Montana’s Economic Momentum

By Beacon Staff

“Montana is going into this year with good momentum. Better momentum than we thought,” one of the chief economists in the state announced in Kalispell last week.

Patrick Barkey, the director of the Bureau of Business and Economic Research at the University of Montana, sees a reinvigorated economy across the state’s landscape, stretching from the booming Bakken oil fields in the east to the reviving housing, wood products and construction markets in the west.

Uncertainty exists on national and international levels, but Montana’s prospects appear favorable following last year’s exceeded expectations.

“We have been surprised at how well the state economy performed in 2012,” Barkey told a packed room at the Hilton Garden Inn for the 38th annual Economic Outlook Seminar.

After feeling the brunt of the Great Recession, Montana’s economy is regaining its pre-recession growth, according to data analyzed by the BBER.

The economic recovery of Flathead County is underway, too, according to the BBER.

Though other counties have healed faster, Flathead’s economy has grown annually since taking a sharp decline in 2009. Last year’s wage growth — 1.9 percent — was the best since the recession. The county’s total employment level is now 90 percent of its peak in 2007. Total wages remain 4 percent below peak levels in 2008. Economists expect another 2.9 percent growth this year and roughly 2.6 percent annually through 2016.

Barkey estimates the state economy grew by roughly 2.7 percent in 2012, which exceeded the previous 2 percent estimate and was better than the nation’s overall growth rate.

The state experienced strong income growth, thanks largely to the continued energy development in Eastern Montana. But industries in the western portion of the state enjoyed healthy rebounds, too.

“We’re now finally seeing, for first time, a glimmer of growth in the West,” Barkey said.

Mining and health care remained strong while there was better-than-expected growth in professional business services, housing and construction.

“The housing recovery has started,” Barkey said.

Housing sales and prices increased statewide and 2013 has strong potential for further improvements, analysts said.

Health care was the main topic of conversation at this year’s seminar as the national system prepares to undergo a transformation under the Affordable Care Act (ACA).

Analysts expect the demand for health care to skyrocket in the coming years as previously uninsured residents — roughly 172,000 in Montana — gain coverage and Medicaid possibly expands.

“Can Montana’s existing primary care workforce accommodate the increase in demand that will follow the newly insured in Montana?” asked Gregg Davis, health care director of the BBER.

Davis said the number of primary care physicians in the state per 100,000 people — 51— is well below the generally accepted national threshold of 60-85. Flathead had the second largest health care real-wage growth last year behind Yellowstone County. But, according to the BBER, Flathead remains underserved for primary care resources.

Flathead County has the second largest sector for manufacturing in the state, with 15 percent of the total industry. The industry outlook for 2013 remains positive with expected employment and earnings growth.

The forest products industry received help from new housing starts across the U.S. Montana’s sawmills, plywood and board facilities reported across-the-board gains last year compared to 2011, according to BBER. The value of sales of primary wood and paper products was estimated to reach $580 million, 25 percent higher than the previous year. The figures were still roughly $400 million below pre-recession levels, which hit almost $1 billion in 2006.

Montana attracted roughly 10.88 million visitors in 2012, a 3 percent increase over a year ago. Nonresident visitors spent $3.19 billion.

After dropping to a decade-low in 2011, Amtrak deboardings across the state were 17 percent higher in the third quarter of 2012 than the previous year, according to the Institute of Tourism and Recreation Research (ITRR). Airport deboardings continued a gradual climb and were 8 percent higher in 2012. Skier visits dropped 6 percent but remained higher than between 2008-10.

“This spending is brought to Montana by nonresidents because of Montana’s open space, clean waters for fishing and wildlife habitat, clean air and a chance to escape,” says Norma Nickerson, the director of the ITRR.

Analysts foresee a 2 percent growth in the state’s tourism industry in 2013 for both resident and nonresident travel while spending is expected to rise another 4 percent.

The brunt of the Great Recession largely missed the state’s agriculture industry as net farm income and equity kept rising every year since 2009. However, the historic drought that continues to plague the Midwest has hurt the entire nationwide industry.

Feed costs have spiked and food prices are expected to keep increasing. Yet moisture and favorable harvest conditions have maintained an impressive crop sector throughout Montana, as wheat production climbed 8.3 percent last year and prices rose almost 4 percent over a year ago, according to the Department of Agriculture. Hay production dropped 23 percent but prices skyrocketed more than 50 percent. Similarly, cattle herds have shrunk in drought-stricken states, except Montana.

The uncertainty surrounding the latest Farm Bill threatens the overall health of the industry, too. As the nation’s primary agricultural policy, the legislation provides a wide scope of subsidies and titles, such as food stamps and crop insurance, to farmers. If neither a new bill nor an extension emerges, farm programs will lose billions of dollars in financing and would raise consumer prices for milk and products made from wheat and other crops.

For more information about the BBER’s 2013 outlook, visit www.bber.umt.edu

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