Economic recovery still 'disappointingly' slow

The tale of the tortoise and the hare might be an apropos analogy for economic recovery in Montana this year.

Both businesses and consumers would like the recovery from one of the worst recessions to race along quickly, but from all indications the recovery here and statewide will continue to plod along.

And like the tortoise, slow and steady will win the race.

That was the underlying message at Friday’s annual economic outlook seminar delivered in Kalispell by the University of Montana Bureau of Business and Economic Research.

“Recovery has been disappointingly slow,” said Bureau Director Patrick Barkey. “In Montana we were surprised to find growth lower in 2011 than in 2010.”

A surprising amount of inflation — roughly 4 percent in 2011 — kept strong growth at bay in Montana, as did underperformance in two key sectors: health care and government.

Even though health-care earnings increased slightly, they were about $203 million less than projected in 2011, Barkey said. And as the size of government continued to shrink, that left a $308 million dent in projections.

“That’s a half-billion dollar error,” Barkey said.

The national economy also is playing into Montana’s slow recovery.

“In every other recession, we’ve seen relatively strong bounce-back,” he said. “This recession was different because it was accompanied by a financial crisis. It was a completely different animal.”

The banking crisis froze up credit markets and for a short time stopped ordinary credit transactions.

“We haven’t had one of those events since 1929,” he said, adding that similar financial crises occurred in Japan in 1992, Sweden in the 1980s and much of Southeast Asia in the late 1990s.

“And the evidence tells us the recovery from these kinds of recessions is measured in years, not months,” Barkey said.

Nationally, weak consumer and business spending, long-term unemployed workers and exorbitant government debt are perhaps the three biggest strikes against recovery.

As a result of this slow rebound, Montana didn’t attain the 2.6 percent growth rate projected last year. The state managed only 0.7 percent growth in 2011.

Economists project a 2 percent growth rate in 2012. There won’t be any huge gains over the next four years, either. In 2013 the statewide growth is expected to be only 1.6 percent; with further projections of 1.9 percent in both 2013 and 2014 and 2.1 percent in 2015.

Slow and steady, like the tortoise.

Barkey predicted pauses and spurts of growth as the recovery slowly continues. In fact, there could be another slowdown in growth this summer, he said, driven by consumers’ continued reluctance to spend money.

There are some bright spots in Montana, though:

n Energy and natural resources are booming, largely on the east side of the state, and account for 14 percent of the state’s economy.

n The agricultural industry has seen healthy increases in gross receipts.

n There’s been an encouraging uptick in job growth.

n Consumer confidence is higher in Montana than in the United States.

Some of the lingering problem areas in the economy — construction and retail sectors — specifically affect the Flathead Valley.

“The housing bust is like a virus we haven’t expunged from our bodies yet,” Barkey said. “And retail remains weak. It’s kind of a sick puppy.”

Employment in Flathead County’s construction industry has declined 44 percent from its 2007 peak, according to Gregg Davis, health-care director for the bureau, who supplied Flathead County-specific data for the bureau’s 2012 outlook compilations.

From 2007 to 2012, more than 5,270 private jobs were lost in the Flathead, with only 416 gained, Davis said. Most employment losses were in manufacturing and construction, with wage losses totaling $104 million.

Davis said personal health-care spending in Flathead County this year will be about $670 million. That will increase to more than $760 million by 2014.

“The health-care sector is one of only two sectors to add jobs to the [Flathead] economy in the three years since the county’s peak employment in 2007,” he said. “While other sectors in the economy have lost more than 5,000 jobs, health care has added more than 400 jobs, comprising a remarkable 99 percent of the total jobs added economy-wide.”

But heath care is feeling the effects of the recession, too, Davis pointed out.

Charity care at Northwest Healthcare, the parent company for Kalispell Regional Medical Center, is averaging $1 million per month, most likely a reflection of the nagging high jobless rate here and health insurance extensions provided through the Consolidated Omnibus Budget Reconciliation Act running out.

Even so, investment in health continues, with Kalispell Regional in the throes of a $42 million surgical tower expansion.

Tourism in Montana will rebound slowly as well, said Norma Nickerson, director of the UM Institute for Tourism and Recreation Research.

The state’s tourism industry is expected to grow by 2 percent this year. Nearly half of the state’s tourism-related businesses expect growth in 2012; 40 percent expect to stay at the same level.

Nationally, increases in the numbers of international visitors is a bright spot, as developing countries such as China create a middle class with more disposable income.