What is in store for the Oklahoma City economy in 2023?

By Chamber Staff / Economy / February 16, 2023

Editor's note: This is an excerpt from the recently released 2023 Greater Oklahoma City Economic Outlook.

Read the full 2023 Greater Oklahoma City Outlook.

Overview

The Greater Oklahoma City Economic Outlook provides a comprehensive analysis of the national, state and metro economies. It details historic trends, a snapshot of the current situation, as well as a forecast for 2023.

In 2023, the Oklahoma City metro should continue to show positive growth despite slowing national economic conditions. The Oklahoma City MSA now accounts for 41% of the state of Oklahoma’s total GDP, or four out of every ten dollars of goods and services produced. Last year saw the metro return to pre-pandemic employment heights. In 2022, the economy experienced year-over-year nonfarm annual job growth of 3.4% or a gain of 22,000 jobs in the Oklahoma City MSA (preliminary estimates). The largest percentage of year-over-year job gains (all over 5%) were found in mining/oil & gas (+11.6%), transportation, warehousing & utilities (+7.6%), wholesale trade (+6.9%), administrative services (+5.8%), and healthcare (+5.5%). The only sectors experiencing declines were found in information (-3.5%), state government (-1.1%), and financial activity (-0.2%).

Positive Oklahoma City metro nonfarm job growth in 2023 is expected, with the baseline job forecast scenario growing by 2% or adding approximately 13,600 jobs by the end of 2023. Supporting detail by each industry is offered in the following commentary. Two alternative forecast models that the Greater Oklahoma City Chamber tracks separately show a slightly more modest 2023 employment growth between 1.4% and 1.6%. The local economy remains vulnerable to national and global uncertainties that may disrupt economic conditions.

Oklahoma City Metro and Nation Enjoy Record Low Unemployment

The Oklahoma City metro completed 2022 with an annual average unemployment rate for the entire year of 2.9% (preliminary). Monthly unemployment rates ranged as high as 3.3% (Oct. 2022) and as low as 2.4% (Dec. 2022). The annual unemployment rate of 2.9% ranked tied as the third lowest experienced by the OKC metro in modern history (1990 to 2022). The total labor force, driven by population and migration gains, was the largest in history with more than 710,000. Oklahoma City finished out the year ranked among the top 10 lowest unemployment rates for large metros (over 1 million population). Throughout the year, rankings fluctuated from the No. 3 lowest (January) to the No. 23 lowest (October).

The nation also experienced record-low unemployment during the year (Dec. 3.5%).

Value of Construction Projects

According to Dodge, in 2022 the total construction value of tracked contract projects (residential, non-residential, and non-building infrastructure) in the Oklahoma City MSA was $5.2 billion. That was 32% more than the prior year (2021). The largest positive year-over-year percentage gains were found in the hotel/motel, other government services, and garage/service station categories. The largest year-over-year declines in the construction value of contracts were in warehouses, dormitories, and miscellaneous non-residential categories. For 2023, the total construction value of contract projects in the Oklahoma City MSA is forecasted by Dodge to be slightly negative and decline by 5%. A 1% increase in non-residential and a 7% increase in residential construction value are expected. A 30% decrease is expected in non-building infrastructure projects which include bridges, water supply systems and other. The non-building category decline is expected to pull the overall total construction value across all categories into negative territory.

As described in the methodology, the Greater Oklahoma City outlook and forecast for construction employment is entirely determined by the past information contained in the dataset and the econometric specification of the models. So, forecasted construction contract detail or proposed infrastructure investment is not incorporated into the baseline forecast for employment.

Oklahoma City Receives Highest Bond Ratings for 12th Year in a Row

In early 2022, Standard & Poor’s and Moody’s Investor Services reaffirmed the Aaa and AAA bond ratings and stable long-term outlook for the City of Oklahoma City. The triple-A ratings are the highest awarded by each agency. It is the 12th year in a row that the City of Oklahoma City has achieved the highest rating. The ratings are used to price bonds that the city sells to fund the 10-year, $967 million Better Streets, Safer City infrastructure investment program. Oklahoma City is one of only eleven cities in the United States with a population of 690,000 or more that have triple-A ratings.

Oklahoma City Industrial Market Overview

The CoStar Industrial Market Report (January 2023) reports that the Oklahoma City market has an inventory of 140 million square feet of industrial space. Rent growth remained strong in recent quarters as the competition among landlords increased, with vacancies hovering near historical lows. Vacancy rates in early 2023 were 4.2% but are expected to rise modestly in 2023.

There is currently 6.6 million square feet of industrial construction underway in Oklahoma City. Around 80% of that space is in the southwest submarket, with 4.9 million square feet. With 65% of the total construction preleased, CoStar is not anticipating these projects to have an impact on market fundamentals.

Oklahoma City Office Market Overview

Oklahoma City’s office market continues to hold firm with market rents positive at 1.3% over the past year (2021-2022) and the vacancy rate hovering near 9.5% (as compared to 12.9% for the nation). According to CoStar, there is currently about 8.5 million square feet of available office space in the Oklahoma City market. Oklahoma City has seen a notable increase in the amount of available sublease space, increasing from 112,000 square feet to 216,000 square feet since the end of 2021. As of early 2023, 760,000 square feet of office product is currently under construction.

Local Housing Market Follows National Trends

According to Dharma LLC, the Oklahoma City metro recorded 5,213 housing starts in 2022. This was 21% below the prior year. Despite the decline, the number of housing starts was very similar to pre-pandemic levels (5,366 in 2019). Over the past five years (2018-2022), more than 28,000 housing starts were captured in the Oklahoma City metro.

Similar to the nation, as borrowing costs continued to increase in 2022, Oklahoma City area home sales and home prices began to slow. After two years of record-breaking activity, the red-hot housing market has finally started to cool. More than 27,400 closed sales and 26,000 pending sales were reported. The MLSOK Annual Report showed that 2022 home prices in the Oklahoma City metro were up compared to last year. The overall median sales price increased by 11.5% to $242,000 for the year. Single-family home prices were up 11.4% compared to last year, and townhouse-condo home prices were up 14.4%. Comparing 2022 to the prior year, the number of homes available for sale was up 81.5%. There were 5,021 active listings at the end of 2022. New listings decreased by 1.1% to finish the year at 32,006.