Flathead County Resumes Role As ‘Growth Leader’ in Montana’s Economic Landscape

Gains in key industries propelling local economy into 2016

By Dillon Tabish

Nearly every aspect of the Flathead County economy grew at a steady rate in 2015 and the outlook for 2016 is similarly positive, according to state economists.

Many of the county’s key industries – retail, health care, construction, manufacturing and tourism – experienced solid gains over the last 12 months and that trend is expected to continue over the next 12 months.

The overall message was decidedly optimistic at this year’s Economic Outlook Seminar, delivered last week in Kalispell by economists from the Bureau of Business and Economic Research at the University of Montana.

Two counties in Montana – Flathead and Gallatin – outperformed the statewide average in terms of economic growth last year.

“They’re projected to be the best (in 2016),” BBER Economist Paul Polzin said, highlighting the local economy’s broadening growth.

“Flathead County’s traditional role is being a growth leader in the state and that has clearly resumed. That’s good news,” said Patrick Barkey, director of the BBER.

Barkey said the state’s economic growth has been similarly broad.

“What’s driving growth? Just about everything,” Barkey said.

Consumer spending is a leading force behind this economic growth, he said, although business and government spending have remained rather tepid.

The strengthening U.S. dollar and weakening global market, primarily in China, the world’s second-largest economy, could create a headwind for the state and local economies. The U.S. economy has become stronger in recent years and is driving up the cost of U.S. goods while continued job growth over the past five years has increased Americans’ spending power.

Drops in the energy sector could worsen in the coming years as crude oil prices linger around the lowest in over a decade.

Nevertheless, Barkey said Montana is poised to withstand these opposing forces.

“We think there’s enough momentum in the economy to power through some of the obstacles in our path,” Barkey said.

A reduction of unemployment claims shows a strong labor market, and noteworthy wage gains have been made across Montana.

Barkey said the Flathead – and most of Montana – is approaching full employment, which could lead to further increases in wages as businesses compete in the labor market for skilled workers.

The local construction industry has recovered to the second-best levels in the state, Polzin said.

Economist Todd Morgan said Montana manufacturers are expecting a better year than 2015, and about 45 percent of surveyed manufacturers said they are planning an increase in employment, while only 4 percent said they’re expecting to reduce staff.

Montana’s manufacturing industry has grown noticeably since the recession, and Flathead County has one of the top manufacturing sectors in the state. The county has added roughly 500 manufacturing jobs in recent years, although the income level is still below the pre-recession levels.

Flathead County’s manufacturers were the second most optimistic in the state, Morgan said.

“Manufacturers are quite positive and expect to increase employment here,” Morgan said.

Health care is still growing, too, but concerns have been raised about a drop in Canadians who visit here for health care needs or retail shopping.

Statewide, health care spending is projected to return to historic levels largely due to the aging Baby Boomer generation.

The share of Montana’s population over age 65 is expected to grow from 17 percent to 23 percent over next 10-15 years, economist Bryce Ward said. Montana’s aging population could add $2.3 billion to the state’s health care spending by 2030, an increase of 31 percent.

Also, the increase in insured residents will likely lead to heightened needs at hospitals, Ward said. The number of uninsured residents in Montana has dropped from 20 percent to 14 percent, and after Medicaid expansion that figure should drop to 11 percent, he said.

“More people with insurance leads to more health care use,” Ward said, estimating the increase in insured residents will raise spending by 5 percent.

The state will need an estimated 16,000 new health care workers in less than 10 years to address the mounting needs and retirements that are predicted within the industry.

The tourism industry is predicted to continue growing, particularly this year as the National Park Service celebrates its centennial, according to Norma Nickerson, director of the Institute of Tourism and Recreation Research.

An estimated 11.7 million people visited Montana in 2015, an 8 percent increase over the previous year. The nonresident visitors spent almost $3.6 billion in the Treasure State last year, an 8 percent decrease from 2014. Initial observations indicate that the decrease in spending may be attributed, in large part, to lower fuel prices, according to analysts.

Flathead County annually draws the most spending among tourists, alongside Gallatin County.

The outlook is mostly positive this year, although declining Canadian visitors could hurt local businesses in the Flathead. Gas prices are low, though, and could lead to a spike in domestic visitation.

Only 5 percent of Montana tourism-related businesses expected a decrease in sales in 2016, Nickerson said.

“Made in Montana” products and the Montana experience will continue to be a growth sector, Nickerson said.

The most popular adult activities among visitors were running, jogging and trail running; fishing; bicycle riding; hiking; and camping, according to a 2015 ITRR survey.

Both Baby Boomers and millenials – the latest generation of adults who were born in the early 1980s through the early 2000s – want experiences that are authentic instead of contrived, the survey found. However, millenials noticeably spend less money for trips than Baby Boomers.

The agriculture industry is in the midst of changing and challenging times, according to George Haynes, a professor and agriculture policy specialist at Montana State University.

Supplies are expanding while prices are going down, he said. Cattle prices, which have experienced a strong run in the market in recent years, are coming down but staying above historical averages. Crop markets are seeing price declines and the strong U.S. dollar is making it difficult on exports, particularly wheat. Exports to China have nearly halted completely, Haynes said.

In terms of cash receipts, Montana’s agriculture producers saw 25 percent in declines last year, and the figure was 38 percent for U.S. gross sales.

A lingering drought in Northwest Montana has hurt producers even more, he said.

“These are tough times for producers,” Haynes said.

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