Building, jobs needed

Economic growth in Flathead County and Montana continues to improve at a snail’s pace, but a prolonged construction slump and lack of job creation still are major obstacles to overcome, economists said Thursday during their midyear economic outlook seminar in Kalispell.

“We are talking about growth — that’s a lot different than what you heard me say a couple years ago that Flathead was the epicenter of the recession,” said Paul Polzin, a University of Montana business professor and director emeritus of UM’s Bureau of Business and Economic Research. “We are seeing signs of slow growth. The trough is behind us.”

Patrick Barkey, director of the bureau, said not too much has changed since February when the two economists were in town for the annual outlook seminar. Growth was forecasted to be 2.6 percent in Montana during 2011; that prediction has been downgraded slightly to 2.1 percent, largely because the continued slump in construction and job creation. Montana finished 2010 with a mere 0.9 percent increase in economic growth.

“Sadly, as predicted we still haven’t started the engine for construction in either the nation or the state,” Barkey said.

An 80.8 percent decline in housing starts in Flathead County from the peak growth year of 2005 when 1,743 homes were built here — to 335 homes built last year — has been a mountain to overcome, Polzin said. Declines in construction earnings have been felt not only in building construction but also specialty trades and heavy equipment trades.

“Housing recovery keeps getting postponed,” Barkey added.

While jobs still are missing from an improved economic picture, the economists have seen recovery in wages. That’s a good sign of a turnaround in business, Barkey said. Economists gauge wages by state income tax withholding, which totaled $625.4 million in July 2008 during the depths of the recession. July 1 this year that number had rebounded to $660.6 million.

“Wages are up, and that’s why there’s talk of a return to growth,” Polzin said. “Existing workers are working longer hours and earning more.”

Another factor affecting job growth is the inability of people to move to new jobs.

“People can’t move like they used to [because they are] trapped in underwater mortgages,” Polzin noted.

Even though wages are up in Montana, spending isn’t. Consumer spending is still recovering.

Montana’s economy has come through the first two critical stages of recession aftermath, dealing with unemployment and weak spending and then working to correct inventories at the first sign of increased demand for goods.

“We’re not yet to stage three,” which is a return to hiring and earnings and strong consumer spending, Barkey said.

That said, Montana is one of several states where “patterns of growth are starting to re-emerge,” he said. North Dakota, Colorado, Utah, Alaska, Oklahoma and Texas are among the states showing economic improvement.

There are some new national and international concerns that could play into Montana’s economy. Gas prices spiked early in the summer season, which could impact nonresident spending, Barkey said. There’s also speculation that growth is slowing in Asia, with potential for a housing bust there, too.

“They have all the makings of a housing bubble popping over there,” Barkey said.

Declines in federal spending could impact Montana, a state that long has benefited from federal funding on many levels.

Even natural disasters such as the tsunami in Japan have stalled growth in the United States, he added.

The mining industry, including gas and oil production, is a bright spot in the state economy, with strong growth prospects. Prospects likewise are good for agriculture and manufacturing. The wood products industry continues to be depressed; tourism and transportation are recovering; and there has been a mild decline in the federal civilian work force.

The Montana Chamber Foundation, along with the Bureau of Business and Economic Research, are coordinating the midyear update seminars that will be making their way around the state in the coming weeks. The Kalispell session was the first of seven scheduled seminars.

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