Western Montana leads economic growth

While the labor market continues to improve in Montana, business proprietor income has suffered steep declines and will continue to see slower earnings growth through the rest of 2017.

That was one of the take-away messages from the midyear economic update delivered Thursday in Kalispell by the University of Montana Bureau of Business and Economic Research. It was the Montana Chamber of Commerce’s final session of a seven-city tour to update community leaders on the state’s economy.

Some of the sluggishness in business earnings is tied to the collapse of farm earnings, bureau Executive Director Patrick Barkey said. Farm earnings in 2015-2016 showed a 71.2 percent decline. Drought has affected Montana’s farmers, and wildfires burning through the state’s midsection likely will worsen economic conditions for many farmers and ranchers.

Barkey said he expects the bureau’s forecast of slower earnings growth in 2017 to remain intact through the end of the year, but Western Montana continues to be a bright spot for economic growth.

Growth in wages has been strongest in Gallatin County, with Flathead in second place for wage growth, noted Paul Polzin, bureau director emeritus. From 2014 through 2016 Gallatin had a 9.22 percent increase in wage growth; Flathead posted a 6.73 percent increase.

“Gallatin County is firing on all eight cylinders,” Polzin said. “And Kalispell has evolved into a true regional trade center.”

On a broader scale, Montana’s across-the-board wage growth of 1.9 percent last year was overshadowed by stronger wage growth in Idaho, which posted a 4.4 percent increase, and Washington with a 6.1 percent gain in total wage growth. Idaho and Washington also had much stronger wage growth in construction and administrative services. In retail trade, Montana had a 2.2 percent increase in wage growth, dwarfed by Washington’s 23.1 percent increase, driven largely by growth of a single company: Amazon.

After years of strong economic growth tied to the Bakken oil boom in Eastern Montana and Western North Dakota, low oil prices prompted that growth to shift in Montana by the end of 2015 to “more of a traditional pattern of growth,” Polzin said.

The latest labor survey of Bakken oil-field workers showed just 26 Flathead County residents still working in Richland County along the state’s eastern border. By comparison, 140 Yellowstone County residents are working in Richland County.

Polzin said there was a “Trump bump” after President Donald Trump took office in January, but while the S&P 500 stock-market index increased during the first six months of 2017, consumer sentiment has plateaued.

Darryl James, executive director of the Montana Infrastructure Coalition talked about how sound infrastructure provides a foundation for healthy communities.

The coalition is a group of more than 100 public and private associations and individuals representing all sectors of the economy, including engineering, construction, finance and maintenance.

Montana is facing a $1.1 billion shortfall in needed infrastructure improvements, but there are limited resources to generate that kind of money, James said. Local-option infrastructure taxes are one way; others are fuel tax/user fees, bonds, vehicle registration fees, capping the coal trust fund and public-private partnerships.

Barkey offered three caveats for tax-financed infrastructure spending:

- Infrastructure spending doesn’t always produce economic growth.

- The Obama stimulus program “taught us the limits of infrastructure spending as a policy tool to help struggling economic areas.”

- Paying for things with taxes guarantees political distortions.

Features editor Lynnette Hintze may be reached at 758-4421 or lhintze@dailyinterlake.com.