Decrease in oil prices has an impact on life in the Equality State

Wyomingites often argue that you can’t put a price on living in Wyoming; the scenery, the people and culture are priceless. But rent and mortgages must be paid, food must be bought, and other essential expenses must be met in order to live — and those prices vary by region and tend to go up annually. 

Wyoming’s cost of living increased by 0.9 percent over the past year, according to the Wyoming Economic Analysis Division’s update on the cost of living on Friday.

“In Wyoming, it tends to follow national trends,” said senior economist Amy Bittner. But, this year the national inflation rate was only 0.1 percent, and a big reason for that was a decrease in transportation costs, Bittner said.

Basically, cheaper gasoline means a slower rate of inflation, but it also means lower income in Wyoming.

“There was a substantial drop in employment in mining, and that is the most dominant sector,” Bittner said.

That drop means Wyoming’s economy is slowing down and so is inflation, said Wenlin Liu, chief economist for the Wyoming Economic Analysis Division.

Meanwhile, total personal income grew by 2.4 percent in Wyoming during the second quarter of 2015, according to the Wyoming Economic Analysis Division.

Inflation measures the changes made over time by collecting prices for 140 typical household budget items, and then monitoring them over time, Bittner said. For example, food may go up due to drought and transportation can go down due to the decrease in fuel costs.

Wyoming’s cost of living increases include the following:

• Medical: 4.7 percent

• Apparel: 2.5 percent

• Housing: 1.9 percent

• Food: 1.7 percent

Recreation and personal care saw no change in the last year, and transportation costs decreased by 4.4 percent due to the drop in fuel prices. 

Although housing didn’t see the biggest shift, it is the driving force in determining cost of living adjustments as the most heavily weighted portion of a consumer’s budget, representing nearly half the total. 

Park County was slightly below average for Wyoming’s overall comparative cost of living. With 100 as the average, Park County scored a 97. Teton County ranked as most expensive with 135, and Niobrara and Platte tied for lowest at 88. 

“Teton County is always at the top,” Bittner said.

The following are Park County’s comparative cost of living index breakdowns as of the end of the second quarter for 2015:

• Food: 104

• Housing: 90

• Apparel: 105

• Transportation: 100

• Medical: 109

• Recreation and personal care: 99

“Areas with economic booms have higher inflation,” Bittner said.

The northwestern portion of Wyoming is doing better than other parts of the state due to an increase in tourism, which is attributed to the drop in transportation costs, Bittner said.

Meanwhile, the southwestern region had a drop in cost of living since last year due to decreases in mining activity.

The mining category sector in the report includes all mineral extraction industries — everything from coal and trona to oil, gas and uranium.

Wyoming’s Economic Health

Nationally, job growth is expanding and unemployment is shrinking, and the same holds true in Wyoming, according to the Wyoming Economic Analysis Division’s economic summary for the second quarter of 2015.

Currently, the state unemployment rate is 4.1 percent, following the first increase since the first quarter of 2013 by 0.1 percent, or 190 jobs. National unemployment rates are down to 5.4 percent.

In Wyoming, employment in the mineral extraction sector decreased by 10 percent in the second quarter of 2015; that’s 2,620 jobs. Construction lost 490 jobs and other industries, such as repair and maintenance, lost 210 jobs in the second quarter.

That hit was absorbed by other sectors within the state where jobs increased by 2,880, Liu said.

But transitioning from the mineral extraction industry means these workers are now making less money, by as much as a third to half their previous income, Liu said.

“In 2014, their average wage was $90,000, so when we lose mineral workers, we lose lots of income,” Liu said. “If they find another job, their wage is cut quite a bit and will have an impact overall on their spending ability, and that will transition into buying smaller houses or TVs.”

The economic summary attributes the global oversupply and weak demand for the ongoing low price of oil. Liu estimated 2,700 jobs have been lost in the mineral extraction industry in Wyoming since January of this year because of the downturn. A total of about 4,400 jobs have been lost overall, with some likely due to projects completing and new ones not starting.

