Recovery expected to take years

Flathead County likely won’t fully emerge from the ongoing recession until 2018, according to predictions about the state’s economic recovery by directors at the Bureau of Business and Economic Research at the University of Montana.

That less-than-welcome news was delivered to a group at Thursday’s midyear economic update presented in Kalispell by the Montana Chamber Foundation and the research bureau.

Flathead is predicted to be one of the last counties in the state to recover from the recession that began in December 2007.

However bleak that news may be, Flathead fared better than a half dozen or so other Montana counties expected to experience permanent declines in their economies.

The culprits contributing to the economic situation are the usual players, according to Patrick Barkey, director of the economic research bureau. The poor housing market continues to plague Flathead County and much of the United States.

“The correction in housing is not finished,” Barkey said.

“Housing is the real big problem in Kalispell and many places in Montana,” he said. Drops in construction activity and in the sales price of real estate have been “huge” every year since 2008.

 A continuing reluctance by consumers to spend money affects Flathead County to a greater degree than some counties because of the historic levels of tourism spending here. That’s not to say people aren’t continuing to visit the county, but their stays appear to be shorter and people are seeking cheaper lodging options, Barkey said, perhaps camping instead of renting motel rooms.

He shared a bit of good news related to expenditures by travelers, though, saying a 2 percent increase is expected this year in Flathead County.

Another dominant economic factor is the low level of confidence many consumers still have in small businesses, Barkey said.

While “corporate America is almost back to pre-recession earnings,” Barkey said, that’s not the case for small businesses, many of whom “made smart decisions in order to stay afloat,” but those decisions included cutting employees. And small business owners aren’t yet borrowing money, which contributes to a stalled economy.

Permanent plant closures in wood manufacturing also hurt Flathead County, Barkey said. But no additional closures are expected, he said.

Economic recovery is expected to be tied to three factors, Barkey said.

One is a rebalancing of consumer spending. Today wealthy consumers are spending money, but most people are still holding on to their cash.

A second factor is an expected change in population migration, which has now “come to a screeching halt,” Barkey said.

“People are not moving even if the grass is greener in Montana. They are trapped where they are.”

Third is the expectation that mining will improve in the future. There is opposition to mining in the state, he said, but at the same time the investment plans for mining look good and “there’s an overwhelming interest in expanding mining” ventures.

Reporter Shelley Ridenour may be reached at (406) 758-4439 or by e-mail at sridenour@dailyinterlake.com.