Economists: Slow Turnaround for Flathead County

By Beacon Staff

Montana’s economic outlook is grim, but it could be, and has been much worse. This was the message delivered Thursday in Kalispell during a mid-year economic update presented by the Montana Chamber Foundation along with the University of Montana Bureau of Business and Economic Research.

“No one liked our growth forecast [in February] because it was so anemic, but now it’s even more anemic,” Patrick Barkey, bureau director and a professor at the UM School of Business, said. He spoke to a room crowded with local business owners at the Hilton Garden Inn.

“We’d like to see more growth but we are headed in the right direction,” he said. “While there has been growth, we’re not anywhere near where we [once] were.”

He noted that throughout the recession, Montana has moved in sync with the United States, following its highs and lows, though by a slightly better margin. Although it hasn’t fared as well as neighboring North Dakota, the state with the best economic performance in the nation, Montana is leaps and bounds ahead of Nevada, the state that has fared the worst.

Barkey noted that much like across the rest of the country, consumer spending in Montana is unbalanced. Those with deeper pockets are propelling the economy with impulse purchases while poorer families have cut back on basic expenditures.

“Consumer confidence is stuck in a rut and that’s a concern for Montana,” Barkey said.

Along with restrained spending from residents, Montana’s tourism industry has struggled with lower profits.

“We’ve seen a double-digit decline on spending from non-resident travelers and it’s pretty sobering,” Barkey said. While the actual tourist numbers haven’t dropped off, the spending level of these tourists has dramatically fallen.

Barkey noted that as Flathead County is largely dependent on tourism and also took especially hard hits in the housing and manufacturing industries, he doesn’t expect the county to fully recover its economic strength until 2018.

“I haven’t lived through a financial crisis like we just did and I hope I never have to again,” he said.

Paul Polzin, also a UM School of Business professor and the second speaker of the afternoon, agreed with his colleague’s remarks. He displayed several charts that showed both the halcyon days of the economy before December 2007 and the dark aftermath of the recession.

Prior to the economy’s downturn, Flathead County had one of the highest economic growth rates in the state. In 2008, the county suffered a 2.7 percent decline in non-farm labor income. In 2009, this figure worsened to 9.3 percent

Retail labor income fell 5 percent in 2008 and 9.5 percent in 2009, which according to Polzin, was the second worst drop in the state after Gallatin County.

Dismal figures were also revealed for the construction industry, the sector in the region that took the hardest hit. Construction labor income fell 16.5 percent in 2008 and dipped to 31.7 in 2009, the worst in the state.

“2009 was by far the worst year for Flathead County,” Polzin said.

In the near future, Barkey and Polzin expect to see growth in professional business services and are encouraged by a stabilization in the mining industry. They also expect the agricultural sector to rebound to its long-term average.

The Montana Chamber Foundation, a non-profit that focuses on the development of the state’s economy, will host the mid-year annual economic outlook in six other cities across the state. For a schedule of the events and more information about the chamber, visit www.montnanachamberfoundation.org.