The Telegraph

Economic OutlookDr. Anne M. Alexander

Director, International ProgramsUniversity of Wyoming

Idaho - Unemployment

"January

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Idaho Unemployment Rate, 2011-2012

PERCENT OF LABOR FORCE UNEMPLOYED

Idaho Outlook Idaho posted year-over-year job losses for 30 straight months until October

2010, when the economy began to stabilize. In 2012 the economy has begun to show signs of job growth. June 2012 nonfarm jobs totaled 618,600, or 1.2 percent above June 2011.

State government revenues for the last fiscal year ran below expectations, and business formation has been essentially flat.

Tourism, which accounts for roughly 5% the state’s GDP, has rebounded but has not recovered to pre-recession levels.

Utah Unemployment

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Utah Unemployment Rate, 2011-2012

Percentage of labor force un-employed

Utah Outlook Utah typically grows more rapidly than the nation after recessions, and this pattern is

taking hold in the current recovery to a certain extent, but it is a much slower recovery than normally would be expected.

Job growth in 2011 was a healthy 2.3% for Utah, and the unemployment rate fell to 6% by June 2012.

Government revenues have stabilized and grown since FY 2011 for Utah.

Economic growth in Utah has risen at a reasonable pace during 2012, but there is still room for improvement. Housing has stabilized, but home-building is not leading the economy as it does during a typical Utah recovery. There is still significant hang-over in foreclosure rates, as they hover around 2.5% of mortgage loans in the state.

Another interesting note is that Utah is the state with the 5th largest percentage of GDP generated by exports (top trade partners: United Kingdom, Hong Kong, Canada, Thailand, Taiwan). This can buffer growth and present opportunities (though it can also make you more susceptible to outside financial chaos).

Wyoming’s economic structure ring-fences us from some of the continued residual impacts of the 2007 recession and continuing financial volatility in Europe.

Resumed robust tourism and hospitality growth. Potential increase in flight to safety of European savings to

US, potentially WY as well as ID and UT, by Europeans concerned about financial instability in Euro zone.

Concerns about Iran and Syria (see also – “Negatives/Red Flags”), and their impact on oil prices and energy exploration patterns in general.

Wyoming Economic Outlook

Financial volatility in Eurozone and potential for “Fiscal Cliff” if Congress does not come to debt ceiling deal continue to cause uncertainty. As we all know, “capital is a coward.”

Recession in EU is certainly underway due to austerity measures, which could put a damper on hospitality and tourism.

Concerns about public policy towards coal. Concerns about Iran and Syria (see also – “Positives-Green

Flags). Impact of oversupply of natural gas on state fiscal picture.

Wyoming Economic Outlook

Wyoming Economic Outlook**Caveat Emptor!

Poverty rate = 9.8% 6th lowest in U.S. according to Census Bureau

Food stamp usage is lowest in the country at 5.8% Has fallen 7% since Sept. 2010.

Personal disposable income per capita = $47, 301 6th highest in U.S. according to Bureau of Economic Analysis

Wyoming Economic Outlook**Caveat Emptor! “Competitiveness Effect” - effect on job creation of differing

public policy, industry focus, and economic development strategies across states (newgeography.com) Wyoming created 1.1% more jobs in 2011 than could be explained by

national economic environment only

Jan-01 Oct Jul Apr Jan-04 Oct Jul Apr Jan-07 Oct Jul Apr Jan-10 Oct Jul April0.0

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Wyoming 10-Year Unemployment PictureJanuary 2001-May 2012

Recession begins

Financial crisis begins

Wyoming Economic Outlook**Caveat Emptor!

