Ten Year Outlook
Wyoming Economic and Demographic Forecast: 2007 to 2016
Published in August 2007
Contact: Wenlin Liu (wliu@wyo.gov)
Ten Year Outlook is meant to provide businesses, individuals, government leaders, and other interested parties with a description of key economic trends and variables. It is hoped that the information contained in this report will allow users to make more informed decisions.
The focus of the report is on long-term structural trends within the Wyoming economy as opposed to short-term fluctuations. A long-term forecast focuses on the probable growth path of the economy. Short-term fluctuations in the economy are often caused by external shocks, which are impossible to predict. External shocks can include natural phenomena such as droughts or earthquakes or man made impacts such as regional wars or sudden technological advances. In addition, because of the long term nature of the forecast, commodity prices for minerals are assumed to change in a slow predictable manner. Obviously, commodities do not change in slow predictable patterns, but instead tend to fluctuate rather dramatically depending on short-term economic conditions.
The main economic and demographic indicators presented in this report are nonagricultural wage and salary employment by industry, labor force and unemployment, population and migration, and income and earnings data. The report features 25 graphic charts depicting economic trends and characteristics for the state. They will greatly help readers to grasp main issues and matters concerning Wyoming's economy, and they would even provide many busy readers with a sketch of the state's economy without their going through detailed narrative. The state forecast was prepared by Wenlin Liu at Economic Analysis Division. The national forecast was produced with reference to the economic consulting firm Economy.Com.
Executive Summary of the Report
The global economy is still in good shape and remains on track for a healthy expansion this year. Even though the U.S. economic slowdown will be a large factor in this year’s deceleration of global growth, the world economy will continue to expand close to potential of 3 percent in 2007. The ongoing self-sustaining recovery in Europe and strong domestic demand in Asia are offsetting the weaker than expected U.S. economy.
The astonishing performance of the U.S. economy in the 1990s was probably the best and the longest expansion decade in history. After a brief economic recession in 2001, the U.S. economy recovered well and has been performing strongly more than five years into the current expansion. Real GDP grew at 3.3 percent in 2006, the third year in a row with over 3 percent of growth. The economy’s growth potential is estimated at 3 percent. Employment increased 1.9 percent which was the highest job expansion since 2000. The 4.6 percent unemployment rate in 2006 was below the 5 percent mark, and was the lowest since 2000. However, the real GDP growth of a 0.6% annualized pace in the first quarter of 2007, was the weakest growth in four years, as a housing slump continued to hobble the expansion. As the economy is still operating just beyond full employment, the job market is finally relenting to the weaker GDP growth. Overall, the U.S. economy is expected to continue the expansion, but at a weaker pace of 2.1 percent in 2007. This is due to the erosion in mortgage credit quality, weakness in housing market activity, and the record breaking gasoline prices that are weighing on consumer spending.
Largely driven by the demand of natural resources, Wyoming’s economy continued to surge in 2006, and even accelerated. The mining industry contributed approximately one third of both the state’s total earnings growth and job growth. In addition, the multiplier effect associated with the acceleration in the mining industry is resulting in upward movement in many other industries such as construction, wholesale trade, transportation, and professional and business services. As a result, slews of breath taking statistics appeared in the state, with many economic indicators leading the nation. For example, the total job growth rate of 4.9 percent in 2006 was the second highest in the U.S.; a personal income growth rate of 10.4 percent in 2006 was virtually the highest; and the annual housing appreciation rate of 14.3 percent during 4th quarter of 2006 was the second highest. In comparison to the U.S. industrial structure, the state’s economic diversification was the lowest, and also was the lowest in Wyoming’s history. The growth rate of 13.2 percent in gross state product (value added) in 2005 was the highest; Major state and local tax burden was the lowest, just 4.4 percent of income in 2005; the 14.5 percent of growth rate in per capita state revenue in 2005 was the highest in the country.
Bolstered by a booming energy industry, the Wyoming economy is continuing to expand rapidly in 2007, though at a slower pace than the previous year. The recent slowdown is caused by a decelerating, yet still robust growth in the mining sector. This is due to the reduced drilling activities (particularly for coal bed methane), shortages of qualified workers and affordable housing, declining spot prices of natural gas in the Rocky Mountain region which is caused by constraints of pipeline capacity, and wildlife concerns. However, production will remain sturdy going forward thanks to elevated prices and growing global demand for energy. So in the near and midterm, the energy industry will continue to support strong, but decelerating growth for the state economy. The state’s tight labor market and the high paying nature of energy related jobs will support strong wage and income growth. Over the long term, Wyoming’s very low industrial diversity and/or high dependence on the energy sector will be a limiting factor, particularly if energy prices drop lower and faster than expected.
Due to the larger proportion of baby-boomers, with a white dominant racial structure, and no big metro presence in the state, Wyoming’s population will be aging fast in the near future. Therefore, the tight labor market will probably hang round, or could be getting worse for many years in the state, particularly when early boomers start to exit out of the labor market around 2010.
|
