Emerging Trends in the U.S. &
Wyoming Economies
Alison Felix
Economist & Branch Executive
Federal Reserve Bank of Kansas City, Denver Branch
The views expressed are those of the presenter and do not necessarily reflect
the positions of the Federal Reserve Bank of Kansas City or the Federal Reserve System.
The U.S. economy is expected to expand at a moderate pace
in 2016.
REAL U.S. GROSS DOMESTIC PRODUCT
Percent Change from Previous Quarter at Seasonally Adjusted Annualized Rates
6%
High
Low
4%
2%
0%
-2%
-4%
Year-over-Year Percent Change
-6%
-8%
-10%
'05Q4
'07Q4
'09Q4
'11Q4
'13Q4
Source: Bureau of Economic Analysis and Federal Open Market Committee (FOMC)/Haver Analytics
*Note: Projections as of March FOMC meeting
'15Q4 ‘16‘17‘18
FOMC
Central Tendency
Projections* 2
Inflation remains below the FOMC’s two percent target,
weighed down by declining energy prices and cheaper
imports.
PERSONAL CONSUMPTION EXPENDITURE PRICE INDEX (PCEPI)
Percent Change Year-over-Year
6%
Headline
Inflation
4%
FOMC’s Target
Inflation Rate
2%
Core Inflation
0%
-2%
Jan '06
Jan '08
Source: Bureau of Economic Analytics
Jan '10
Jan '12
Jan '14
Jan '16
3
Measures of unemployment and under-employment have
declined steadily over the past five years.
U. S. UNEMPLOYMENT AND UNDER-EMPLOYMENT RATES
Seasonally Adjusted
18%
16%
14%
12%
10%
9.7
8%
6%
6.0
4.9
4%
2%
0%
'80
'85
Source: Bureau of Labor Statistics
'90
'95
'00
'05
'10
'15
Feb.
‘16
4
“The Committee currently expects that, with gradual adjustments in the stance of monetary
policy, economic activity will expand at a moderate pace and labor market indicators will
continue to strengthen. However, global economic and financial developments continue to
pose risks. Inflation is expected to remain low in the near term, in part because of earlier
declines in energy prices, but to rise to 2 percent over the medium term as the transitory
effects of declines in energy and import prices dissipate and the labor market strengthens
further…Against this backdrop, the Committee decided to maintain the target range for the
federal funds rate at 1/4 to 1/2 percent.”
- March 2016 FOMC Statement
6%
5%
4%
EFFECTIVE FEDERAL FUNDS RATE
3%
2%
1%
0%
2006
2007
Source: Federal Reserve Board
2008
2009
2010
2011
2012
2013
2014
2015
2016
5
Most FOMC members expect gradual increases in the federal
funds rate over the next few years.
MIDPOINT OF TARGET RANGE OR TARGET LEVEL FOR FEDERAL
FUNDS RATE
Individual FOMC Member Responses – March FOMC Meeting
5%
4%
3%
2%
1%
0%
2016
Source: Federal Reserve Board
2017
2018
Longer
Run
6
Unemployment rates are starting to edge up in Wyoming as
the energy sector deteriorates.
UNEMPLOYMENT RATES
January 2016, Seasonally Adjusted
Feb. ‘16
Unemployment Rate
U-3
U-5*
U-6*
United States
Wyoming
Casper (Jan. ‘16)
4.9%
5.0%
5.9%
6.0%
4.8%
9.7%
8.2%
*U-5 and U-6 values are 12-month moving
averages as of Q4 2015 for Wyoming and are
for February, 2016 for the United States.
Less than 3%
3 to 4%
4 to 5%
5 to 6%
Greater than 6%
Source: Bureau of Labor Statistics
7
Employment has declined sharply in Wyoming over the past
year due primarily to weakness in the energy sector.
Percent
Change
PAYROLL EMPLOYMENT GROWTH
Index 100 = February 2006, Seasonally Adjusted
U.S.