WY Unemployment Rate, Jan 2001-Jan 2011

May 2012 = 5.2% (June preliminary estimate = 5.4%)

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Wyoming Unemployment Rate 2011-12

Unemployment Rate

Economic Outlook*

WY Unemployment Rate, Jan 2001-Jan 2011

WYWYUTID

Commodity Outlook – Oil From US EIA

Commodity Outlook – Natural GasSource: US EIA

Commodity Outlook – Natural GasSource: US EIA

Commodity Outlook - CoalFrom Economist Intelligence Unit

2007 2008 2009 2010 2011 2012 2013 2014 2015 20160

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Coal ($/ton)

Coal ($/ton)

Economic Outlook**Caveat Emptor! In the next 3-6 months, expect a stabilization of the Wyoming

unemployment rate near 5.0%. Utah’s unemployment rate will finally fall below 6.0%, while Idaho’s will drop to around 7.3%.

Without growth in the rest of the U.S., the Wyoming energy economy will be solid but not accelerating.

WY has likely hit a spot where improvement comes more slowly, but conditions are very unlikely to worsen unless the Euro crisis spins out of control or the U.S. falls back into recession.

Utah and Idaho are more exposed to a U.S. recession should it occur, and both are more directly impacted by the Euro crisis.

US Economic Outlook**Caveat Emptor! In the EU a recession is already underway. A financial crisis or recession (or both) in the EU could tip the

U.S. back into recession in the coming 3-6 months. If a mild recession grips the EU, it may just slow growth in the

U.S. and Wyoming by as much as full percentage point (weak 2-3% growth instead of recovery rates in excess of 3%).

US Economic Outlook**Caveat Emptor!

We are still recovering from a deep and long economic trauma.

Research shows that recessions caused or exacerbated by financial crises induce such an economic shock that they significantly alter the structural characteristics of the economy

The recessions that ensue are significantly deeper and longer than those not caused by financial crises.

Note that on average, your “run of the mill” non-crisis-induced recession lasts around one year.

Financial Crises and their Recessions Unemployment rates are significantly higher in the

decade after crises compared to the decade before. In the vast majority of post-World War II crises, unemployment rates never returned to their pre-crisis levels by the end of 10 years post-crisis.

Real housing prices are 10-15% lower during the entire post-crisis decade compared to their prices just before the crisis.

Financial Crises and their Recessions Economic growth (real per-capita GDP) is significantly

lower during the entire post-crisis decade than during the pre-crisis decade. On average, median growth is 1% lower post vs. pre-crisis.

Financial Crises and their Recessions US economic outlook has begun to look more

positive in the early part of the past three years, then tips back towards slowing growth.

Based on financial crisis histories, it’s almost always a precarious situation and we are in for a long slog.

Unemployment

Unemployment

Unemployment Recovery Estimates

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Time Required to Restore 6% Unemployment Rate NOTE: Around 125,000 jobs must be created per month to

keep up with net population growth – this what the red line represents

Jobs Shortfall

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Unemployment Recovery Estimates

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Time Required to Restore 6% Unemployment Rate

Jobs Shortfall 300000 jobs added per month

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At 300K jobs added per month, 6% unemployment late next year at current GDP growth rate

Unemployment Recovery Estimates

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Jobs Shortfall 300000 jobs added per month 250000 jobs added per month

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At 250K jobs per month, 6% unemployment by mid-2014 at current GDP growth rate

Unemployment Recovery Estimates

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Time Required to Restore 6% Unemployment Rate

Jobs Shortfall 300000 jobs added per month250000 jobs added per month 200000 jobs added per month

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At 200K jobs per month, unemployment would fall to 6% in mid-2016

Job Losses Relative to Peak Employment in Recent Recessions

Vehicle Sales 2006-2012

Vehicle Sales (since 1967)

Retail Sales

Housing Starts

Mortgage Delinquencies and Foreclosures

Specific Uncertainties/Challenges Net neutrality Cybersecurity Privacy

Euro Crisis Impact on The Tristate Region

36

Sigh…when are the German

elections?

You know, I’m kind of not

sorry that I lost the election…

Exposure to Euro Crisis Wyoming’s top-ten trading partners do not include

any EU country. On average, Wyoming firms have low direct exposure to Euro crisis via

exports.

