Flathead wage growth second highest in state

Wages in Flathead County grew faster than the state average in a strong year for the Montana economy in 2015, but one expert warns an economic slowdown could be on the horizon.

The Flathead’s 9.3 percent wage growth was the second highest among the most populated counties in the state, behind only Gallatin County. Construction, visitor spending, health care and professional services all saw promising growth as well, Dr. Patrick Barkey, director of the Bureau of Business and Economic Research at the University of Montana said. With the economic uptick, people have started moving into the area again, he added.

“Flathead is now growing significantly faster than the state average — that’s not news up here,” he said Thursday during an economic update presentation at Hilton Garden Inn in Kalispell. The Montana Chamber Foundation hosted the event.

Statewide wage growth last year is promising as well, and could be caused by factors like workers spending more hours on the job or the mix of jobs shifting toward higher paying industries. Health care, public administration and financial and business services saw the largest jumps in wages. Housing construction in the state also grew at a modest 2 percent.

While lumber prices are nearing their five-year high, Barkey said the industry’s situation is “clearly a cause for concern,” making note of the recent closure of Weyerhaeuser mills in Columbia Falls. Yet, if other areas of the economy continue to grow, issues caused by a troubled lumber market can be offset, he said.

Not all areas of Montana’s economy had a good year, however. Last year was a “disastrous” year for the coal industry, Barkey said, and Montana saw a 28.8 percent decrease in coal production. State revenues from coal production was down 9.3 percent. Similarly, oil production began a sharp decline in the first quarter of 2015, and state revenues from oil and gas dropped 53.2 percent last year. These industries were also exceptions to Montana’s strong wage growth.

Following the strong year, Barkey said he’s less optimistic about 2016. He called the status of the nation’s economy “good but not great.” Slow growth continues and the labor market is healthy, he said, but the U.S. might be hitting a peak.

“The business cycle, the ups and downs of the economy as it goes from recession to recovery — we’re really reaching the peak of the business cycle right now,” he said.

Barkey said that while construction, manufacturing and visitor spending grow, the impacts of declining energy industries lie ahead. Simply put, this year will not be as good as last year for Montana’s economy, he said.

One area Barkey focuses on is gaps in the labor market that will need to be addressed in the future. Construction and health care workers are in short supply, and as of now there aren’t enough available workers to fill those gaps.

In order to fill the roughly 500,000 construction positions needed to keep employment at the historic average, Barkey said nearly every available male worker aged 55 and younger would need to join the industry, which is impossible. To fill these gaps, construction employers will need to start bidding for available workers in other industries, but rising construction costs may hinder their ability to do so.

Similarly, Montana’s growing population of adults aged 65 and older are projected to add $2.3 billion in health care spending by 2030, he said, and the increased number of people with insurance helps boost this trend. The obvious conclusion: Montana needs more health-care workers. Unfortunately, Barkey said the state’s universities are producing about 1,200 health graduates a year, not enough to fill the state’s projected need for 15,000 health-care jobs in the next decade.

The aging population poses a concern to the state’s revenue from income tax as well. More people retiring will be earning less income, generating less income tax.

Barkey’s presentation Thursday was the first of the 2016 Economic Update Series. Future dates and more information can be found at www.bber.umt.edu/events/EOS.asp.