WY
Casper (Jan.)
Past 10
Years
Past
Year
5.7%
4.7%
5.4%
1.9%
-3.0%
-7.1%
120
115
110
Casper
United States
Wyoming
105
100
95
Feb. '06
Feb. '08
Source: Bureau of Labor Statistics
Feb. '10
Feb. '12
Feb. '14
Feb. '16
8
Weakness in the energy sector has spread to other industries in
the state.
CHANGE IN PAYROLL EMPLOYMENT, FEBRUARY 2016
Seasonally Adjusted
Local Government
Health Care & Social Assistance
Federal Government
Retail Trade
State Government
Professional & Business Services
Private Educational Services
Other Services
Information
Manufacturing
Leisure & Hospitality
Financial Activities
Transportation & Utilities
Construction
Wholesale Trade
Natural Resources & Mining
Source: Bureau of Labor Statistics
Percent Change Year-overYear
2.1%
1.7%
1.4%
1.3%
0.6%
0.5%
0.0%
-1.9%
-2.6%
-3.0%
-3.0%
-5.3%
-6.3%
-7.2%
-7.2%
-19.5%
Wyoming
United States
9
As the economy slowed, Wyoming experienced a slight outmigration over the past year.
NET MIGRATION
Total 2015 Net Migration as a Percentage
of 2015 Population
Annual Percent Change
United States
Wyoming
Natrona
2015
0.4%
-0.2%
0.1%
1% to 2%
0% to 1%
-1% to 0%
-2% to -1%
-2% to -3%
-3% to -4%
Source: Census Bureau
10
Residential construction activity has been increasing for more
than six years in the nation, led by strong gains in multifamily
building.
RESIDENTIAL PERMITS
Seasonally Adjusted
United States
Wyoming
240,000
800
180,000
600
120,000
Multifamily
400
60,000
Single Family
200
0
Feb. 06
Feb. 11
Source: Census Bureau/Haver Analytics
Feb. 16
Feb. '06
Feb. '11
0
Feb. '16
11
Home prices continued to appreciate in Wyoming through the
end of 2015.
FHFA PURCHASE-ONLY HOME
PRICE INDEX
Index 100 = 2005:Q4, Seasonally Adjusted
2007:Q1
Year-Overto
Year
Current
5.8%
0.3%
2.9%
10.9%
Percent Change
United States
Wyoming
140
Wyoming
120
United States
100
80
'05Q4
'07Q4
Source: Federal Housing Finance Agency
'09Q4
'11Q4
'13Q4
'15Q4
12
Business tourism activity has slowed sharply over the past
year, while leisure tourism remains healthy.
HOTEL OCCUPANCY RATES
Year-to-Date Average Through February
Casper
68%
64%
64%
60%
60%
56%
56%
52%
52%
48%
48%
44%
44%
40%
40%
10-yr
Average
2015
Source: Colorado Hotel and Lodging Association
Jackson Hole
68%
2016
10-yr
Average
2015
2016
13
Manufacturing activity has slowed in the region due in part to
a weak energy sector and a strong dollar.
MANUFACTURING ACTIVITY
Diffusion Index, Seasonally Adjusted, Month-over-Month
65
Expanding
60
55
U.S. 49.6
50
February 2016
45
Kansas City 46.9
District
40
35
30
Mar. '06
Contracting
Mar. '08
March 2016
Mar. '10
Mar. '12
Source: Institute for Supply Management & Federal Reserve Bank of Kansas City
Mar. '14
Mar. '16
14
After strong gains in export activity in 2014, Wyoming
exports declined last year.