However, trade in manufactured/high tech goods as well as tourism and other services are more highly interconnected to EU. They are most at risk from an unwinding Eurozone or continuing

instability in the EU.

Exposure to Euro Crisis Utah’s top-ten trading partners includes the UK (non-

Euro, but impacted by crisis nonetheless); top-fifteen includes Germany and Belgium as well On average, Utah’s firms have moderate direct exposure to Euro crisis

via exports.

Again, Utah’s trade in manufactured/high tech goods as well as tourism and other services are more highly interconnected to EU. They are most at risk from an unwinding Eurozone or continuing

instability in the EU.

Exposure to Euro Crisis Idaho’s top-ten trading partners includes France; top-

fifteen includes the UK and Netherlands as well On average, Utah’s firms have moderate direct exposure to Euro crisis

via exports.

Tourism and other services are more highly interconnected to EU.

Exposure to Euro Crisis On broad scale, most impacts on region would be

indirect, which is not to say small or insignificant. Potential U.S. bank exposure uncertainty, though US

banks have likely unwound a large portion of their EU portfolios, could lead to a “Lehman-like” moment.• Already seeing a large volume of outflows from EU banks,

and reduced lending there. If bank-run atmosphere takes hold, that will impact all lending institutions.

What Uncertainty Does to Financial Investment Environment

Lehman collapse, Emergency Economic Stabilization Act of 2008 fails to pass

Double-dip speculation begins Euro

mess

Exposure to Euro Crisis Indirect Effects, continued

Wealth effects in savings held by people in our region – when there is financial chaos, nest eggs tend to shrink.

Higher uncertainty in the investment and business climate could negatively impact employment and expansion plans that may have been looking more positive.

Could see mini “trade collapse,” as seen in wake of 2008 financial crisis, that drags down growth for a few months.

Reduced demand for commodities and energy resources if either a European recession or a Euro financial crisis set in.

Summary – Wyoming Barring financial market chaos, Wyoming is on a solid, steady

economic trajectory. Unemployment will hold steady in the state around 5% in the next year. For the next

12 months, economic growth will remain solid but unimpressive as subdued domestic demand for energy, the warm winter, and oversupply of natural gas continues among high national unemployment, relatively low U.S. consumer confidence and weak national growth projections.

If oil prices spike higher due to Iran or Syrian interventions or tensions, this could improve Wyoming’s state revenue outlooks in the near term, but would depress growth in the longer term as the US responds by falling into another recession.

Even with indirect exposure to Euro-Mess there is still concern about that Lehman-like moment and its possible impacts on Wyoming. If something spins out in the next few months, there would be a significant hit on the Wyoming economy along with the rest of the U.S.

Summary – Idaho Barring financial market chaos, Idaho’s outlook is

improving. Unemployment will decline in the state to around 7.3% in the next year.

For the next 12 months, economic growth will pick up but will not be robust because of relatively high state unemployment, high national unemployment, weak consumer demand and confidence and weak national growth projections.

Summary – Utah Barring financial market chaos, Utah’s outlook is

stronger. Unemployment will decline in the state to around 6% or lower in the

next year. For the next 12 months, economic growth will strengthen due to strong export sector, but caution is still needed because of residual effects of the housing bust, high national unemployment, weak consumer demand and weak national growth projections.

Summary – US and World U.S. economy will remain sluggish but improved.

EU is the US largest trading partner, so the Euro crisis and an emerging recession in the E.U., a high degree of both investment and political uncertainty nationally and globally, and chronically high but slightly improving level of unemployment point to a challenging year ahead.

Global economy on shaky ground. Strong and steady emerging economies’ growth rates are leveling or falling, and

confidence globally is eroding.

It is still uncertain whether the Euro as a currency will continue on. Whether that decision and ensuing results are orderly or not is up for grabs.