Economist: Wyoming looks ‘fabulous’

High oil and gas prices hold a bright future for Wyoming for the next decade, despite their current hobbling of the stock market, an economist said Thursday.

"Wyoming is looking fabulous for years to come," Brian Wesbury said before speaking to a group of business and civic leaders at the Petroleum Club.

By TOM MORTON
Star-Tribune staff writer

http://www.casperstartribune.net/articles/2004/09/24/news/4075bdb4b7e39df187256f190004d0f9.txt

Oil prices, according to futures markets, will hover between $30 and $35 a barrel during the next 10 years, Wesbury said.

Hilltop National Bank sponsored the talk by Wesbury, the chief economist at the Chicago-based investment banking firm of Griffin, Kubik, Stephens & Thompson Inc.

The tax revenues from those higher prices will continue to pump millions of dollars in royalties and tax revenues into the state’s General Fund, he said.

While Wesbury focused his comments on the burgeoning national economy, he said Wyoming will share in that growth for reasons besides its energy industries.

The state’s sparse population and scenery will attract entrepreneurs who can do business from any place that has Internet and broadband access, he said.

The state’s economy has diversified more than in the past, which will mitigate the effects of the traditional boom-and-bust energy cycles, he said.

Wesbury also lauded the state’s business climate, which the Pacific Research Institute recently ranked as ninth best, he said.

However, that position slipped from fourth in 1999 in part because the cost of the government sector has grown faster compared to other states, he said.

Nevertheless, the state’s low tax rates — eased by the contributions from the minerals industries — put the state in a far better business climate position than high tax rate states such as California and New York, which rank 49th and 50th respectively, Wesbury said.

A report released Thursday by the Federal Deposit Insurance Corp. supported some of Wesbury’s comments, including the continued creation of jobs in the support industries for the oil and gas sector, and job creation in the health care sector. (See box)

Pessimism

But Wesbury noted that the condition of the national economy and what people think about aren’t in sync.

Public opinion polls indicate that people think the overall economy isn’t doing well, even though they tell pollsters that their personal economies are good, Wesbury said.

"It’s hard to understand why people are pessimistic," he said.

Granted, stock prices aren’t what they should be, and Wesbury blamed that on high energy prices, the war in Iraq, terrorism, taxes and the Federal Reserve Bank’s policies, he wrote in "The True Rock-Stars of the Economy" in the Aug. 11 issue of The Wall Street Journal Online.

Yet Wesbury wrote that the average growth rate from January through June grew at 3.8 percent, which is slightly higher than the 3.7 percent rate during the Clinton administration.

Exports, he added, grew at an 18.4 percent annual rate from April through June, and real business fixed investment jumped by 8.8 percent in that indicator’s fifth consecutive quarter of growth.

The record deficits aren’t a problem, either, Wesbury said. The deficits are proportionately a smaller percentage of the Gross Domestic Product now than they were a decade ago, he said.

Job data jive

Wesbury attributed part of the unwarranted pessimism on the faulty use and spin of employment data.

Nonfarm payroll jobs grew by 32,000 in July, which became political fodder for Democratic presidential candidate John Kerry’s campaign and supporters.

That news caused a downturn in the stock market and bond yields, and Federal Reserve Bank rates were revised downward, Wesbury wrote.

"This is somewhat ridiculous," he wrote. "No single monthly estimate of job growth should ever be given this kind of power."

Instead of focusing on this data, economic policy should look more to investment activity and risk-taking on the part of entrepreneurs, Wesbury wrote.

A big problem with employment data, Wesbury wrote, centers on the two ways the U.S. Bureau of Labor Statistics measures job growth: the Establisment (Payroll) Survey and the Household Survey.

The payroll survey — which counts only nonfarm employees who are registered with the states’ unemployment insurance systems — stated the July 32,000 job growth figure.

But the household survey — which surveys those who are self-employed — indicated that the economy created 629,000 new jobs in July, Wesbury wrote.

Since the recession ended in 2001, the payroll survey indicated that 401,000 net new jobs were created, compared to the household survey which indicated that nearly 3.3 million net new jobs were created, he wrote.

Economics and politics inevitably collide, and Wesbury puts his faith in President Bush, he said.

Bush wants to make the tax cuts permanent, while Kerry wants to raise taxes, and allow the expiration of the dividend tax rate cuts and the capital tax rate cuts, Wesbury said. "Those two policies would have a dramatic (negative) impact on the economy."

Wesbury credited the 2003 tax cuts for the surge in the revived economy, he said. "One of my basic points is that the lower the tax rates are, the better off the economy will be," he said.

"Clearly you can see basically the economy turn, almost to the day … we cut taxes," he said.