WYOMING EXPORTS BY TRADING PARTNER
Billions
2015
Percent Change
$2.0
$1.8
Total Trade
All Other
Indonesia
Canada
Brazil
China
Eurozone
$1.6
$1.4
$1.2
$1.0
$0.8
-33.2% SHARE
-13.6
45.6%
-5.1
6.9
-73.7
13.5
-14.5
16.3
-11.2
4.7
5.8
9.9
$0.6
$0.4
$0.2
$0.0
'99
'01
Source: WISERTrade
'03
'05
'07
'09
'11
'13
Note: Eurozone includes the 27 EU member countries.
'15
'15
'16
Year-to-Date
15
The coal sector continues to struggle, and coal production
declined substantially in Wyoming over the past year.
COAL PRODUCTION
Thousand Short Tons
25,000
20,000
Total U.S.
15,000
10,000
5,000
0
Feb. '06
Wyoming
Feb. '08
Feb. '10
Feb. '12
Share: 42.0%
Feb. '14
Source: U.S. Department of Energy, Energy Information Administration and Haver Analytics
Feb. '16
Energy activity has declined sharply in Wyoming and the
nation.
CRUDE OIL PRODUCTION
TOTAL RIG COUNT
WY
U.S.
2,800
United States
Wyoming
2,100
320
United States
Wyoming
WY
15
12
240
9
160
6
80
3
80
700
0
Mar. '09
160 400
120
1,400
U.S.
Millions of Barrels, Monthly,
Seasonally Adjusted
40
Sep. '12
0
Mar. '16
0
Dec. '05
Source: Baker Hughes, Energy Information Administration and Haver Analytics
Dec. '10
0
Dec. '15
17
Most energy contacts expect additional layoffs in 2016, but
the magnitude of layoffs this year is expected to be lower than
in 2015.
CHANGE IN ENERGY EMPLOYMENT - FRBKC ENERGY SURVEY
Percent of Total Responses
60%
2015 Actual
2016 Expected
50%
40%
30%
20%
10%
0%
0.0%
up more
than 20%
Source: FRBKC Energy Survey
0.0% 0.0%
up 10-20% up less than down less
10%
than 10%
down 1020%
down more
than 20%
18
Breakeven oil prices have fallen as productivity rises and
costs decline, but oil prices remain well below the levels
needed for a substantial increase in drilling.
REPORTED BREAKEVEN OIL PRICES AND WTI EXPECTATIONS
$/Barrel
110
$/Barrel
Energy Survey
avg. breakeven
in late Sept.
2014 - $78
110
June 2015 price needed
for substantial increase in
drilling to occur- $73
80
50
December 2015 price
needed for substantial
increase in drilling to
occur- $60
50
Late Mar. 2015
avg. breakeven
- $62
Oil Price (West Texas Intermediate)
20
Jul. '14
Jan. '15
Jul. '15
Jan. '16
80
Oil
Futures
Jul. '16
Source: Kansas City Federal Reserve Bank’s Energy Survey, Energy Information Administration, Reuters
Jan. '17
20
Jul. '17
19
Farm income has dropped sharply and is expected to remain
low.
U.S. REAL NET FARM INCOME
TENTH DISTRICT FARM INCOME
Billion dollars (constant 2005 dollars)
Diffusion Index
$140
180
$120
160
$100
140
120
$80
100
$60
80
$40
$20
$0
60
40
20
Farm Income
Expected Farm Income
0
2010 2011 2012 2013 2014 2015 2016
*Forecast for 2016
Source: Kansas City Federal Reserve Bank’s Energy Survey, Energy Information Administration, Reuters
20
Agricultural credit conditions have gradually deteriorated.
TENTH DISTRICT AGRICULTURAL CREDIT CONDITIONS
Fourth quarter 2015
Diffusion Index
160
150
140
130
120
110
100
90
80
70
60
50
Farm Loan Demand
Loan Repayment Rates
Loan Renewals or Extensions
Diffusion Index
Expected in three
months
Expected in three
months
160
150
140
130
120
110
100
90
80
70
60
50
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: FRBKC Survey of Agricultural Credit Conditions
21
For additional information on the regional
economy:
http://www.KansasCityFed.org/Denver