Tuesday, May 9, 2017

Wyoming Still Losing Jobs

We now have employment data for Wyoming for the first quarter of 2017. These numbers, which are published monthly by the Bureau of Labor Statistics, are important advance indicators of what we can expect in terms of more comprehensive macroeconomic data - in other words, of how the state economy in general is performing. 

First, a look at the major industrial categories.
Figure 1 reports the annual change in employment, first quarter of each year, in minerals (columns), the non-minerals private sector (dark blue) and state and local governments combined (light blue):

Figure 1

In a nutshell, Wyomingites are still losing jobs. The most striking news is, of course, that the minerals industry has now been reducing employment three years in a row, with the small decline in 2015 being dwarfed by the 21-percent drop in 2016. It is also important to note that 2017, when we record a decline of 12 percent, is not far behind the Great Recession job loss in 2010 of 14.7 percent. This tells us that the decline in the minerals industry is still ongoing (although there are some small indicators of a stabilization; more on that in a moment) which in turn is a stern warning to our legislators in Cheyenne: the heydays of free-flowing severance tax revenue are behind us.

The non-minerals private sector, represented by the dark blue line, is also in downsizing mode. Last year's 2.3-percent decline in employment was followed this year by a 1.7-percent drop. While these numbers are small compared to the minerals industry, in absolute jobs lost the non-minerals sector is actually responsible for the bulk of all private-sector jobs lost in the past year:
  • In the first quarter of 2016, the minerals industry accounted for 55 percent of the decline in private-sector employment;
  • In the first quarter of 2017, the minerals industry is only responsible for 44 percent of the decline in private-sector employment.
As we shall see in a moment, the jobs loss outside of the minerals industry continues. First, a couple of points about government employment:

--It is encouraging to see that compared to the same quarter the previous year, combined state and local government employment has been declining in three out of the four past years;
--That said, the actual employment reduction has been limited, with 1,900 jobs in the past four years;
--In terms of employment, Wyoming still has the largest government sector in the country, with a Government Employment Ratio that stubbornly remains above 300:*

Figure 2

As mentioned, there are some signs of a stabilization in the minerals industry. Perhaps the best indicator is that employment in mining support activities actually ticked up a smidge in March. After having lost a total of 6,200 jobs for 25 months in a row (equal to 46.6 percent of all employees) the minerals-support businesses added a marginal 200 jobs i March this year. That puts current employment in this subcategory of the minerals industry here in Wyoming at 7,300. 

It remains to be seen if this is the beginning of a new trend; judging from other data, primarily showing a slight uptick in coal production, it is reasonable to expect that there will be no more losses in minerals support jobs for now. It is more likely with a weak upward trend in employment than a continuation of job losses.

Things are not quite as good in coal mining, where first-quarter employment in 2017 was down by 900 over first quarter of 2016, a 14.2-percent decline. In absolute numbers, this decline is more than three times as big as it was from 2015 to 2016, which does sound dramatic. It is, of course, but we do have reasons to believe in a stabilization in coal mining employment over the course of this year. 

A new normal, as they say.

Outside government and minerals, here are some highlights:

Construction. Employment continuing to decline, now at 23 months straight; weak signs of a stabilization in the making.

Wholesale trade. Employment down 20 months in a row, with the decline remaining steady or even accelerating. Employment fell by almost the same absolute numbers in Q1 of 2017 as it did in Q1 of 2016.

Retail trade. Here, too, there are signs of a steady-to-accelerating downward trend. Retail employment is down by 800 (2.7 percent) in Q1 of 2017, compared to an increase of 767 (2.6 percent) in Q1 of 2016. Even though retail employers have only been cutting jobs for eight months straight so far, it is troubling that they continue to do so. This is an indicator of an economy-wide decline in consumer spending at a relatively basic level. Plain and simple: Wyoming families are hurting.  

Transportation and warehousing. Employment still trending downward, though at declining rates. A total of 700 jobs lost in Q1 2017 compared to a year earlier; the same number in Q1 2016 was over 1,000. Monthly employment numbers suggest a stabilization in employment is under way.

Finance and insurance. After 13 months of layoffs, this industry has stabilized. In March, employment numbers were similar to those for the same month a year earlier. There is some encouragement in this, as finance and insurance jobs often require a college degree; Wyoming desperately needs jobs that will keep a college-graduated workforce in the state. However, so long as our state's economy overall remains in the tank, do not expect this industry to start hiring people at any significant numbers. A good forecast is we will see finance and insurance companies stabilize with a workforce around 6,600.

Health care and social assistance. This is probably the only private industry that continuously adds jobs. In the first quarter this year they increased employment by 1.1 percent. This is not much for a 25,000-employee industry, but the steady trend (36 months straight with slow but steady jobs growth) clearly shows that if you want a job in Wyoming, this is the industry to turn to.

Again, overall the Wyoming economy is still in a depressed mode; the decline in minerals, while tapering off, has sent a shock wave through the rest of the economy; that shock wave may have taken on a life of its own, at least in some industries outside minerals. 

I still predict that at the macroeconomic level we will see a stabilization this year, with a tiny uptick in select industries, but absolutely no return to the good, old days. For this reason, it is imperative that our state legislators get with the program, drop all plans on increasing the tax burden on our economy - and that they instead focus on structural reductions in government, to adjust it to our state's new macroeconomic normal.
*) The Government Employment Ratio (GER) is calculated as the total number of state and local government employees, divided by the total number of private-sector employees; the ratio is then multiplied by 1,000 to produce a workable number.

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