Kalispell chamber survey shows most businesses feeling impact of economy

Nearly 80% of Kalispell businesses say they’ve experienced a negative effect from the current economic conditions, but just as many seem to have a positive outlook for the future of operations.

Of those businesses, which participated in a survey sponsored by the Kalispell Chamber of Commerce, 11% say they are seeing little or no effect and 7% are seeing a positive effect from the economy.

The chamber recently surveyed its 740 members to get the pulse of the Flathead Valley on how things are looking for businesses. The results were presented Tuesday during the chamber’s monthly luncheon.

Lorraine Clarno, president of the chamber, said the impacts of increases in the cost of living, inflation, and increased gas prices are being felt.

“We’re in uncharted waters this year,” she said.

The consumer-price index increased to a nearly 40-year high of 8.6% in May from the same month a year ago amid growing warnings from economists that a recession may be around the corner, the Associated Press reported Monday. Nationwide gas prices are averaging just under $5 per gallon, according to AAA.

In terms of the chamber survey, the top businesses represented included professional services, service, retail and restaurants. Most of the businesses, at 84%, are small businesses with less than 50 employees.

James Williamson, with Sage Appraisal and Strategy, and Brandon Bridge, professor of economics at Flathead Valley Community College, presented an analysis of the survey results.

Williamson says it wasn’t surprising to see that businesses say that the top areas impacting them are a workforce shortage, increasing prices, supply chain disruptions and price uncertainty.

Of the businesses surveyed, 45% reported they have not changed their workforce size as a result of the economy and 46% expect their staffing levels to remain the same and 40% expect to increase staffing. Twenty-four percent of businesses say they’ve decreased and 28% say they’ve increased in size.

“The good news is that they are not changing their workforce,” Williamson said. “And an almost equal number expect those levels to remain the same.”

THE SURVEY noted that 64% have experienced increased employee compensation costs and 46% have open positions for three months or longer.

Businesses reported that workforce shortages are a result of a lack of attainable housing and lack of childcare.

Looking at trends over time with the U.S. Bureau of Labor Statistics, nationwide the number of people in the workforce has been declining since its peak in the late 1990s, Bridge noted.

“Every time there is a bad economic downtown the labor force participation takes a downtick and it never really seems to return,” Bridge said. “People exit the workforce and they never really return. That is also problematic for labor shortages.”

Also providing a snapshot of the outlook going forward, the survey found 85% of businesses expect their revenue will remain the same or increase and 87% report average to good current business conditions. Seventy-five percent expect the cost of labor to increase.

“Many felt their revenue was remaining the same even with the challenges around workforce and supply chain logistics,” Williamson said. “It’s not the amount of cash on hand that’s a challenge for businesses, it’s employees being able to live here and get the supplies needed to operate their businesses.”

IN TERMS of looking at Flathead County, figures from the U.S. Bureau of Labor Statistics were used to look at growth by industry, growth of employment by industry and the average annual pay by industry.

The only industry area that showed a decrease in growth for the last five years, from 2017 to 2021, was manufacturing and trades, which declined by 3%.

“The primary stories that stand out,” Bridge said, “is that we had growth in all sectors except we had a steady decrease in the trades, transportation and utility sector.”

The highest growth, at about 30%, was in financial activities — insurance, real estate and leasing.

For the number of employees in the same industries, the information sector was the only industry that saw a decrease in growth, at about 13%. Construction had the highest growth at about 30%.

“A couple of things stand out,” Bridge said. “There was a pretty steady increase among all sectors except information — that is publishing, broadcasting, internet companies and telecom companies.”

Figures show, in terms of growth of average annual pay by major industrial sectors, the pay was up the most — almost 40% — in the information sector since 2017. Construction had the lowest increase in pay in the last five years.

“One of the only sectors where you are beating the official inflation numbers,” Bridge said. “Across the board, there were pretty good pay increases.”

In the hospitality sector, there was a dip in employment numbers in 2020 but the five-year growth shows an increase in all three. For hotels and motels, the growth was 8%, drinking establishments saw 30% growth and 6% for restaurants.

“The main takeaway is that all three experienced decreases in 2020, but what we see in 2021 is all those have recovered back to a higher trend,” he said.

Features Editor Heidi Desch may be reached at 758-4421 or hdesch@dailyinterlake.com.