Recovery is on way, economists say

Slow growth expected over next two years

The recession is bottoming out, and Flathead County can expect a slow recovery over the next two years, according to economist Paul Polzin of the University of Montana's Bureau of Business and Economic Reasearch.

Polzin talked to more than 100 people, who attended a luncheon at the Hilton Garden Inn on Thursday hosted by the bureau and the Montana Chamber Foundation. It was the fourth annual economic outlook midyear update.

Polzin and Patrick Barkey, also with the Bureau of Business and Economic Reasearch, said that the U.S. economy has hit bottom, and that a steady, though slow, recovery is coming. They also said what everyone already knew - that the local economy has taken quite a hit over the last two years.

"Kalispell and Flathead County is probably the epicenter of the recession in Montana," said Polzin.

"This is the worst economic recession since the 1980s," Barkey said. "The good news is we're doing much better than the rest of the country."

Montana has experienced a 2.2 percent job loss - 10,000 jobs - the fifth best rate in the nation.

Barkey said that consumer confidence is on the rise and the housing market will rebound, but growth will be 60 to 70 percent of pre-recession levels.

"The U.S. recession will end this year," Barkey said. "There will be a lower rate of growth than the pre-recession boom. Personal savings rates have gone up."

Prior to the recession, the American savings rate, which is calculated as the difference between amount earned and amount consumed, was often negative, and usually pegged at between zero and 1 percent.

The Federal Reserve estimates that Americans lost an average net worth of 30 percent last year, triggering limited consumption and increased savings in response.

Economists predict that the savings rate will reach a permanent plateau of 2 to 3 percent.

"Consumers are now saving more than they did a year ago, and that is having a significant impact on the economy," Polzin said.

FLATHEAD COUNTY has been hard-hit compared to the rest of the state. The three leading components of Montana's economic base are wood products, nonresident travel and the federal government (mostly land ownership). Local construction and wood products industries have suffered significant job losses. Five wood processing facilities have closed.

Paul Polzin said this will be a structural change to Flathead's economy.

Between 2001 and 2007, Flathead experienced a 5 percent growth rate, one of the state's highest. That plunged to -4.1 percent between the fourth quarters of 2007 and 2008.

Nonresident travel has declined 2 percent, but the federal government, because of stimulus money is experiencing normal growth.

Polzin said he and his associates thought that 2008 would be the trough of the recession, which was incorrect. However, he predicts 2009 as the trough, with Montana's growth rate marked at -2.2 percent.

But Flathead County has rebounded quickly after recession before, Polzin said, citing the swift turn-around after the 1991 recession, and the fact that the county was barely affected in 2001 when the dot-com bubble burst.

Recovery is coming, he said, though it will be slow. Polzin predicts the 1.1 percent growth in 2010, 1.5 percent in 2011 and 2.5 percent in 2012.

Reporter K.J. Hascall may be reached at 758-4439 or by e-mail at kjhascall@dailyinterlake.com