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WYOMING ECONOMIC AND REVENUE TREND

Wyoming Business ReportNovember 7, 2013Cheyenne, Wyoming

Wenlin Liu, Principal Economist

Economic Analysis Division

State of Wyoming

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Recent Economic Trend• 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 since the 2nd quarter of 2012 – 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 was still quite active in 2012 (2.0%).• Driven by housing market recovery, construction employment

showing growth.• Tourism business (leisure & hospitality) was robust. • Starting the 3rd quarter of 2013, Wyoming’s economy appears

growing again – stabilization of NG drilling activities and coal production from increased NG prices.

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Mining - 1st

Construction – 1st

Government – 3rd

Manufacturing – 49th

Prof. & Bus. Svcs. – 51st

Educ. & Health Svcs. – 50th

Wyoming = 392,348U.S. = 179,613,300

Employment by Industry for U.S. and Wyoming: 2012

(Includes: full and part-time wage and salary jobs, and proprietors employment)

Source: U.S. Bureau of Economic Analysis

Agriculture1.9%

Mining0.7%

Construction4.9%

Manufactur.7.0%

Wholesale & Retail Trade

13.6%

Professional & Business Ser-

vices14.2%Educational and Health

Services13.4%

Leisure & Hospitality

9.4%

Government13.4%

All Other21.4%

U.S.

Agriculture4.0%

Mining8.4%

Construction7.4%

Manufactur.2.9%

Wholesale & Retail Trade

12.4%

Professional & Business Ser-

vices7.8%Educational and Health

Services8.4%

Leisure & Hospitality

10.4%

Government19.3%

All Other19.1%

Wyoming

Rank of Wyoming’s industry share in the U.S.:

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Gross Domestic Product for U.S. and Wyoming: 2012by Industry

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

Agriculture1.1%

Mining1.8%

Construction3.6%

Manufactur.12.0%

Wholesale & Retail Trade

11.9%

Professional & Business

Services12.5%

Educational and Health Services

8.6%

Leisure & Hospitality4.0%

Government12.3%

All Other32.2%

U.S.

Agriculture1.3%

Mining28.4%

Construction5.0%

Manufactur.5.9%

Wholesale & Retail Trade8.9%

Professional & Business Services

4.3%

Educational and Health Services

4.2%

Leisure & Hospitality

3.9%

Government14.0%

All Other24.1%

Wyoming

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Wyoming’s Economic Diversification

• 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.”

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'73 '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13100

120

140

160

180

200

220

240

260

280

300

Wy

om

ing

Em

plo

ym

en

t (i

n t

ho

us

an

ds

)

60,000

70,000

80,000

90,000

100,000

110,000

120,000

130,000

140,000

150,000

160,000

U.S

. Em

plo

ym

en

t (in th

ou

sa

nd

s)

Wyoming US

Non-Agr Wage and Salary Employment for Wyoming and U.S.

(Number of jobs)

Prepared by Wyoming Economic Analysis DivisionSource: U.S. Bureau of Labor Statistics

Job growth rate: 2006=5.1%, 2007=4.1%, 2008=3.3%

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1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 20132.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

Pe

rce

nt

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

U.S Wyoming

Wyoming and US Unemployment Rates: 1977 - 2013

Annual Average

Source: U.S. Bureau of Labor Statistics Prepared by Wyoming Economic Analysis Division

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Percentage Change in Non-farm Employment by StateAugust 2012 – August 2013

1.1%

U.S. = 1.7%

Source: U.S. Bureau of Labor Statistics

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Unemployment Rate by State August 2013(Seasonally Adjusted)

4.6%

U.S. = 7.3%

Source: U.S. Bureau of Labor Statistics

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Percent Change in Wyoming’s Sales Tax Collections(year over year)

-50.0

-40.0

-30.0

-20.0

-10.0

0.0

10.0

20.0

30.0

40.0

50.0

Source: Wyoming Department of Revenue

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• Robust Supply – tech (HF, HD)• Higher Storage – mild weather

Source: Natural Gas Intelligence

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• Tax structure reliant 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).

• Near top rank in per capita state and local government revenue and expenditures.

• Household tax burden ranks among the lowest in the nation.

Wyoming Revenue and Tax Facts

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1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

$1,100

$1,200

2013 Dollars*OtherCoalNatural GasCrude Oil

Mineral Severance Taxes: FY1980 - FY2016

Prepared by Wyoming Economic Analysis DivisionSource: Wyoming CREG

(in millions of current and constant dollars)

* Note: Inflation rate is assumed to be at 2% each year for FY 2014 to FY 2016

Crude oil

Natural Gas

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1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

$22,000

$24,000

$26,000

$28,000

$30,000

$32,000

2012 Dollars*CoalNatural GasOilOther

Total Locally and State Assessed Valuation: 1980 - 2015

Wyoming Economic Analysis Division

(in millions of current and constant dollars)

* Other includes other minerals, real and personal property

* Note: Inflation rate is assumed to be at 2% each year for 2014 and 2015

Percent of Total Mineral Valuation:1981 = 72%1998 = 49%2008 = 70%2012 = 59%

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Population AgingSpeed and pattern are determined by

3 principal factors:• Most important is the Secular decline in fertility rates

– sustained increase in the ratio of old to young (<5 vs. 65 & +).

• Mortality rates declined substantially in many countries over the past century (rising life expectancy: Japan=83, US=79)– Improvement of public health, revolution of medical technology.

• Baby boom in developed countries– pronounced rise in post-WWII fertility rates (1946-1964).

Percent of Population 65 and over: Japan = 22%; Germany = 20%; Western Europe = 19%. WORLD = 8%. U.S. = 13.0% in 2010, 20.3% in 2030. Wyoming = 12.4% in 2010, 20.5% in 2030.

20Source: U.S. Census Bureau and Wyoming Economic Analysis Division

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0 - 4 5 - 910 - 1415 - 1920 - 2425 - 2930 - 3435 - 3940 - 4445 - 4950 - 5455 - 5960 - 6465 - 6970 - 7475 - 7980 - 84 85+

0 - 4 5 - 910 - 1415 - 1920 - 2425 - 2930 - 3435 - 3940 - 4445 - 4950 - 5455 - 5960 - 6465 - 6970 - 7475 - 7980 - 84 85+

Male FemaleMale Female

Male FemaleMale Female

2000 2010

2020 2030

Source: U.S. Census Bureau and Wyoming Economic Analysis Division

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Wyoming’s Positive Outlook• WY economy is expected to improve for the rest of 2013 and next year –

benefiting from continuing growth of oil exploration, recovery of NG prices. Population grow around 1%, and employment will grow about 1.5%; unemployment rate below 4.5% in 2014.

• As a energy extraction dependent economy, WY will benefit from continuing global commodity demand and U.S.’ stronger economy in 2014.

• Expansion of oil development from Niobara Shale – Converse and Niobrara. • Residential construction continues to grow. • Because of its large proportion and pivotal role in WY’s economy, the

improvement in mining industry will trigger into other economic sections. Coal production is stabilizing, NG future prices over $4/mcf.

• Tourism industry will benefit from EU recovery and continued U.S. recovery because they bolster tourists’ spending ability.

- Potential Projects: Chokecherry and Sierra Madre; Moneta Divide; Transmission lines.

- Concern: upcoming regulation on existing coal fueled power plants.

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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

THANK YOU!