'Weak but durable growth' to continue

Economic experts at the Economic Outlook Seminar in Kalispell on Tuesday sumarized the national economy for 2016 as “weak but durable growth” — a trend expected to continue throughout 2017.

The annual seminar featured discussion topics on manufacturing, real estate and housing, tourism, health care and overall outlooks on the U.S., Montana and Flathead economies.

Patrick Barkey, director of the Bureau of Business and Economic Research through the University of Montana, noted that growth in 2016 was disappointing, but he’s optimistic about this year.

Barkey said the driving force in the national economy last year was debt-fueled consumer spending, while exports, business spending and manufacturing all saw a decrease. Exports took the biggest hit, at a 3.2 percent drop for the year, while business spending was down 0.8 percent, and manufacturing down 0.3 percent.

Wages were a central focus for the seminar. Montana wages and salaries never picked up after the recession, Barkey said, growing somewhere between 2 and 4 percent in 2016. He added that these numbers do not accurately depict the big picture for real wage growth due to changing demographics.

“Demographics say a different story,” Barkey said. “With the baby boomers retiring, the labor market is dominated by millennials who have yet to reach their earning peak.”

In Montana, Gallatin County alone accounted for almost half of statewide wage growth for the first half of 2016, while Flathead County experienced a slight cooling in wages.

“Last year forecasted things would be better. Now it looks like a slow down because 2015 was so good,” Barkey said.

In his outlook on the Montana economy, Barkey noted that “energy and natural resources are still mired in a deep slump,” but that the best days for home building are still ahead and health care is continuing to grow and did not experience much of a slowdown compared with other industries.

The 2017 Montana Economic Report predicts that Flathead county will see continued strength throughout the year in manufacturing, which accounts for 15 percent of Flathead’s economy. Growth in wood production is uncertain, as the question of whether or not the county has seen an end to closures in the industry has yet to be answered. The merger of Weyerhaeuser and Plum Creek last year was considered to be a contributing factor in declining growth, with Columbia Falls and the Kalispell area taking the biggest hit in wood production.

A 3.2 percent increase in overall nonfarm earnings in the Flathead was projected for 2016, however, the actual increase fell short at 2.2 percent. Projections show 2017 will be another year for weak increases.

In Montana as a whole, the 2017 report shows that oil, natural gas and coal saw major decreases, with oil and natural gas declining more than 40 percent, and coal declining 6 percent. The forecast for the year is that reduced production and lowered prices are expected to continue.

In real estate and residential construction, the report states that Montana’s housing market is closely following the national trend, with prices 10 percent higher than the pre-recession boom.

The Legislative Fiscal Division reported a drop in the state general fund revenue collections of more than $78 million, or 3.6 percent, for the 2016 fiscal year. Terry Johnson with the Bureau of Business and Economic Research reported that this drop was primarily due to a decline in corporation income-tax revenue, which was $54.2 million below the previous year. Oil and natural gas production tax revenue was $34.1 million below the 2015 tax revenue.

“This situation,” Johnson wrote in his report, “has traditionally occurred only during economic downturns like the Great Recession of 2008-09. Although Montana did not experience a recession in 2016, the plight of the natural resource industry played havoc on general fund revenues.”

Barkey also said that since 2007, Montana’s economy has grown by about 15 percent. Flathead County, however, has not “climbed as far out of the hole.”

“No, I don’t think we’re going to go into a recession this year,” Barkey said, adding, “Economists have a great way of telling you there’s a recession coming, when we’re already in one.”

Barkey added that many of the statistics on the 2016 economy are based only on the first half of the year, as the finalized end-of-year numbers will not be available until summer.

“I think the economy’s going to get better next year, I always say that,” Barkey said.