Experts say state's economy holding steady
Montana’s economy is continuing to grow, but at a slower rate than the rest of the West.
Patrick Barkey, the Director of the Bureau of Business and Economic Research at the University of Montana, presented on the state’s economic performance so far this year during the 2019 Economic Update at the Hilton Garden Inn in Kalispell on Thursday, the final stop for the Montana Chamber of Commerce’s seven-city tour to update community leaders on the state’s economy.
Montana has seen continued growth since a downturn in 2016 in its earnings, but that growth is slowing down as the second half of 2019 begins, Barkey said. This is in line with national data that shows a strong 2018 in gross domestic product growth and a forecasted slight slowdown through 2020.
In comparison to the rest of the western states, however, Montana falls behind.
Montana came last in real nonfarm earnings growth in 2018, growing 1.5%. Washington and Utah grew the fastest at 5.7% and 4.6% respectively, while Idaho grew 3.9%.
When comparing personal income growth, which combines income from earnings, transfers and property, Montana fares better, with a 2.9% growth rate. Washington still leads at 4.7% percent by the same measures.
This difference suggests transfers from government programs like Social Security play a large part in Montanans’ income, Barkey said, particularly in non-urban areas and smaller counties.
Growth in Montana’s economy has been spurred by strong years for construction, manufacturing, finance and business services, while agriculture and energy industries have been performing poorly, Barkey said.
Looking at Montana’s most important commodities, barley ($2.73 per bushel) and palladium ($1,443.85 per ounce) are both nearing five-year highs price-wise, while most other commodities, including lumber, are down.
“The story of lumber of course, as everyone knows in this part of the state, is that they’ve fallen back. They briefly peaked, there was a lot of complaints from builders about how expensive supplies were getting, but in the case of framing lumber, it’s fallen back,” Barkey said.
Changes in global trade have had their effects on Montana as well, he noted, including the U.S.’s campaign of tariffs on Chinese goods, namely steel.
“What’s that got to do with Montana? Simple, you put a tariff on steel, they retaliate with tariffs on agricultural products. And that hurts Montana. We’re all connected here,” he said. “As an economist, I don’t think tariffs are a good policy. I think they’re an incredibly crude solution to problems. However, it is addressing a problem which is real.”
The other part of Montana’s economic puzzle is its aging demographic.
Growth in the population of prime age workers, defined as age 36 through 65, has stagnated, and the percentage of workers aged 65 and older continues to increase. The expected population of workers in that age group by 2026, nearly 250,000, is forecasted to match the same number of workers in the 20 to 35 years-old age group as well.
“Demographics right now are not helping the situation in Montana’s tight labor markets, particularly in communities like this one where unemployment rates are very low,” Barkey said.
Montana is also the oldest western state, with a median age of 39.8 years old. A major contributing factor to high median ages in Montana counties is migration as well, Barkey said. However, Flathead County has a high rate of net migration, meaning more people are coming to the county versus those leaving.
Barkey also touched on whether the national economy is heading toward another major recession. The forecasted chance for a recession is 15% currently, he said, which is about as low as it usually gets. However, recessions aren’t easily guessed ahead of time.
“The question is, ‘Is the ice getting thin here? Are we getting closer to a recession?’ We could be. Currently, national forecasting firms are saying the probability is quite low,” he said. “The track record of calling recessions is pretty poor. Recessions are surprises.”