Good & Bad of Montana’s Economy
Montana led the nation in its rate of economic growth during the first quarter of this year – a little reported fact, according to Dr. Pat Barkey, of the Bureau of Business and Economic Research (BBER), during its mid-year economic update at the beginning of August.
Despite that report, based upon lower tax revenue collections so far this year, the state’s economy appears to be flat. Dr. Barkey noted, however, that tax revenues have been on something of a “crazy roller coaster”— in part because of federal revenues flowing into the state.
“We are seeing fragile local growth,” reported Dr. Barkey, “Cities are doing well but eastern Montana is not.”
Yellowstone County has had a good year, according to Dr. Barkey. He reminded that over the past few years in reporting on Yellowstone County’s economy he would ask, “Where did the growth go?” But 2023 shows a return of the county’s economic performance in almost all sectors, coming in at the top of all counties except for Gallatin County.
Nationally, “There has been a remarkable decline in inflation, but not in prices,” according to Dr. Barkey. But he posed the question about inflation, “Has it really come down?”
High prices, which were brought on by past inflation, will probably not decline, even if inflation declines.
Forecasters at the beginning of the year were off a bit about Montana’s economy, noted Dr. Barkey, who was among those forecasting a rather dismal economic performance of minus one percent. Instead it looks like the state will increase in economic growth one to two percent.
Dr. Barkey went on to note that the labor shortage has improved a little bit, but not much. The labor shortage shouldn’t be so surprising, he said. It’s a matter of demographics. For example the 16-24 year old age group, which is usually part of the workforce, comprised 74 percent of workers in 1995, but now their numbers are down to 63 percent. Older age groups are comprising a larger percentage of the workforce.
Also squeezing the available workers is a trend among retirement age workers to retire earlier than anticipated – -being called the Great Retirement Boom — it began as part of the economic impacts of COVID. This past year four percent more people retired than the four percent originally projected.
The labor shortage is, however, something that researchers saw coming as early as 2014, said Todd O’Hair, Montana Chamber of Commerce CEO, who also presented at the annual event. O’Hair pointed out that Montana Chamber leadership recognized the demographics that were unfolding and the need for worker development over a decade ago. They launched programs aimed at helping to mitigate it.
For decades, Montana has been one of the leaders among states when it comes to entrepreneurship, said O’Hair, “No one knew why, because for generations the economy was crappy, but regardless of why the Chamber asked ‘How do we keep the pipeline open?’” Across the state, through Chamber efforts, there are currently 120 teachers teaching entrepreneurial thinking, said O’Hair.
Over the past months, Montana has quietly added 17,000 new jobs, a 31.5% growth, of which 4300 were jobs in the food business.
Asked about the impact in tax revenues “because of the tremendous amount of taxes” generated by sales of marijuana, Dr. Barkey explained that the revenues compared to the whole are not that great. Taxes on marijuana sales generated about $100 million but personal income taxes in Montana generate $2.4 billion. In lists of state revenues marijuana taxes are included in the category of Other Taxes. “They don’t move the needle much,” said Dr. Barkey.
Dr. Barkey was also asked his opinion on the potential impact of AI (Artificial Intelligence), which has generated much discussion in all of media as a potential threat to society. Dr. Barkey said, “It will be part of the solution.”