Think of Wyoming’s economy as a toy boat, floating in a pool. Now imagine that the boat and pool are situated on an ocean liner, sailing upon a sea.
Wyoming’s economy is like the boat, the national economy like the pool, and the global economy, the sea. Big waves upon the sea can capsize the ocean liner, swallowing the small pool and toy boat with it.
“We have managed to skirt some severe storms, but there is a significant chance we will not get to port before experiencing a storm and serious risk of the ship floundering,” Robert Godby, University of Wyoming associate professor in the department of economics and finance, wrote in an email from Germany.
In 2012, shocks could, and probably will, come unexpectedly.
What if the euro self-destructs, if Iran detonates a nuclear weapon? Godby asked.
“With luck, 2012 will be a year of improvement, but odds seem good that if improvement comes, at best it will continue to be slow, with downside risks continuing to distract us,” he said.
Ernie Goss, director of the Denver-based Institute for Economic Research, said if financially troubled European nations like Greece begin to default, the state’s economy could be threatened.
“It tends to push up the value of the dollar and push down energy prices,” he said.
Another possible negative could be slower growth in China, which would push down demand for Powder River Basin coal.
“Growth in China is likely to cool, but then, you’ve got South Korea, and maybe some pretty good growth there,” he said.
On the other hand, higher interest rates don’t pose much risk at this point. Goss said the dollar is likely to strengthen against the euro, but weaken against other currencies, especially Asian currencies.
Taken together, Goss said states with large energy and farm sectors are likely to fare pretty well in 2012.
“It’s probably going to cool a bit. But that said, it certainly doesn’t look like a recession,” he noted.
Goss added that the state’s unemployment rate could tick up as individuals enter the labor market. But there’s a chance that by the end of 2012, more people than ever before could be working in the state.
Wenlin Liu, senior economist with the state’s Economic Analysis Division, said mineral extraction should propel the state ahead in 2012 - so long as global demand for energy continues to grow, particularly in emerging markets, and recent positive momentum continues in the U.S. economy.
Liu does not expect state employment to reach its pre-recession peak until late in 2013.
Joan Evans, director of the state Department of Workforce Services, said program funding could be a challenge in 2012, as both the state and federal governments look for ways to save money.
“We just have to remain nimble and ready to respond to whatever hand we’re dealt,” she said.
Efforts will continue to replace the state’s current unemployment tax and benefits system. Evans said the present system is unresponsive and creates opportunities for overpayments, and it often makes fraud difficult to detect.
The department also will be developing strategies to reach out to businesses more effectively, she said.