Economic headwinds are blowing across the state. But a Montana economist said that low unemployment and other signs of economic strength will help Billings weather the national recession.
"Right now, Billings is almost one of the best places to be in the United States," Larry Swanson said during the recent Celebrate Billings Community Leadership breakfast at Montana State University Billings.
Swanson, director of the O'Connor Center for the Rocky Mountain West at the University of Montana, said Montana has avoided the worst effects of the economic crisis. Foreclosures resulting from the subprime mortgage meltdown are almost nonexistent in Montana. Businesses have been shedding thousands of jobs across the country. But so far the losses have been less severe in Montana, he said.
Economists agree that the nation's economy slipped into recession one year ago, and the slowdown could be one of the longest in history, possibly extending into 2010.
Swanson didn't dispute that Montana is feeling the effects of a slowing economy. The state's unemployment rate climbed to 4.9 percent in November. By comparison, the national jobless rate has already reached 6.5 percent, and some economists are projecting that the nation's unemployment rate could climb to 10 percent before the recession wanes, he said.
In Montana, "We're going to be a magnitude below what we'll see nationally," Swanson said. And in Billings, the jobless rate should remain somewhat lower than the state average, he said.
He warned that a torrent of negative economic news leads people to project national conditions onto the local level.
"If Montana's economy was going to hell in a hand basket, you wouldn't hear about it on the national news," he said. "So much of the national economic news is centered in places like New York, and people tend to project it into their own back yard. But there's a vast difference when you get into the real economy in Montana."
The best way to cope with the bad news might be to turn off your TV, he advised.
Swanson found reason for optimism, but another study indicates that Montanans are feeling increasingly gloomy about the economy.
The Montana Index of Consumer Sentiment dipped to 91 in November and December. That compares to 113 a year earlier and a high of 131 measured in the fall of 2007.
The Montana Index of Consumer Sentiment, which began in 1982, is based on a telephone survey and is conducted by the Bureau of Business and Economic Research at the University of Montana. It is comparable to the University of Michigan's U.S. index and is calculated from five questions concerning individual aspects and perceptions about the state and national economy. The index is benchmarked to a baseline of 100, the value assigned at its introduction in March 1982. A higher number means that Montanans are more optimistic about the economy.
"Like the rest of the nation, Montanans are feeling worried about the economy," said BBER Director Pat Barkey. "However, the numbers suggest they are more optimistic than people throughout the country."
Barkey attributed Montana's lower consumer sentiment to a slower state economy, concerns over the national recession, steep declines in the stock market and the credit crunch.
"We use this index to cross-check other state statistics," Barkey said. "The decline in consumer sentiment reports the lagging numbers we are seeing in other current indicators, primarily in the labor market."
Swanson has spent more than a decade studying the economies of Montana and other states in the Rocky Mountain West. One of the more significant trends to emerge during that period is the urbanization of Montana. Most of the growth in population and personal income has occurred in the state's seven urban centers - Billings, Bozeman, Missoula, Butte, Great Falls, Helena and Kalispell, he said.
The Billings economy suffered a multiyear economic downturn in the late '80s in the wake of a collapse in the oil industry. But things started turning around in the early 1990s. For the past 15 years, Billings and other urban centers in Montana have enjoyed a steady increase in jobs, personal income and population, Swanson said.
Construction, health care, professional services and real estate accounted for much of the increase in jobs in the past decade. Those sectors have slowed, partly because some buyers are waiting to find out what will happen with the economy.
The Celebrate Community meeting included a panel discussion by three Billings business leaders: Marilyn Floberg of Prudential Floberg Realtors, Chamber of Commerce President John Brewer and Keith Cook, regional president of First Interstate Bank.
The Chamber regularly surveys its members to measure economic trends. In the most recent survey, a growing number of Chamber members expect to see the economy slow. On a positive note, the travel industry appears to be in good shape. The Chamber's Convention and Visitors Bureau is anticipating a busy season next year, Brewer said.
Floberg said fewer new homes are being built in Billings, and there's a backlog of inventory for homes priced at $350,000 and more. The total number of sales has declined by about 20 percent compared to last year, she said.
But Floberg looks for interest rates on mortgages to fall to 4.5 percent by next spring as a result of action from the Federal Reserve. When that happens, many people will discover that it will be cheaper to buy a home than to rent one, she said. In Billings, the good news is that homes are still affordable, there are still jobs and interest rates will be favorable, she said.
Cook agreed that lower interest rates will spur people into buying houses. Contrary to national headlines about a credit crunch, First Interstate and other regional banks are lending money, he said. Looking forward, lower interest rates will reduce companies' borrowing costs. On the other hand, people who buy certificates of deposit will likely see a lower rate of return on their savings, he said.