UM Economists: 2009 Will Be Rough

By Beacon Staff

At the 2008 Montana Economic Outlook Seminar, economic researchers from the state’s university system projected the national recession – then, in its beginning stages – might miss Montana. A year later, amid layoffs and rising unemployment, that rosy outlook had unraveled.

“We presented a very optimistic forecast about Montana,” Paul Polzin, former director of the Bureau of Business and Economic Research at the University of Montana, said of last year’s prediction. “We thought this would be the third U.S. recession in a row that Montana would miss.”

Polzin told a crowd at the Hilton Garden Inn on Tuesday that in January 2008 economists assumed the national recession would be limited to certain industries like financial services and autos, sparing states like Montana where those businesses are few. In July, the bureau tempered its Montana forecast slightly, and then in September, “the world starts to fall apart,” he said.

By December, it was clear Montana wouldn’t escape this time around.

“In just a few months, the U.S. recession evolved from being short and mild to a worldwide downturn,” Polzin said.

Now, economists are predicting that Montana’s 2009 growth rates will be the state’s lowest since 1988 – 0.5 percent, or practically zero. “Depending on layoffs, I wouldn’t be surprised to see that drop as low as negative 1 percent,” Polzin added.

Assuming Montana follows along with the national economy, he said the best forecasts show the recession bottoming out this summer and then continuing through late 2009 or early 2010.

National and state unemployment levels are expected to peak at 9 or 10 percent, he said, which is about the same as the 1980s. In comparison, during the Great Depression, unemployment ran 15 percent to 25 percent.

“This may be the most severe recession since the 1930s,” Polzin said, “but it’s certainly not the same as the recession of the 1930s.”

Locally, Polzin said people should consider two main economic indicators in the coming months: how many announced layoffs actually take place and how fast the construction and real estate industry recovers. Those changes, he said, will indicate how deep and how long the recession may last here.

On a brighter note, Polzin said prices have improved recently for copper and platinum, which could signal the end of the dramatic decline in commodities prices. Also the growing strength of the state’s agriculture and energy sectors will prove beneficial when things improve.

Polzin retired as the bureau’s director last year, but still works at the university as a professor emeritus and research associate. This is the 34th year that economists like Polzin have presented the traveling seminar, which examines local, state and national economic trends and is held in large cities across Montana during January, February and March.

Last week’s seminar also offered economic industry forecasts in transportation, health care, nonresident travel, real estate, manufacturing, agriculture and forest products. Here’s a sampling, from some of those industries:

Nonresident Travel: Norma Nickerson, Institute for Tourism and Recreation Research

Montana tourism saw a 3.7 percent drop in nonresident visitors in 2008, compared to 2007, apparently due to high gas prices last summer. Overall, Nickerson predicted another downturn of anywhere from 2 to 6 percent in tourism-related business for 2009.

Airline travel, however, was up almost 3 percent last year, with Glacier Park International Airport seeing a 5.1 percent increase. During the summer, Canadian visitors, drawn by a good exchange rate, boosted travel in the Flathead area and along the Hi-Line. State ski resorts also had a very good year, with visits up 14.5 percent compared to the winter of 2006-07.

Steve Albert, Western Transportation Institute

Transportation is a vital key to economic growth, Albert said, but gas tax revenue is consistently falling short of the funding needed for road maintenance and construction. States are beginning to consider measures like congestion tax, where drivers are taxed by how often and how far they drive, to make up the difference.

Albert said three crucial trends will affect the future of transportation needs in Montana: rapid population growth; an aging population; and nonresident travel.

Health care: Patrick Barkey, Bureau of Business and Economic Research

With changes in the national health care system possibly afoot, Barkey offered a glimpse of where Montanans are at in regards to coverage. About 15 percent of the population is uncovered here, putting the state somewhere in the middle ground of where other states rank.

Montanans, however, are significantly more likely to be covered by individual insurance than comparatively more generous employer-based plans, with about 52 percent here on business insurance compared to about 63 percent nationally. Uninsured Montanans unsurprisingly fall into certain groups, namely the young, the lower income and the less educated, he said.

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