State’s Economic Recovery Robust, also Puzzling
By Evelyn Pyburn
Montana has seen a strong and quick rebound from the economic impacts of the COVID crisis, reported Dr. Pat Barkey, during a mid-year report on the state’s economy, sponsored by the Montana Chamber of Commerce.
Montana is actually rebounding stronger than the economic growth predicted by Barkey prior to the pandemic. It is an “economic consequence that no one anticipated,” said Barkey, who heads the UM Bureau of Business and Economic Research. “You can hardly see the recession in the numbers.”
Montana’s gross domestic product declined 32.5% in the second quarter of 2020, only to bounce back even higher — by 33.44% — in the third quarter.
Montanans have seen personal income growth, year over year, of 20 percent.
“It is strange to see the economy growing this hard,” said Barkey, who predicted that it would continue to grow just as much throughout the rest of 2021. “We are looking at a big year,” he said, but beyond that it is uncertain. The two troublesome issues Montana faces are work force and housing prices.
In trying to explain what happened over the past year and a half, Barkey said, “We didn’t go through a recession, it was a public health crisis. No one anticipated how the federal government would come out swinging.”
The federal government put $8 billion into the Montana economy. “It was enormous,” said Barkey, who noted that transfer payments as a segment of the economic base, usually retirement income paid by the federal government, was a record high.
“Government payments made 2020 a boom year.”
Much of what the future holds depends on what the Federal Reserve does. “What they do is really important,” said Barkey, adding, “I think what they are doing is wrong.” He said he believes the Federal Reserve is paying too much attention to what is happening in the coastal states in terms of unemployment rates.
“The pandemic was a seismic event—a huge negative event, but look at how much people are making. You cannot see the recession in personal earnings. Those who were working were making more money,” said Barkey, while noting that there were those – mostly in the lower income categories –who were not making more and who were more negatively impacted.
There was a three percent decline in employment the last half of 2020, yet wage growth was “respectable.”
Job losses during the COVID shutdown through mid-2020 were seen in every industry category except for agriculture and government. For the whole year of 2020 job losses were experienced in all industry sectors except construction, manufacturing and government. During that same period, however, wages grew in every industry sector except for accommodations /food and mining, which declined substantially. Wages especially grew in the finance and healthcare categories.
Montana is coming out of the “public health crisis” with a high demand for labor, a demand that exceeds supply. But that is a situation that was developing in the state prior to the COVID crisis, pointed out Barkey. With an unemployment rate of 3.6 percent, Montana is for all practical purposes at full employment.
One disparity that has emerged in the after-COVID shutdown is the participation level of women in the labor market. “Those who were laid off the most were women,” said Barkey, and they are having a harder time getting back into the economy. Prior to COVID-19, women made up about 20 percent of unemployment claims every month. Since the beginning of COVID, women have accounted for more than 50 percent of unemployment claims.
Some of the reasons for this remain a bit of a mystery, said Barkey.
Since February 2020, Montana has lead the nation in the number of job openings – increasing by almost 65 percent through July 2021.
An indicator that the market is good for labor is the level of voluntary “quits.” When workers voluntarily quit a job, it is because “they have a high degree of confidence” in being able to get another. Nationwide, there is an increasing number of “quits” as people move to different locations and find jobs that make more money. “Boomers” – the baby boom generation that is of retirement age – are quitting, “and taking their taking their pay with them”, which depresses the wage growth trend.
Wage growth has been “tilted” toward entry level jobs, which is a good thing.
Bioscience, technology and manufacturing are the three industry sectors shining the brightest in the state’s recovery.
Sharon Peterson, executive director of the Montana Bioscience Alliance, as part of a panel discussion, said “The bioscience industry in Montana has been a well-kept secret.” It poses great opportunity in Montana for the future in providing more jobs and economic growth.
The cost of housing is impacting the ability for businesses to hire in some areas of the state.
Such was the experience of Zoot Enterprises, a company represented during the Economic Seminar, by Tony Rosanova, President/CTO. Zoot, located near Bozeman with a facility in Billings, creates systems that process data that allow companies to make better decisions. While Zoot complied with the same COVID shutdowns, they experienced a rapid increase in demand for services after reopening as their clients sought to innovate more than ever before.
In hiring to meet that increased demand, Rosanova said it was difficult because people can’t afford housing in Gallatin County, because of that, the software company’s most recent expansion of 20 new employees was done through their Billings facility, where housing is more affordable.
Commodity prices for the state are strong, except for agriculture, which is a “sad story,” mostly because of the drought. “Government support payments will be a life line” for agriculture, said Barkey.
Bakken Oil production has dropped significantly. North Dakota is called the “sleeping giant of the energy industry,” said Barkey, “That’s not what we would have called it a few years ago.”
In 2019 California increased their importation of power by 20 percent and it is the largest net electricity importer of any state.
Montana was still a net exporter of power before the closure of Colstrips 1 & 2.
Barkey expressed grave concern about the situation of power supply for Montana, given that NorthWestern Energy is 645 megawatts short of being able to meet energy needs during peak use periods.
MDU expects to be “resource efficient”.