Montana’s growing economy is slowing this year, largely because of federal cutbacks, softening commodity prices and low wages, a University of Montana economist said Tuesday in Billings.
Patrick Barkey, director of the UM Bureau of Business and Economic Research, said state business tax collections over the first half of 2014 show “slow momentum” compared to 2013. The economy is continuing to grow, however, he said.
Also, while jobs are being added nationwide, worker wages are not following suit, which is hurting demands for raw materials and goods produced in Montana, Barkey said during UM’s ninth annual economic update series.
“The spending capital of the American worker is not very aggressive,” he said.
Montana’s unemployment rate in June was 4.5 percent, the 10th lowest nationwide, and the state has gained 11,000 jobs since the beginning of the year. However, wages statewide and nationwide have not kept pace, chilling consumer demand and choking business growth, Barkey said.
“The unemployment rate doesn’t capture the (whole) story anymore,” he said.
Barkey was joined by Paul Polzin, former director of the economic research bureau, at the Hilton Garden Inn. Polzin noted that Montana’s manufacturing sector is in good shape thanks to the Bakken oil boom in North Dakota.
The shale boom has boosted natural gas production, which keeps electricity costs down for factories and provided new markets for manufacturing oil-drilling equipment, he said.
“The new energy revolution is going to make life a lot easier for Montana manufacturers and those across the country,” Polzin said.
Barkey noted that 2013 was a strong year for businesses in Montana. Housing starts in Yellowstone County neared 2,000 in 2013 and were about 1½ times above 2004, when the construction slowdown began in Montana, Barkey said. Other Eastern Montana counties saw big jumps because of the Bakken boom.
Total earnings by construction workers grew by 8.1 percent last year, health care by 4.9 percent and manufacturing by 3.6 percent. Elsewhere, earning by government employees fell 1.8 percent, the third consecutive decline, Barkey said.
And while 2014 may be less rosy, Montana businesses have a positive outlook, said Glenn Oppel of the Montana Chamber of Commerce.
According to a 2014 survey by the Minneapolis Federal Reserve Bank, 88 percent of Montana businesses reported an “optimistic” outlook, up from 51 percent the years before, Oppel said.
Top challenges for manufacturers include health insurance costs, worker’s compensation rates and shortages of qualified workers, according to the survey.