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Liu - Wyoming Business Report - Casper - Eco 2013
- 1. WYOMING ECONOMIC AND REVENUE TREND Wyoming Business Report Economic Forecast Lunch December 10, 2013 Casper, Wyoming Wenlin Liu, Principal Economist Economic Analysis Division State of Wyoming 1
- 2. • WY in the recession: late entry, sharp contraction in 2009, stronger rebound in 2010 and 2011 – employment, income, wage, and revenue all increased. • • • • But the recovery slowed in the second half of 2012 and the first half of 2013 – mainly caused by reduced NG prices (drilling declined, fuel switching by power plants). (NG prod -6.0%, coal prod -9.0%). Mining industry lost jobs. However, oil exploration continued to expand in 2012 (2.0%). Driven by housing market recovery, construction employment showing growth. Starting the 3rd quarter of 2013, Wyoming’s economy appears growing again – stabilization of NG drilling activities and coal production from increased NG prices. 2
- 3. Employment by Industry for U.S. and Wyoming: 2012 (Includes: full and part-time wage and salary jobs, and proprietors employment) Wyoming U.S. Agriculture 1.9% Mining 0.7% All Other 21.4% Construction 4.9% Agriculture 4.0% All Other 19.1% Construction 7.4% Manufactur. 7.0% Leisure & Hospitality 9.4% Manufactur. 2.9% Wholesale & Retail Trade 13.6% Government 13.4% Government 19.3% Educational and Health Services 13.4% Wyoming = 392,348 U.S. = 179,613,300 Professional & Business Services 14.2% Mining 8.4% Leisure & Hospitality 10.4% Wholesale & Retail Trade 12.4% Educational and Health Services 8.4% Professional & Business Services 7.8% Rank of Wyoming’s industry share in the U.S.: Manufacturing – 49th Construction – 1st Prof. & Bus. Svcs. – 51st Government – 3rd Source: U.S. Bureau of Economic Analysis Mining - 1st Educ. & Health Svcs. – 50th 3
- 4. Gross Domestic Product for U.S. and Wyoming: 2012 by Industry Wyoming U.S. Agriculture 1.1% Agriculture 1.3% Mining 1.8% Construction 3.6% All Other 32.2% All Other 24.1% Mining 28.4% Manufactur. 12.0% Wholesale & Retail Trade 11.9% Government 12.3% Professional & Business Services 12.5% Leisure & Hospitality 4.0% Educational and Health Services 8.6% Government 14.0% Construction 5.0% Leisure & Hospitality 3.9% Educational and Health Services 4.2% Manufactur. 5.9% Professional & Business Services 4.3% Wholesale & Retail Trade 8.9% Note: GDP is often referred to as its "value added", is equal to its gross output (sales or receipts and other operating income, plus inventory change) minus its intermediate inputs (consumption of goods and services purchased from other industries or imported). Source: U.S. Bureau of Economic Analysis 4
- 5. • Wyoming’s economy does not mirror that of the nation. In terms of economic diversity and specialization, Wyoming is probably the least diversified state in the nation when measuring employment and GDP distribution across industries in comparison with the U.S. • Economic diversity has been commonly considered as a means to achieve economic stability. A diversified economy is considered a robust economy, and is better able to withstand and recover from significant unfavorable changes in any one sector. • “However, research is mixed as to whether it is better for a state or local economy to become more diversified, or remain specialized in sectors where it has, or may acquire, a comparative advantage.” 5
- 6. Non-Agr Wage and Salary Employment for Wyoming and U.S. (Number of jobs) 300 160,000 Wyoming US 280 150,000 260 140,000 240 130,000 220 120,000 200 110,000 180 100,000 160 90,000 140 80,000 120 70,000 100 U .S . E m p lo y m e n t (in th o u s a n d s ) W y o m in g E m p lo y m e n t (in th o u s a n d s ) Job growth rate: 2006=5.1%, 2007=4.1%, 2008=3.3% 60,000 '73 '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 Source: U.S. Bureau of Labor Statistics Prepared by Wyoming Economic Analysis Division 6
- 7. Wyoming and US Unemployment Rates: 1977 - 2013 Annual Average 10.0 10.0 9.0 9.0 U.S Wyoming 8.0 7.0 7.0 6.0 6.0 5.0 5.0 4.0 4.0 3.0 P e rc e n t 8.0 3.0 2.0 1977 1980 1983 1986 Source: U.S. Bureau of Labor Statistics 1989 1992 1995 1998 2001 2004 2007 2010 2.0 2013 Prepared by Wyoming Economic Analysis Division 7
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- 9. Percentage Change in Non-farm Employment by State October 2012 – October 2013 0.8% U.S. = 1.7% Source: U.S. Bureau of Labor Statistics 9
- 10. Unemployment Rate by State October 2013 (Seasonally Adjusted) 4.6% U.S. = 7.3% Source: U.S. Bureau of Labor Statistics 10
- 11. 50.0 40.0 30.0 20.0 10.0 0.0 -10.0 -20.0 -30.0 -40.0 -50.0 Jan 08 Jan 09 Source: Wyoming Department of Revenue Jan 10 Jan 11 Jan 12 Jan 13 11
