Without a doubt Montana is in a recession – “one more severe than anything Montana has experience since World War II,” says Pat Barkey, Director of the Bureau of Business and Economic Research at the University of Montana. The recession is the consequences of business closures and economic shutdowns that has resulted in job losses, income losses and losses in production.
Looking at it optimistically, said Barkey, while Montana’s economy will probably get back to a strong recovery process before the end of the year, “even an optimistic forecast …puts the state economy in a hole that takes years to refill.”
The downfall of the state’s economy has been so fast that there hasn’t been time to compile the data but the initial data is already showing a decline greater than the Great Recession of 2008
Barkey’s research shows that the area of the state hardest hit was the northwest, with losses of about 17 percent followed by the area of the southwest, showing job losses of about 13 percent. The Southcentral area, including Yellowstone County, the loss has been about 11 percent, and in eastern Montana the loss has been about 3 percent.
Job losses means that people are not getting income, and in 2020 the personal income in 2020 will be down $3.9 billion in Montana.
“While events remain extraordinarily fluid and much uncertainty remains, even an optimistic forecast where growth resumes at the end of this year, puts the state economy in a hole that takes years to refill.” It will take at least two years to get back to the point at which the year started.
The unprecedently swift and severe declines in economic activity that have coincided with the outbreak of the global Covid-19 pandemic have not spared Montana. As recently as mid-February, when the Bureau of Business and Economic Research (BBER) was in the midst of its statewide Economic Outlook tour, Montana was at full employment and enjoying a third consecutive fiscal year of healthy state revenue growth, reflects Barkey.
Declines since then have occurred too quickly to be adequately measured by the most comprehensive economic measures, but when those data become available they will depict a broad-based recession of greater magnitude than what was experienced in 2008-09, according to Barkey.
The BBER has conducted a preliminary analysis of this new economic trajectory .
Looking at data from December 2019 to April 2020, the question posed by this analysis is: what does the revised level and composition of national economic activity mean for the Montana economy?
Principal findings are that:
• In calendar year 2020, the Montana economy will suffer an average employment decline of more than 50,000 jobs (including payroll, proprietor, and contract workers), which represents a decline of 7.3 percent. Job losses will exceed that average in the second quarter of the year, with some improvement expected in the final quarter.
• Personal income (not inflation-corrected) in 2020 will be $3.9 billion lower in Montana than was projected in December, a downward revision of 7.1 percent.
• Almost every major industry in Montana will have lower employment in 2020 due to the Covid19 contraction, with job losses particularly severe for accommodations and food, retail, arts and entertainment and personal services businesses. Job losses will be greatest in the northwest region of the state, but every region will experience a significant downturn.
• Stronger economic growth in 2021, and to a lesser extent, 2022 will mostly close the gap and bring economic activity back within range of the medium term growth projection made before the crisis.
This final point is perhaps the most problematic, said Barkey. It is based on the expectation, that the U.S. economic downturn will be pronounced but also relatively short.
The IHS Markit forecast to which the state of Montana subscribes foresees annualized growth kicking up strongly in the fourth quarter of 2020 to double-digit rates. Since an event like the current Covid-19 pandemic lies outside the ordinary experience of economic models, such projections must be treated with caution, warned Barkey.