CHEYENNE – The Wyoming state economy continued the positive trajectory of 2018 with a good first-quarter 2019 report. Year-over-year increases in sales and use tax collection, severance taxes and a 1.6% increase in job growth were some of the brightest spots in the state’s MACRO Report released Wednesday.
That good news helped balance out the negative trends in coal and natural gas production and overall sluggish growth in home values and personal income when compared to the rest of the region and country.
“What I take from this report is there’s probably more good than bad happening for the state right now,” said Jim Robinson, principle economist for Wyoming. “We’re getting pretty good information in terms of the oil sector. The energy sector in Wyoming is a pretty solid driver, and (oil) production is important.”
By the end of January 2019, oil production had increased throughout the state by 16.9% over the same time in 2018. And that increase in production, with six more rigs operating than this time last year, has helped increase revenues going into the state’s coffers.
So far in the 2019 fiscal year – which began in July 2018 – Wyoming has received a total of $518.5 million in severance taxes. That’s a $56.3 million increase in revenue, or 12.3%, over the same time in 2018. That uptick mirrors the increases in sales and use taxes, which are $61.9 million ahead of last fiscal year.
Oil production is driving the rise in sales and use tax, along with the increase in activity in the construction sector.
The building of new pipelines in Wyoming has helped boost employment in construction by 2,000 jobs over this time last year, an increase of 10.1%. The 700 jobs added in the retail sector in large part were tied to the increase in oil and construction activity, Robinson said.
“We’re seeing those jobs because of oil production and because of pipeline construction. The retail trade is getting some of that spillover from the pipeline activity,” Robinson said. “It’s a ripple effect. Once you start that interest in the oil sector in Wyoming, in terms of drilling, in terms of construction, it spills over into other areas as well.”
Despite the increase in oil activity, the energy sector experienced essentially flat job numbers, losing 100 jobs over this time last year. While the oil and gas sector added 200 more jobs over last year, the decline in coal and natural gas production helped suppress those overall numbers.
Robinson said even with the activity in the oil and gas sector, energy companies have changed how they do business since the last time oil prices collapsed in 2015. And that means an increase in production won’t necessarily equate to new job growth.
“(Energy) companies had to cut costs, they had to look at different ways of doing things moving forward. And as they became more efficient, they didn’t want to bring jobs back again unless they had to,” Robinson said. “They’re doing more automation than they ever did before, and there’s a hesitancy to bring back (the number of) jobs like we saw two to three years ago.”
In the year-to-date numbers, Wyoming’s housing sector has lagged both in new home construction permits and in the value of existing homes. Between the end of Fiscal Year 2017 and the end of Fiscal Year 2018, Wyoming’s home value has gained an average of only 3.7%.
In the same time, Colorado’s home value increased on average by 8.4%, and across the country, homes increased in value by 6%.
New homes also aren’t currently on the horizon, but the state will soon see a massive increase in apartment options. Compared to last year, across the state there’s a 2.4% decrease in the number of single-family homes but a 300% increase in multifamily unit permits.
While the state is seeing a major boon from oil production, Cheyenne and Laramie County continue to see growth that’s somewhat insulated from the booms and busts of the energy sector.
Since 2008, Cheyenne’s business cycle index, which takes into account the unemployment rate, private sector jobs and wages, sales and use tax collections and median home prices, has rarely increased or decreased by more than 2%.
That’s steady when compared to a city like Casper, which has seen several large increases and decreases of around 8% due to energy’s booms and busts.
Nick Colsch, director of the Wyoming Center for Business and Economic Analysis at Laramie County Community College, said the presence of both federal and state government jobs in Cheyenne, along with F.E. Warren Air Force Base, helps provide a stable economic base for the area.
“Absolutely the stability of government jobs is both a huge benefit to Laramie County and kind of a detriment as well,” Colsch said. “The downside is the room for growth in government positions is pretty minimal. Even if state revenues increase due to an increase in coal or natural gas, you won’t see new positions created in state government.
“But you’ll see new positions up north and where they’re more energy dependent. We don’t ride the wave as hard as other areas in the state.”
One area where Cheyenne’s stability is apparent is in the housing market. Cheyenne saw its housing values grow by 4.5% between the end of FY 2017 and the end of FY 2018. That’s in comparison to a 1.3% decrease for Casper during the same time period, and a 3.7% across the state.
Those trends seem to hold when looking at the last several years. Since 2008, Cheyenne has seen its housing values grow by 3%, compared to 0.9% for Casper and 1.4% for Wyoming as a whole.
In the MACRO Report, Cheyenne saw a growth of 500 jobs for a 1.1% increase. That was just behind Casper, which saw 700 more jobs than last year at this time. And Laramie County saw the third-highest sales and use tax collection increase in the state. It’s pulled in $9.5 million more than compared to this time in FY 2018, with Casper coming just behind that with $7.2 million more.
Another major reason for the stability of Cheyenne and Laramie County are their close proximity to the booming economy of the Denver metro area. The Interstate 25 corridor continues to see increased growth both in jobs and housing prices, which means some of that spills over across the border into Cheyenne and also to Laramie.
Colsch said both Cheyenne and Laramie benefit from the increasing number of people working in Colorado who are looking to move to a more affordable area.
As more and more jobs come into northern Colorado, there should be an increase in people willing to commute in order to avoid the ever-rising housing costs in Colorado.
“I would think Cheyenne and Laramie are better suited to capitalize on growth in Colorado,” Colsch said.
Robinson agreed Cheyenne could see more and more growth due to the expanding economic impact of Denver.
“It’s easy to buy property in Cheyenne and drive back and forth today. You see it in Laramie as well; people have jobs in Fort Collins (Colorado), but for whatever reason, they’re willing to commute,” Robinson said. “Especially along I-25, that’s where we see that happening. Already people as far away as Denver are willing to live up in Cheyenne and commute.”