© Copyright 1999 by the Wyoming Department of Employment, Research & Planning

Total Payroll as a Tool for Identifying Business Cycles in Wyoming
by: David Bullard, Economist figure by: Gayle C. Edlin, Economist data provided by: Nancy Brennan, Economist

" ... real total payroll ... suffered a four-quarter decline in late 1995 and 1996."

How do professional economists define a recession? Has Wyoming suffered a recession since 1990? This article will use total covered payroll data from first quarter 1990 to third quarter 1998 to help answer these questions. While it does not appear that Wyoming has suffered a recession in recent years, a large drop in real total payroll occurred in 1995 and 1996 that could be characterized as an economic "slowdown."

The National Bureau of Economic Research (NBER) defines a recession as "a recurring period of decline in total output, income, employment and trade, usually lasting from six months to a year, and marked by widespread contractions in many sectors of the economy(1)." That is, a recession is seen in several measures of economic health and it affects many different industries. From the currently available data, there have not appeared to be any recessions in Wyoming since 1990. Unemployment Insurance (UI) covered employment has been growing steadily in the 1990's. Other measures including Gross State Product (GSP) also show growth. However, real(2) total payroll, a measure of economic performance available on a more timely basis than GSP, suffered a four-quarter decline in late 1995 and 1996.

The average growth rate of real total payroll over the period shown in the Figure is 1.7 percent. The shaded areas of the Figure and Table represent a "slowdown" in the Wyoming economy. From third quarter 1995 to second quarter 1996, real total payroll growth was negative, averaging -1.3 percent. However, it appears that real payroll growth has improved since the end of the "slowdown" and is now averaging 3.0 percent.

1 Refer to the National Bureau of Economic Research (NBER)'s "U.S. Business Cycle Expansions and Contractions" webpage: http://www.nber.org/cycles.html.

2 Real and nominal total payroll are distinctly different numbers (see the Table). Nominal total payroll is the payroll in current dollars. In other words, payroll figures in 1990 are expressed in 1990 dollars and payroll in 1998 are expressed in 1998 dollars. Real total payroll is expressed in constant dollars which do not vary over time. That is, real total payroll dollars are adjusted for inflation using values from the Consumer Price Index (CPI)(3). As can be clearly seen in the Figure, real payroll is below nominal payroll, but the two series generally move together.

3 Gordon Wolford, "How the Consumer Price Index Measures Changes in Consumer Prices," Wyoming Labor Force Trends, November 1995, pp. 1-3.

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