Wyoming continues to see unemployment rates that are significantly higher than this time last year and markedly higher than the national average, according to figures released Friday by the U.S. Bureau of Labor Statistics (BLS).
Wyoming is one of three states in the nation that saw a statistically significant increase in unemployment rate between July 2015 and July 2016. Of those three states, Wyoming's unemployment increase was the highest, increasing 1.4 points from 4.3 percent in July 2015 to 5.7 in July 2016. Oil rich North Dakota also saw a 0.4 increase in that state's unemployment rate.
According to the BLS, unemployment rates in the mining and gas and oil extraction industry increased from 8.1 percent in July 2015 to 9.3 percent in July 2016, suggesting that Wyoming's reliance on coal and oil coupled with low oil prices and a collapse in the coal market are hitting the state particularly hard, especially when compared to neighboring states with more diversified economies, the BLS said in a release.
Reliance on oil and coal
"For Wyoming, it's two things," Jim Robinson, principal economist at the Economic Analysis Division (EAD) of the State of Wyoming Department of Administration and Information.
"It's oil and gas and there's also been a drop in coal."
With fracking technologies, there was a lot of oil and gas production, Robinson said, adding that much of the oil and gas produced went into inventories. That glut of available product has driven down the market price, making additional production not lucrative enough for the oil and gas extraction firms.
The problems in the coal business are more complicated.
Federal policies have discouraged utilities from constructing coal-fired power plants, Robinson said, adding that coal also faces competition from other energy sources.
"Gas and coal are substitutes for one another," he said. "A lot of these utilities that have the capability to burn either coal or natural gas switched to natural gas the last couple years because it was so much cheaper than coal."
Reductions in overseas demand for coal, as well as competition from other coal producing nations has also cut into the demand for coal.
"China had tremendous growth about a year or so and that growth has been curtailed and their demand for energy is curtailed along with that," Robinson said. "Their demand for coal is not as great as it once was."
In 2007, China's annual gross domestic product growth rate was 14.2 percent, and decreased to 7.9 percent in 2015, according to figures released by the World Bank. The nation's most recent five-year plan has a targeted growth rate of 6.5 percent between 2016 and 2020. The Chinese government also has placed a heavy emphasis on reducing pollution, greenhouse gasses and increasing energy efficiency the World Bank said.
Broad impacts to
Data from consumer credit reporting agency TransUnion also shows that unemployment in the state may be beginning to take its toll on other areas of the economy. According to TransUnion, Wyoming was one of only three states in the nation where year-over-year increases in mortgage delinquencies have been noted.
According to Transunion, Wyoming's rate of mortgage delinquency-defined as a mortgage that is 60 or more days late-increased 9.6 percent year-over-year between second quarter 2016 and second quarter 2016. North Dakota and West Virginia, both states heavily reliant on coal or oil extraction, were the only other two states in the U.S. to experience increases in mortgage delinquency.
States neighboring Wyoming all saw decreases in mortgage delinquency, at an average of 15.5 percent over the same time period.
Robinson said he believes it likely that many of those delinquencies are occurring in two counties hit particularly hard by the decline in the oil and gas and coal industries, Natrona and Campbell counties.
"You'd expect to see more of those delinquencies in Natrona county because of all the oil and gas activities there," Robinson said. "Another would be Campbell county because of the layoffs in the coal industry there just in the last six months or so."
According to state figures for the month of June, the average unemployment rate in Wyoming was 5.6 percent, but Natrona and Campbell counties have unemployment rates of 7.8 percent.
Reports released by EAD show a 1.5 percent decrease in economic activity in Cheyenne year over between June 2015 and June 2016. Over the same period, economic activity in Casper decreased 4.6 percent.
The decrease in economic activity is caused by more than slowdown in oil or coal extraction activities, Robinson said.
Construction, wholesale trade and transportation have also suffered according to Robinson. A lot of construction in the state was tied to the mining industry, and transportation derived a good portion of its business from moving oil and minerals extracted in the state to market, he said.
The downtown in mining and mineral extraction has also harmed one of Wyoming's other major business sectors; leisure and recreation.
"We usually think of that as tourism, and tourism itself has been a good story this year. Those numbers are good has been a good story this year. Those numbers are good in terms of people visiting national parks," Robinson said.
But part of leisure and hospitality also had to do with miners, people involved in mining who were going to restaurants and staying at hotels. We've lost a lot of that business in the state and that has driven down the leisure and hospitality sector."
Even though visits to national parks and other vacation travel indicators are on the upswing, those gains do not offset the losses incurred in business travel.
Wyoming's increasing unemployment, shrinking economic activity and increasing mortgage delinquency flies in the face of the rosier picture emerging across the nation as the U.S. begins to pull out the recession that began in 2007.
The nation as a whole has an unemployment rate of 4.9 percent, on par with the approximately 5 percent unemployment rate at which many economists believe full employment has been reached.
The U.S. economy, as a whole, is doing so well the Federal Reserve Bank's Federal Open Market Committee (FOMC) has signaled that an increase in the target interest rate is on the way. The Federal Reserve can increase the target rate in order to prevent inflation.
When interest rates go up, spending by consumers and business sometimes decreases since it becomes more expensive to borrow money. Meant to cool the economy and prevent runaway inflation, it can chill already weakening economies such as Wyoming's.
"The Feds are waiting for a favorable jobs report and I think last month they got that," Robinson said, "And I don't believe they think that is going to change next month."
Robinson though, says he does not think a rate hike will harm Wyoming's economy, saying that the Fed has been signaling a potential rate increase for about a year now, and that such an increase has already been accounted for by markets.
But it's not clear if oil and mining jobs will be coming back. Oil, after a brief rally over the last week-and-half that pushed its price closer to $50 per barrel, tumbled Monday back toward the $40 per barrel mark as Iraq and Nigeria announced increased crude production, and China exported large quantities of refined fuel.
A price of $50 per barrel could make it more sustainable for more oil companies to begin extraction operations.
At the New York Mercantile Exchange Monday, the price of oil closed down 3 percent, at $47.05 per barrel.
Coal demand is expected to continue to drop across the world, according to the U.S. Energy Information Administration. According to the agency, demand for coal will continue to decrease nationally and worldwide in favor of alternate energy sources.
"About six months ago, when I was looking at the difference in oil and gas jobs in the state compared to a year ago, we were up to about 6,000-7,000 fewer jobs compared to a year ago," Robinson said. "Now we're down to about roughly 3,000 fewer jobs based on my June numbers."
"That doesn't sound so bad, you might say, 'We were down 6,000 but now we're only down 3,000,'" Robinson said. "But you have to remember as we go back 12 months, we're going back to a period in time that wasn't that great."
"We've been in the slide now for almost two years."