Answering economic questions, Snead provides economic outlook for Wyo
Casper – Mark Snead, president of RegionTrack, Inc. of Yukon, Okla., categorized Wyoming as the state of mining, moose and migration.
With much of the country seeing recovery following the economic recession, Snead said, “We are back to pre-recession patterns, so where does Wyoming fit into this? What is the key driver?”
Snead spoke with attendees of the 2014 Agricultural Bankers Conference, held in Casper on May 15-16.
“When we look at the patterns a little more broadly, we see steady growth rates in retail sales through 2009-10,” he explained. “In early 2012, retail sales flattened, and we had soft data in 2012. By and large, retail sales were flat year over year.”
Taking a broad perspective and looking at large sectors, Snead said the goods sector overall has weakened.
“Construction, mining, agriculture and manufacturing have all weakened, and the government sector has been particularly weak under budget constraints,” he said, marking local governments as the weakest area. “The growth has been in services.”
Snead also looked at Wyoming’s two major metro areas – Casper and Cheyenne – noting that they tend to lead the state in terms of economic trends.
“Softening was first visible in the job growth numbers in Casper,” he commented. “By the end of 2012, we saw some clear softening. Both of the major metro areas were soft in the fourth quarter of 2012 and first quarter of 2013. It doesn’t really matter what the rest of the state is doing when the two metro areas are soft in both the first and fourth quarters.”
“It would be nice to bounce out of the recession, but I would argue a clear downshift has showed up in the rural areas first and the metropolitan areas last,” Snead commented. “Wyoming, at the moment, is operating below its historical level.”
He added that determining economic activity can be difficult and is somewhat dependent on the sector being analyzed, but overall trends can still be noticed.
“It is hard to get behind the wheel and gauge economic activity, and to some degree, it is specific to the industry,” he said, “but nonetheless, Wyoming has cooled.”
One of Wyoming’s major sectors for economic growth and development is the mining sector, which is broken into mining support, mining except oil and gas, and oil and gas extraction.
“Mining support is the biggest sector,” Snead said. “Wyoming has about 12,000 jobs in the mining support sector.”
The sector has driven the slowdown in the mining sector, with visibly slowed growth in 2012.
“We also see some softness in mining except oil and gas,” he said, noting that the sector includes coal, uranium and other extracted minerals. “This is certainly not the problem.”
The third portion – oil and gas extraction – includes drilling and white collar activities and has stayed fairly flat.
“It is the support activities that are the problem for the mining sector,” said Snead. “Wyoming is clearly still highly mining-dependent, and the mining sector is the problem for Wyoming.”
In the energy sector on a national scale, Wyoming sits high in natural gas production but drops for oil production.
“The U.S. produces about 26 trillion cubic feet of natural gas,” said Snead. “Texas produced 8 trillion by itself, and the second tier, Wyoming, Oklahoma, New Mexico and Louisiana, jointly produce about the same as Texas.”
However, growth for Wyoming is limited, due to the dry natural gas that is prevalent in the state.
“Wyoming’s gas is not liquid-rich, especially when compared to other states,” he explained. “Profit models are based on the liquid mix. On the gas side, Wyoming is just particularly less competitive than many of the other energy hubs.”
However, with stronger gas prices, Wyoming may re-enter the industry.
Crude and coal
When looking at crude oil and coal, Snead also marked some challenges.
“When we look at the crude side, we are pushing 3 billion barrels of production in the U.S.,” he explained. “Wyoming is clearly in the third tier of oil producers because the state hasn’t seen the spike that Oklahoma, North Dakota, Texas and New Mexico had.”
Based on Wyoming’s geology, Snead said the state is not poised to become a huge player in the crude oil game nationwide.
“Coal is also a tough one,” he commented. “We are modeling Wyoming as having a permanent long-run slow down trend in coal production. The data is telling me that, until we do something on the regulatory or carbon reduction front, this is what we will see.”
International coal shipment also poses a problem with lack of access to seaports on the West Coast.
An additional challenge with coal is that much of Wyoming’s coal extraction takes place on federal land, which is getting more challenging to navigate.
Despite the challenges, Snead sees opportunities for Wyoming as a hub.
“Casper is doing well within Wyoming, which is doing well as a hub,” he said.
Snead, however, also noted that a shift is also seen in agriculture.
“The data in our world has shifted from overwhelmingly positive fundamentals to a steady decline in what we would argue is a clearly deteriorating, though not bad, set of fundamentals,” he said.
With crop prices down, rental rates down, softer ag rental rates and softened repayment rates, Snead said a shift in conditions has occurred in the ag industry.
Across the state
Snead said that across much of Wyoming, job creation matches population growth, with the excpetion of Campbell and Carbon Counties.
“In Carbon County, we are seeing very strong job growth, yet population decline,” he said. “In Campbell county, we have the reverse of Carbon County. We have strong population growth, but a net decline in jobs.”
Most of Wyoming’s new population is moving into Teton, Natrona and Laramie counties.
In Casper and Cheyenne, Snead commented that some growth is occurring.
“Casper is moving forward as an energy hub,” he said. “Casper is growing rapidly.”
The city posted 2.7 percent job growth in 2013 – a higher rate than on the national level.
“Casper is also moving up the ranking in energy markets,” Snead added.
However, Cheyenne is also growing, but Snead said it is only marginally sensitive to the energy sector.
“Cheyenne is really taking on a different personality,” he commented. “Federal employment is something of a concern for Cheyenne with the air force base.”
“In terms of statewide performance, until the cutbacks in the mining sector and government sector pick up, Wyoming won’t see large growth rates,” Snead mentioned.
However, he also said that since 1965, the 13 energy states in the nation far outperform the rest of the nation in terms of job growth.
“Wyoming is 100 percent a traditional energy state, and it is good to be an energy state in the long run,” Snead noted. “The problem is the volatility along the way.”
Looking back to the 1990s, Region Track, Inc.’s Mark Snead noted that Wyoming had one of the best economies in the country.
“In 1991-93, when most states were having a hard time getting traction, Wyoming was doing extremely well,” he explained. “By 2003-04, the natural gas world exploded.”
During the recession, Snead said that Wyoming struggled.
“In early 2010, Wyoming was moving something below the two percent pace that showed the nation was struggling to create jobs,” he said. “While Wyoming came out of the recession at near two percent job growth – much faster than the rest of the nation, in early 2012, the state downshifted to one percent.”
Currently, job creation is at approximately one percent, a figure that tracks below the historical rate and significantly below 2003-08’s explosive rates.
At the national level, Mark Snead of Region Track, Inc. noted that pre-recession trends are returning across the country.
“Some of the country obviously has lower unemployment rates, but the coasts have once again accelerated rapidly in terms of job growth,” he said. “We now have the traditional patterns from prior to the recession.”
Included among those patterns in the desire to live within 100 miles of the coast, and the result is that the traditionally high-end migration, fast growth states are creating the bulk of jobs.
Broadly, those high-end migration states include the coastal rims – including California, Washington, Oregon, Texas, Florida, Georgia, South Carolina, North Carolina and Virginia.
Energy and agriculture states led post-recession recovery in the U.S., but those states saw a dramatic slowdown in 2012-13.
“We also have the rural versus metro imbalance,” Snead said. “The metro areas are growing faster than rural areas. We can see that in Wyoming, just as it is playing out in other states.”