Montana's economy: smooth sailing toward a cliff?

A lot of things started to fall into place for the Montana economy in 2012. Strong income growth, led by counties in proximity to the Bakken oil fields, pushed up state income tax collections to near double-digit rates of growth. Dry conditions last summer were certainly felt by Montana farmers and ranchers, but most escaped the full brunt of the drought and heat that devastated our nation’s corn producers. And the slowdown in health care growth in 2009-2010 proved short-lived, as Montana’s hospitals, practitioners and other health facilities resumed faster growth last year.

And even though growth continues to be stronger in the eastern portion of the state, signs of recovery are becoming more abundant in the once-faster-growing western side as well. Perhaps most heartening is the improving condition of housing and real estate markets, which suffered greatly in the recession. The home price declines in Montana markets everywhere appear to have stopped, with at least modest growth under way since the end of 2011. Prospects for a meaningful uptick in new home construction in 2013 are very good, especially for multifamily structures serving rental markets.

But to say that the Montana economy is sailing into uncertainty in 2013 would be putting it mildly. The healthy prices for energy, mineral and agricultural commodities produced in Montana have been supported by strong growth in developing economies abroad that is now sputtering. The U.S. economy hasn’t exactly found its sea legs either — with business spending in particular showing weakness. And the so-called fiscal cliff resolution reached a few weeks ago in Congress left plenty of underwater mines around that could threaten the recovery, some of which are set to go off as early as March.

That’s why it might be safer to watch someone else forecast the economy this year instead of attempting that dangerous task yourself. The Bureau of Business and Economic Research’s 38th annual Economic Outlook Seminars being held in nine cities across the state in the next few weeks are an opportunity for you to do just that.

Of all the obstacles to continued stronger growth in Montana’s economy this year, none looms larger than the federal government budget negotiations in Washington, D.C. The outcome is less in doubt than the process, which has proved to be divisive and disruptive in the past. A shutdown of federal government operations, or more catastrophically a U.S. government default on its debt obligations, will hang over the debates as the U.S. Treasury approaches the “debt ceiling” — the limit on its legal authority to borrow money — in the next two months.

But for all the hoopla and attention paid to this drama, it’s what happens in markets and on Main Streets that is pushing the economy ahead. In Montana, the pace of development in some industries and in some parts of the state has been fast and furious. Most notably are those related to the maturing and solidifying oil boom on the North Dakota side of our eastern border, generating demands for everything from infrastructure to day labor. Less noticed but perhaps of even greater significance in Montana communities are the major changes to the way we deliver and pay for health care that are set to arrive in less than a year.

The stage is clearly set for faster growth for the state economy in the years ahead. The question is, will our leaders help or hinder the process?

Patrick Barkey is the director of the Bureau of Business and Economic Research at the University of Montana. He will present state and local economic forecasts for 2013 at the Bureau’s 38th annual Economic Outlook Seminar titled “The Best Medicine: How Can Montanans Take Charge of Changes in Health Care?” The series will be held in nine Montana cities and will kick off Tuesday, Jan. 29th, in Helena. To register or for more information, visit online at www.bber.umt.edu or call 406-243-5113.