The coal industry was relatively stable, so most losses were in the oil and gas industry, Liu said.

The future of the oil industry remains unknown at this point, Liu said.

Unlike the 2009 recession, there is nowhere for the laid-off oil and gas workers to go, since the downturn is global, Liu said.

“It is different from 2012, when gas prices were low and many left and went to North Dakota and Texas because their jobs were robust,” Liu said. “Even if they left, they couldn’t find another job … Personally, I don’t think we have a massive out-migration yet.”

Although the state as a whole experienced an increase in personal income, those working in the mineral extraction and farming sectors saw a decrease in total earnings by 6.4 percent and 37.6 percent, respectively, compared to the second quarter of last year.

Taxable Sales

Wyoming’s total taxable sales decreased by 13.2 percent in the second quarter of 2015 compared to the same period in 2014. This is the “worst performance since the great recession” according to the Economic Analysis Division.

“The thing about sales tax is, we think groceries and restaurants; but for mining there is a lot of services they pay sales tax on,” Liu said. “If the activity slows down, it has a big impact on sales tax.”

About two-thirds of the decrease was due to less activity in the mineral extraction sector. Oil and natural gas prices are selling for less, equipment and services are less frequent for a total year-over-year drop by 39.3 percent — the steepest drop since the fourth quarter of 2009.

“The nature of Wyoming’s economy, we depend on extraction so much, particularly on the revenue side,” Liu said. “It is probably three-quarters of the state’s income.”

Related industries — such as manufacturing, wholesale trade, and machinery and equipment rental and leasing — declined by 20 percent.

Johnson County was the most heavily hit county, with a drop in taxable sales by 41 percent, followed by Niobrara (32.7 percent) and Converse (32.4 percent).

Severance taxes from mineral services in the second quarter were the lowest since the second quarter of 2012 with $159.3 million, a 29.6 percent decrease since last year.

But the tourism sector did well this year, as exemplified by Yellowstone’s record-breaking year, Liu said. This is good news for Teton and Park counties, where the second quarter saw increases of nearly 4 percent for taxable sales, compared to the state’s decrease of about 13 percent, Liu said.

Restaurants and lodging had double-digit increases, and retail was nearly as high.

“It is quite strong in Park County,” Liu said.

Park County is one of the few counties with a 4 percent of sales tax rate, so that means increases and decreases in sales tax revenue are less dramatic than in counties with a 6 percent rate. Thirty-one percent of Park County’s sales tax income stays in the county.

“That definitely has an impact to cities and towns’ budgets, and some counties have deep declines like Johnson or Niobrara and Sublette,” Liu said. “Park County benefits from tourism at the park, so Park County is doing OK relatively and has a relatively smaller proportion of extraction, so it was less impacted from the decline.”

The cost of living is directly impacted by economic activity, and the biggest component to that is housing. 

Rental rates

Variations in rental prices and mortgages are driven by population size and supply and demand. Counties with lower cost of living indexes tend to be rural, with fewer residents and less mining activity — which means cheaper housing and a lower cost of living.

The biggest component of the cost of living index is housing at 48.8 percent, Bittner said.

The average apartment rental cost in Park County was $591, far cheaper than Teton County’s average $1,289 and a bit higher than neighboring Big Horn County’s $467. The statewide average is $733. 

Housing rental prices were less than average compared to other counties in Park County, coming in at $884. The statewide average is $1,044. Teton County was the highest with $2,115 and Platte was cheapest with $614. 

The most expensive place to rent a mobile home lot is in Campbell County, where the average is $435. The cheapest place is in Platte County, with an average of $142. Park County came in at $253. The statewide average is $316. 

The average rental price for a mobile home in Park County is $761. Teton County mobile homes rent for an average of $948 and Platte is the low end of the spectrum with $416. The statewide average is $717.