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- 14. • Robust Supply – tech (HF, HD) • Higher Storage – mild weather Source: Natural Gas Intelligence 14
- 15. U.S. Electricity Generation by Energy Source 60.0 50.0 40.0 39.0% Percent Coal 30.0 20.0 27.7% 19.2% Natural Gas Nuclear Convent. Hydro. Wind 10.0 0.0 6.9% 4.0% 3.1% All Other Note: 2013 includes data from Jan to Sept 2013. Source: EIA/Electric Power Monthly/1.1 & 1.1A; Prepared by Wyoming Economic Analysis Division 15
- 16. Wyoming Revenue and Tax Facts • Revenue heavily relies on extractive industries. • Mineral income currently makes up about two-thirds of State and over half of Local Government revenue. • FY 2013 Mineral income is obtained from: - Mineral severance taxes ($839.8 M). - Federal mineral royalties ($961.6 M). - Mineral property taxes ($845.0 M). - Sales and use taxes ($181.6 M). - Income from PWMTF ($366.6 M). • No income tax, low property and sales tax rates (food exemption). • Household tax burden ranks among the lowest in the nation. • Near top rank in per capita state and local government revenue and expenditures. 16
- 17. Mineral Severance Taxes: FY1980 - FY2016 (in millions of current and constant dollars) $1,200 * Note : Inflation rate is as s um e d to be at 2% e ach ye ar for FY 2014 to FY 2016 $1,100 2013 Dollars* Other Coal Natural Gas Crude Oil $1,000 $900 $800 Natural Gas $700 Crude oil $600 $500 $400 $300 $200 $100 $0 1980 1983 Source: Wyoming CREG 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 Prepared by Wyoming Economic Analysis Division 17
- 18. Total Locally and State Assessed Valuation: 1980 - 2015 (in millions of current and constant dollars) $32,000 * Note : Inflation rate is as s um e d to be at 2% e ach ye ar for 2014 and 2015 $30,000 2012 Dollars* Coal Natural Gas Oil Other $28,000 $26,000 $24,000 $22,000 Percent of Total Mineral Valuation: 1981 = 72% 1998 = 49% 2008 = 70% 2012 = 59% $20,000 $18,000 $16,000 $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 1980 1983 1986 1989 1992 1995 * Other includes other minerals, real and personal property 1998 2001 2004 2007 2010 2013 Wyoming Economic Analysis Division 18
- 19. Source: U.S. Census Bureau and Wyoming Economic Analysis Division 19
- 20. 2000 Male 2010 Female 85+ 80 - 84 75 - 79 70 - 74 65 - 69 60 - 64 55 - 59 50 - 54 45 - 49 40 - 44 35 - 39 30 - 34 25 - 29 20 - 24 15 - 19 10 - 14 5-9 0-4 2020 Male Female Male 2030 Female 85+ 80 - 84 75 - 79 70 - 74 65 - 69 60 - 64 55 - 59 50 - 54 45 - 49 40 - 44 35 - 39 30 - 34 25 - 29 20 - 24 15 - 19 10 - 14 5-9 0-4 Source: U.S. Census Bureau and Wyoming Economic Analysis Division Male Female 20
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- 22. • • • • • • WY economy has been improving since the summer of 2013 and is expected to continue to grow moderately in 2014 – benefiting from continuing expansion of oil exploration and recovery of NG prices. Because of its large proportion and pivotal role in WY’s economy, the improvement in mining industry will trigger into other economic sections. As a energy extraction dependent economy, WY will benefit from continuing global commodity demand and U.S.’ stronger economy in 2014. Residential construction continues to grow. Tourism industry will benefit from EU recovery and continued U.S. recovery because they bolster tourists’ spending ability. Population grow around 1.0%, and employment will grow over 1.0%; unemployment rate below 4.5% in 2014. - Potential Projects: Chokecherry and Sierra Madre; Moneta Divide; Transmission lines (Gateway West, TransWest Express). - Concern: upcoming regulation on existing coal fueled power plants. 22
- 23. THANK YOU! Economic Analysis Division – EAD “Wyoming’s Source for Business and Economic Information” http://eadiv.state.wy.us ai-ead-info@wyo.gov (307) 777-7504 23
Notas del editor
- If we divide the whole U.S. economy into different industries or sectors, it’s the pie chart on the left.And if we divide Wyoming’s economy into different industries or sectors, it’s the pie chart on the right side.- Mining, AK, WV, ND < 5.0%. OK, LA, TX < 4.0%.- Government: only D.C. & Alaska were higher than Wyoming. Manufacturing: only D.C. & HI were lower.Educ % Health Services: only NV was lower.Most undiversified economy.Economic diversity has been commonly considered as a means to achieve economic stability. A diversified economy is considered as a robust economy, and is better able to withstand and recover from significant unfavorable changes in any one sector.However, research is mixed as to whether it is better for a state or local economy to become more diversified, or remain specialized in sectors where it has a comparative advantage.
