HELENA – The director of the University of Montana Bureau of Business and Economic Research addressed a legislative committee Thursday and said, had he been speaking a year ago, his talk may have been titled, “Will the Montana boom continue?”
Now, economist Patrick Barkey said, a more appropriate title might be, “What will be the impacts of the 2008 recession?”
Barkey told the Legislative Finance Committee that Montana’s economy was extraordinarily robust for four years and surpassed national growth levels for most of the decade, but is now cooling. Barkey said Montana will not be immune from pain amid the nation’s economic turmoil, but he is cautiously optimistic about the future.
“We still think the Montana economy will outperform the U.S. economy by a sizable margin,” he said.
Through 2007, Montana had four consecutive years when income growth for nonfarm labor topped 4 percent, Barkey said. At midyear, that growth was down to 3.3 percent, he said.
Performance by various sectors of the economy is mixed, and some industries that are “taking it on the chin” nationally do not have a big presence in Montana, he said. Those industries include financial services.
The UM bureau has scaled back its economic forecast since releasing an optimistic one in February.
Construction work in the state has declined, but later than it did nationally, Barkey said. Columbia Falls Aluminum Co. announced layoffs during the summer and Plum Creek Timber Co. recently trimmed its Montana work force.
Diminished demand for wood products has hurt Montana’s manufacturing sector, Barkey said, but farmers continue to receive high prices for wheat.
Barkey said wheat growers’ gross receipts were $700 million in 2006 and $1.1 billion in 2007, with a projection of $1.3 billion for 2008. The economic ripple effect includes purchases of new farm equipment, said Barkey, who acknowledged farmers have faced increased costs for supplies such as fertilizer.
Prices for Montana commodities such as copper are in decline after skyrocketing, but they are falling “to a level that is still quite favorable,” Barkey said.
He said five sectors account for 90 percent of Montana’s economic base. They are nonresident travel, mining, manufacturing, agriculture and the federal government, including the military.
“It hasn’t been a simple story of one or two of these sectors leading us along,” Barkey said.
The year 2003 was a big one for the federal sector, with security enhancements along the state’s northern border and projects at Malmstrom Air Force Base. Barkey said 2004 brought a rebound in manufacturing and increases in prices for commodities. Manufacturing and mining remained “expansionary” in 2005, and in 2006 Montana saw an uptick in nonresident travel, he said.
Mining leveled off in 2007 but travel remained strong, as did manufacturing, he said.
State officials said the oil industry was an exceptional contributor to state coffers during the last fiscal year, more because of strong oil prices than because of how much oil was extracted in Montana.