you mentioned. We've had some good and bad. We've had good rains early in March and that helped the winter wheat crop, as well as spring planting conditions.

But things have gotten dry again the last few weeks. So, a little bit of concern there. But like they say, if you don't like the weather in this part of the country, especially in the spring, just wait five minutes and maybe it'll get better.

Lindo Briggs: That is so true, same thing here in the natural state. It sounds like farmers overall are cautiously optimistic.

Let's remind everyone that the views expressed in this podcast do not necessarily reflect those of the Saint Louis Fed or the Federal Reserve System. In this podcast, we are sharing the economic conditions reflected in the most recent Beige Book report, which came out yesterday, April 17th. You can find it on the Saint Louis Fed website under research.

Chad, let's start with you. What are you hearing in regard to general labor conditions?

Wilkerson: Well, I think from businesses’ standpoint, that although labor markets remain tight, like we talked about, things have maybe gotten a little better this year in the state as a whole in terms of finding workers. And this has eased wage pressures just a bit. But in hospitality and other lower paying in-person jobs such as agriculture, there's still extreme difficulty to the extent that some businesses are reducing operating hours, there'll be restaurants in particular. From the worker side jobs are still very available, which is good. But the slightly lower pay increases this year, along with still elevated costs from recent years and less fiscal support in recent years, has squeezed some, especially lower income families. So, we're seeing a bit of an uptick in credit card delinquencies and even a few, examples of more drastic things like moving in with extended family to save on costs.

Lindo Briggs: Same sentiments here. Rural businesses seem to really be feeling the squeeze and their employees are stretching to pay rent, even with those pay increases. Pay increases have tightened profit margins for many and they are trying to work through the budgets. Some are trying to offset labor costs still by increasing prices, but they feel consumers just won't check anymore. They've really hit the top of that peak. Finally, we are also seeing a slight uptick in credit card delinquencies. Before we wrap up, anything stand out in Oklahoma that you are curious we might be seeing here in Arkansas?

Wilkerson: Well, something we've been looking at pretty closely this year is the continued large inflow of residents from other states into Oklahoma. That's been consistently high, record levels each of the last three years. That’s reversed an outflow that happened most of last decade, including of college graduates, that is turned around again. I don't think we're stealing from Arkansas, so don't get worried there. But we have gain from almost every western state, especially California. So, I'm just curious, are you seeing or hearing some of this as well? Are people moving from other states to your state as it maybe is, because it's a lower cost area, is an increasingly nice place to live like Oklahoma or Arkansas.

Lindo Briggs: We are definitely seeing it in northern part of the state. And that Fort Smith area right there next to Oklahoma on the border and all through northwest Arkansas. Last year it was, say, 32 people a day moving into Northwest Arkansas. Now, we've heard the numbers up to 37 people a day. So, we're definitely seeing that. And the only thing that's, really causing concern is what are the amenities that we're going to be able to have for these people, you know, movie theaters, things for them to do more restaurants. So, great thing to just keep our eye on. Chad, I hope this was painless. Can we have you back again?

Wilkerson: Sure, I always like talking about the economy. And I especially like talking with you. So, I look forward to doing [it] again sometime.

Lindo Briggs: Thank you for sharing and comparing what's happening in your Oklahoma footprint. For a full summary of what is happening in the Eighth District, visit the Saint Louis Fed's website at stlouisfed.org. The next Beige Book release will be May 29th, followed by our podcast May 30th. Thanks for listening.