- Mining account for nearly 30% GDP.High wage rate and high taxes they paid.
- The boom in the 1970s, and bust in the 1980s caused by oil price surge and drop.The boom in the period 2005-2008 was led by NG price surge and exploration.Job growth rate in these 3 years were the fastest in the nation. Wyoming’s recent economic recession lagged the U.S. recession by nearly a year. But WY lost 4% jobs in 2009, similar to job losses in the U.S. The job recovery started since early 2010, similarly to the U.S.WY recovery in 2010 and 2011 was quite strong, but it slowed down since the 2nd quarter of 2012. Caused by weak NG and coal prices and production.As a result, WY recovery in 2012 and 2013 was weaker.
- Since 2000, WY’s unemployment rate has been consistently lower than the U.S.During the recent WY boom years 2006-2008, Wyoming’s unemployment rate was just around 3.0%. Due to the recession, the unemployment rate in U.S. and WY increased dramatically in 2009.-For the U.S. , it’s the first time in history that the high unemployment rate lasted so long (4 consecutive years over 8%, highest in 20 years.For 2013, the U.S. unemployment rate will still be about 7.5%, while WY Unemployment rate will be still about 4.7%, the highest since 1999.
- -This chart shows the year-over-year percent change of employment by quarter from 1q08 to 3q13.-You can see that when U.S. was already in recession in 2008, WY still experienced job gains. -Once recession started in WY, it went down faster and deeper.-Our recovery in 2010 and 2011 were stronger.-But it slowed down since the 2nd quarter of 2012. NG gas price dropped to below $2.00/mcf in April 2012, drilling activities slowed. -2012 NG prices was 30% lower than 2011, prod declined 6%; coal production was also down by 9% in 2012.-It turned out that there was no job gains in the 2nd half of 2012, and the 1st quarter of 2013.-WY’s employment started to grow again since this summer. We see
- ND = 3.5%FL = 2.5%; ID = 2.4%; TX = 2.4%.
- Wyoming’s 4.6% in October declined from October 2012’s 5.1%, It was much lower than the U.S. 7.3%, and we ranked 5th lowest in the country, only higher than ND (2.7%), SD (3.7%), NE (3.9%) and HI (4.4%).4 states’ unemployment rates were over 9.0% (NV, RI, MI), and no states were in double digit. The highest was Nevada 9.3%.The states with the next highest rates were Rhode Island (9.2%), and Michigan (9.0%).
- -Another piece of evidence showing the slowdown of Wyoming’s economy during the second half of 2012 and the first half of 2013.-Sales taxes declined for consecutive 11 months from August 2012 to June 2013.-This declining period was just spanned FY 2013.-Finally, sales taxes started to change direction in the summer, just like the employment chart shows, the WY’s economy trends up again.
- The 11 month consecutive declines was just happened to be in FY 2013. This map shows year-over-year % change in sales tax collection by county between FY 2012 and FY 2013. The total sales taxes declined 4.7%. -Sales taxes from mineral extraction industry declined double digits, and it attributed to about half of all sales tax declines during the period.-It clearly reflect the downward trend in energy activities in Southwest (particularly Jonah field in Sublette) and Northeast. -On the other hand, oil drilling in the lower Powder River Basin mainly in northern Converse county continued to be very active.-The nearby Natrona is benefiting with service provisions.
