Wyoming is in economic trouble and might stay there

Saturday , December 24, 2016 - 6:00 AM

JUSTIN FOX, Bloomberg View

We've heard a lot over this past election year about the economic struggles of Rust Belt states. But the most economically troubled state in the country may be Wyoming.

That at least is the verdict of the Bloomberg Economic Evaluation of States index, which currently ranks Wyoming dead last in absolute terms as well as in percentage change since both the beginning (December 2007) and end (June 2009) of the last recession. The BEES index tracks employment, mortgage delinquency, personal income, home prices, and the stock prices of local corporations.

The state employment and unemployment numbers released by the Bureau of Labor Statistics on Dec. 16 offer a more mixed picture. The establishment survey of employers showed the state continuing to shed jobs in November, but the household survey showed an employment gain and a decline in the unemployment rate to 4.9 percent, not much above the national rate of 4.6 percent.

The household survey is subject to a lot more sampling error, so one shouldn't put too much stock in its more hopeful numbers, but an establishment/household divergence like that is sometimes an early indicator of an economic turnaround, as households report jobs with new employers that the BLS doesn't track yet. In any case, the establishment survey numbers show that it's been a pretty dismal business cycle for the Equality State.

But hey, who cares? Wyoming's economic troubles certainly weren't of much significance in the 2016 election. The state only has three electoral votes, and hasn't voted for a Democrat for president since 1964. With only 586,107 residents as of July 2015, according to the Census Bureau's most recent estimate, Wyoming is not only the least-populous state but also smaller than 31 U.S. cities and 92 metropolitan areas. It accounts for just 0.2 percent of U.S. gross domestic product. Still, Wyoming's economic troubles matter to Wyomans. They may also shed light on a bigger economic trend.

There are two main reasons the state's economy has been lagging that of the nation and its Rocky Mountain neighbors. The obvious one is that Wyoming's economy is built around energy extraction, and the past couple of years have been tough on the energy business. But it also seems significant that as economic growth has become more and more concentrated in large metropolitan areas, Wyoming doesn't happen to have any of those.

In energy, Wyoming is the country's leading producer of coal and uranium, is No. 4 in natural gas and No. 8 in crude oil, and its economy is more dependent on mining and drilling than that of any other state. Energy riches have made Wyoming pretty affluent — its median household income and per-capita personal income are both above the national average. But they've also left it subject to the cyclical nature of the energy business — and the past couple of years have been a downer.

Energy prices have been on the rise lately, and the Trump administration will be out to make life easier for miners and drillers. So that's a sign that Wyoming's economy may be due for a turnaround. But the economic shift toward large metropolitan areas seems like a long-running trend, and there Wyoming starts at a big disadvantage as the only state in the U.S. without a metropolitan area of more than 100,000 people. Metro Cheyenne is getting close, with an estimated 97,121 residents as of July 2015, but that's probably not big enough to exert much attractive force.

College towns are also sometimes touted as economic magnets, but Wyoming only has one of those (Laramie), and it's not very big (micropolitan area population of 37,956).

The logic of large metropolitan areas as job-creation centers is that as production work (such as manufacturing and mining) gets automated, interactions between humans will become more and more important. Put more humans — especially humans with lots of skills — together, and you get more economic growth. And while some of this interacting can be done virtually, people seem to prefer living where there are lots of other people. Bigger metropolitan areas mean more alternatives if your (or your spouse's) current job goes away, and more amenities too.

There are obviously limits to this — some coastal metropolitan areas have become so crowded and expensive that they're driving people away. But in general, in the 21st century economy, bigger seems to be better. An interesting case in point: Cheyenne, Wyoming's capital, is about 50 miles away from the larger Colorado cities of Fort Collins (metropolitan area population, 333,577) and Greeley (metro population, 285,174). Almost three times as many people commute to the Cheyenne area from the Fort Collins and Greeley areas as make the reverse trip. Wyoming's biggest city, even when it has jobs to offer, is apparently still too small for them.

Fox is a Bloomberg View columnist. Twitter: @foxjust.

(c) 2016, Bloomberg View

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