Economists say growth is tentative

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Energy and agriculture continue to be two of the brightest areas in the Montana economy, University of Montana economists Patrick Barkey and Paul Polzin told a group gathered at the Red Lion Hotel Kalispell on Thursday.

“This is a very unusual phenomenon, when rural areas are growing faster than urban areas,” Polzin said.

Statistics showing the strongest recent economic growth in the eastern part of the state, with the Bakken oil fields and sustained high prices for commodities, were presented as part of “Montana’s Federal Economic Footprint: The Local Impact of Changes in Washington.”

The presentation was part of a twice-yearly economic update series sponsored by the Montana Chamber of Commerce, with the seven-city swing kicking off in Kalispell.

Barkey, Polzin and Montana Chamber of Commerce Director Webb Brown offered a portrayal of the Montana economy as growing, but still not recovered from the hit the state took in 2007.

Barkey, director of the UM Bureau of Business and Economic Research, said he expects another year of sluggish growth for the national economy. He said that even though unemployment numbers are dropping in the United States, the labor market is still “sick,” depending heavily on part-time and temporary workers, and that bright forecasts can be somewhat attributed to “slow growth fatigue.”

He did state that 2012 was definitely a better year for Montana with solid income growth, though not quite as strong as state tax collections would suggest. However, glimmers of growth will continue to be seen, he said, and evidence of energy activity is prevalent.

“What a huge story it [energy development] is,” he said. “The biggest event of a lifetime for some folks in the mountain plains states.”

Wage growth charts bear this out, with the mining category, which encompasses energy development, and financial and business services industries, which often serve the energy sector, as the prime movers in the mountain plains area.

Lumber prices are significantly better, and commodities as a whole should have a good year, Barkey said. The prices for lumber, barley, beef and wheat are all at good rates and holding steady.

Meanwhile the global climate is decelerating, Barkey said: “I don’t think many Montanans are aware of how much.”

Europe’s high overall unemployment rate is “not good for exports, and not good for keeping commodity prices high,” he said. “Even China has seen a slowdown in growth.”

The outlook for Montana’s key industries was presented.

Agriculture prices are expected to hold, and yield prospects are good. Drilling has tapered a little, but part of that, Barkey said, is because the Bakken activity has become “more efficient, more rational and more controlled.”

He said it’s hard to evaluate 2013’s nonresident travel activity in the middle of tourist season, but growth remains constrained by U.S. weak consumer spending. Current mild declines are expected to continue in the government sector.

Polzin presented some comparisons of income in nine of the state’s counties. Most of the state has rebounded from dismal drops in income in 2007-09, including Flathead County, which had its annual percentage of change in dollars drop 5.2 percent those years, the second worst in the state. Earnings, however, are up 2.5 percent in the years 2009-12.

The county’s best showing in the last few years is in business services, with health care as the second-healthiest sector. Wholesale and retail trade and public administration have not grown.

A list of the county’s economic base measurements offers a hope for modest growth in nonresident travel, which makes up 18 percent of the local economy, with a hint of an upturn in wood products, which makes up 20 percent. As a trade center, the county is starting to recover, though weak retail numbers are not encouraging in the second half of the year.

The projected annual percentage change overall in nonfarm labor income is 2.8 percent in Flathead County through 2016. Gallatin County tops the state at 3.6 percent.

Polzin rounded out the presentation with a look at federal government spending in the state and region. Flathead County ranks 50th among Montana’s 56 counties in total federal spending per capita, with $5,886. Daniels County, almost the farthest county to the northeast, is at the top of the list with per capita federal spending of $46,368.

Per capita spending on retirement and disability puts Flathead County about halfway through the list at 29. This means the population skews toward the younger side, a good sign for the county’s economic future, Barkey said during a question-and-answer session.

“In regards to the Flathead, with amenities growth, this is a young population because of in-migration. That’s a favorable trend, so you’d have to be a fool to bet against that one.”

Brown spoke to the climate of business confidence.

He said that, according to a U.S. Chamber of Commerce small business outlook survey, confidence in the U.S. economy is actually down, with 77 percent responding that the national economy is on the wrong track. But entrepreneurs rate their own prospects highly, with 73 percent believing their own businesses are on the right track.

“We are happy to see that,” he said. “The attitude and the optimism is there, and the right attitude and confidence breed more success.”

Reporter Heidi Gaiser may be reached at 758-4439 or by email at

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