- - This map shows the sales tax change for the first 4 months of FY 2014 comparing the previous year, compare cumulative sales taxes July-Oct 2013 with cumulative sales taxes July-Oct 2012. - Just like the improvement in employment, the sales taxes finally showed increases starting in the 3rd quarter of 2013.It increased 7.1% statewide. Laramie County – one time purchase of computer software in October.Continued expansion of oil drilling in Niobrara shale in Converse and Niobrara counties. - It does indicate that activities from natural gas exploration are stabilizing, particularly in SW (Sublette) and NE (Campbell).
- -Extreme price volatility in natural gas pricing was the story throughout much of the last decade. Demand was far out-stripping supply, and pipeline capacity fell way short of meeting production levels here in Wyoming. The result created price disparities reaching as high as $5.00/Mcf.-All of this has changed in the last 4 years!A simple way to gauge Wyoming’s economic condition is to observe NG prices due to its dominant status in the State.If the price is above $6.00 /mcf - economy is booming (2005 to 2008).If the price is between $5.00 - $6.00/mcf - economy is robust (2003 to 2004). If the price is around $4.00/mcf – economy is just o.k. or growing moderately (2010 and 2011). When the price falls below $3.00/mcf – economy is weak (2002, 2009, and 2012). YTD = $3.70/ Mcf
- Natural gas production in U.S. increased 30% in the past 6 years. - The growth were mainly from unconventional shale gas exploration due to HF and HD in TX, LA, and PA. WY NG production peaked in 2009, decline over 11% in 3 years, 6.0% decline in 2013. WY coal production peaked in 2008, has declined 14% in 4 years. It dropped 9% in 2012, 3.0% decline in 2013. WY oil production increased over 12% since 2009, 3 consecutive years of growth, 8.0% increase in 2013. Chokecherry and Sierra Madre wind project.
- The revenue boom in the early 1980s was dominated by oil.While the recent boom was mainly natural gas.-Severance taxes reached to nearly $1.1 billion in FY 2008, which was 5 times as much as in FY 1999.-Severance taxes dropped 6.0% in FY 2013, mainly caused by reduction of NG prod and prices.-For next few years, we expect oil production continues to rise, but NG and coal flat.-Proportion of severance taxes from each mineral was about equally shared.
- -Valuation is in calendar year instead of fiscal year.-The purple color on the bottom are mostly non-mineral valuation, mainly includes residential, commercial, and industrial properties.-Its valuation was relatively stable over the years, All the fluctuation was from mineral valuation.-% of mineral valuation: 1981=72%; 1998=49%; 2008=70%; 2012=59%.-Solely due to NG price and production decline, the total mineral valuation dropped over 16% in 2012. -% of mineral valuation is still expected to be over 60% in next few years.Illustration of how influential energy is on the State’s taxable value. Note growing importance of natural gas!All property tax is based on the assessed value of property. Mineral production is assessed at 100 percent.Assessments are done on a calendar year basis; property tax revenue received on a fiscal year basis (approx. 2 years later). CY07=FY09
- Charts shows Wyoming’s population by age group from 1970 to 2030.From 1970 to 1980, the younger working group age 25-44 nearly doubled.From 2000 to 2010, the fastest increase happened in older working age group 45-64, due to aging of baby boom population.Then, for the next 10 years, the older age 65&over will grow the fastest over 50% to reach to 107,000 because many early boomers will move into that group.
- This chart is called population pyramid showing population distribution by age and sex; The left side is male, and the right side is female.Horizontal axis is population and vertical axis showing 5-year age group, from young at the bottom to older at the top. -100 year ago, the U.S. population was a perfect true pyramid shape, more young people on the bottom and a lot less older people at the top.-In 20 years, they will be in a rectangle shape. You can clearly see how the baby boomers move in each decade, this group was in 35-54 age group in 2000, 45-64 in 2010, 55-74 in 2020. You can see the higher proportion of baby boomers – age 45 to 64, low proportion of Generation-X, and high proportion of echoes.As you know woman live longer than men. For population older than 70 years, there are more woman than man, for population over 85 years, the number of woman are twice as many as men.
- Mainreasons for delaying retirement: increasing health care cost, keep health insurance. insufficient pension and retirement savings – reduced 401ks from 2008 financial crisis. people are healthier.
- Summary:After weak performance in the 2nd half of 2012 and 1st half of 2013, WY’s economy was improving starting in the 3rd quarter. benefited by continued expansion of oil drilling along southern Powder River Basin. renewed interest in NG drilling resulting from price recovery. stabilization and recovery of coal production.The improvement of WY economy is expected to continue through 2014 with job growth rate over 1.0% and unemployment rate below 4.5%.