State has strong recession resistance
With one projection putting the odds for a recession in the next six months at 50-50, the nation is nervous.
The housing price bubble has burst, the credit crunch from mortgage defaults means only the least-risky borrowers get loans, and energy prices have soared out of sight with $100-a-barrel oil. Five cuts in the prime interest rate since September helped fend off soaring loan rates, but it's taking a serious bite out of retirement investments.
But Montanans don't need to push the panic button - yet.
That's the assessment from Paul Polzin, director of the Bureau of Business and Economic Research at the University of Montana.
Polzin spoke in Kalispell Tuesday morning as part of the bureau's 2008 Economic Outlook Seminar. Commissioner of Higher Education Sheila Stearns headlined the session with her address, "The New I.C.E. Age: Investing in a Competitive, Educated Work Force."
Montana had nothing near the foreclosure rates experienced last year in Nevada, California, Florida, Michigan and Ohio, Polzin said.
In fact, the state ranks 41st in the nation in foreclosures.
On the other hand, when broken down by county, the Flathead's more urban mix and aggressive housing market put it at the top of the foreclosure list for Montana.
"But it's still nowhere near Las Vegas or Los Angeles," Polzin said.
As a whole, the Montana economy gains 90 percent of its vigor from sectors that remain strong: nonresident travel, mining, manufacturing, agriculture and the federal government.
In a national recession, Polzin said, the nation would suffer worst in four areas.
Financial services and durable manufacturing, primarily in the auto industry, don't have much of a presence here. But home building and construction also would be hard-hit, and both leave big footprints in Montana's wood-products industry. So far, he noted, the construction trades have been running counter to national trends and could enjoy some more breathing room.
"So with the exception of these last two, this recession probably would not have a lot of impact on Montana," Polzin said.
"But remember, recessions are a lot like war. Once they start they can take an unexpected turn."
He projects 4 percent growth in 2008 for Montana's economy, continuing at 4 to 5 percent for the next several years. He bases that on a turnaround in mining, oil and gas industries, all in strong global demand; strong manufacturing, high-tech industry and oil refinery upgrades; 2 percent growth in nonresident travel; a strong federal presence with its incumbent spending; and agriculture that is seeing record-high wheat prices that are pushing $12 a bushel.
Five straight years of 4- and 5-percent growth, with more to come, make this a historic run for Montana - with slower growth but a much longer run than the spikes in the 1970s or even the late 1940s and early 1950s, he said.
The 2008 national slowdown will have minimal impact in Montana unless something goes wrong geopolitically, he said. The state could take a bigger hit if construction nosedives or if there's a bumper wheat crop, particularly from global competition in India and China.
In her opening address, Stearns spotlighted the state's work-force shortage.
Two years ago Montana's unemployment sat at 2 percent; by the end of December it rose to 3.6 percent. That's still below the 4 or 5 percent that is considered a "natural" rate in a healthy economy.
Stearns highlighted businesses investing in workers to help them continue their education - buying their books, covering tuition - to fit them for the workplace. The result is they never have to scramble for employees.
Montana holds first place both among 15 western states and in the nation for the ratio of baccalaureate degrees earned to the number of students enrolled in the Montana university system, she said.
But she said business investment needs to continue in educational preparation for two critical-shortage areas in Montana: health care/nursing and the construction trades.
She highlighted two initiatives: Miles Community College is working with a heavy-equipment manufacturer and Montana Tech's College of Technology started a utility lineman pre-apprentice program.
Wages, too, will have to be a focus.
She said Montana ranks worst in the nation for the difference between what a high-school graduate earns on the job and what an associate-degree holder earns. Rural teachers' salaries are so low that Eastern Montana districts, in particular, have a revolving door for staff.
Other speakers on Tuesday discussed real estate and housing, local high school and college curricula geared to the workplace, nonresident travel, health care, agriculture, and manufacturing and forest products.
Reporter Nancy Kimball may be reached at 758-4483 or by e-mail at nkimball@dailyinterlake.com