Economic Growth Tentative in the Flathead

By Beacon Staff

Economic growth in Flathead County and western Montana is slowly increasing, according to economists from the University of Montana, but the growth is tentative as the national economy remains sluggish and global markets continue to decelerate.

This news greeted the audience at Kalispell’s Red Lion at the eighth annual Economic Update from the university’s Bureau of Business and Economic Research (BBER) and the Montana Chamber Foundation.

The Economic Update presentation happens around midyear, after the fiscal year ends on July 30. It’s a way for businesses and chambers of commerce to keep an eye on what is happening in the local, state, national and global economies, and gives the BBER a chance to show how well its predictions from the annual Economic Outlook presentations, which happen early in the year, have fared.

According to Paul Polzin, director emeritus of the BBER, Flathead County is seeing growth in most areas of its economy, though nonfarm labor earnings are still trying to bounce back from where they were before the recession hit.

“The Flathead economy has not yet returned to where it was in 2007,” Polzin said.

But that’s not to say advances haven’t been made. Polzin noted that nonfarm labor income as a whole was down 1.1 percent from 2007 to 2012, but that number includes considerable decreases followed by several years of increases.

From 2007 to 2009, the earnings dropped 5.2 percent annually. Then, from 2009 to 2012, they clawed back 2.5 percent each year.

This is due to many of the economic sectors’ improvements since the recession bottomed out, Polzin said. In Flathead County, business services have seen considerable growth, along with health care, accommodation businesses and construction and manufacturing.

Two sectors that are slowly improving, though not yet expanding, are wholesale and retail trade and government, he said.

Polzin noted that the Flathead’s economy has nearly followed the BBER economic prediction from February, with a few exceptions. In February, economists predicted the construction season would be hopeful, but Polzin said there were conflicting reports about the actual success businesses have had thus far.

BBER economists also predicted the Flathead’s trade center would start to recover, but weak retail growth has put a slight damper on that so far this year.

Otherwise, the predictions about the remaining pieces of the economic base have held up. There has been a “hint of upturn” in the wood products industry; nonresident travel has shown modest growth; manufacturing has shown increases but there is an unexplained pause in high-tech growth; energy growth throughout the state has bolstered transportation industries; and the Columbia Falls Aluminum Company remains dormant, tamping down the primary metals market here.

Traffic moves along Main Street in downtown Kalispell. – File photo by Lido Vizzutti | Flathead Beacon

BBER director Patrick Barkey said the 2012 fiscal year was a growth year for Flathead County, and it closed out on a high note with nearly 4 percent growth. That momentum should continue, Polzin said, with a prediction that the county’s economy would grow 2.8 percent per year from 2013 to 2016.

It’s not the leaps-and-bounds growth economists hoped to see in 2013, Barkey said, noting that current growth trends in the country and state are relatively disappointing.

Nationally, economic growth is slower this year than last year, he said, and the labor market is still very weak.

In Montana, there were big increases in state income taxes in 2012, jumping more than 10 percent, Barkey said. Most of those increases are due to the energy sector skyrocketing with the Bakken, but Barkey noted that counties across the state are seeing economic increases.

“There is finally growth out here in western Montana,” he said.

It may be slower growth than what’s happening out in the eastern part of the state, Barkey said, but “what’s changed is that [the counties] are all growing now.”

“That’s very heartening,” he said.

Apparently, local businesses are also heartened by recent increases. According to a survey from the Kalispell Chamber of Commerce, 25 percent of its members reported they would likely add employees through the end of the year, and less than 10 percent felt they would lose employees.

Eighty-three percent of the 137 responding businesses felt their business would improve in coming months, compared to 70 percent last year.

The biggest concerns many businesses had included the effects the Affordable Care Act could have, future taxes and further government regulation. Those concerns were mirrored in a statewide business survey from the Montana Chamber of Commerce, as well as a national survey from the US Chamber of Commerce.

Webb Brown, president and CEO of the Montana Chamber of Commerce, said many respondents are concerned about global market downturns and have little faith that the national economy is headed in the right direction, but business confidence grows at the state and local levels.

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