Missoulian - Tapping the brakes

While population growth from in-migration has slowed some, Montana can still expect to see continued growth in population, income and employment says one economist.
MICHAEL GALLACHER/Missoulian

Montana's economy and population growth will continue to expand but at a slower pace, keeping in line with the national average

Western Montana's economy is gently tapping its brakes, even as it continues to steer away from the economic traditions driving the rest of the state.

Overall, Montana can expect continued growth in population, income and employment through 2007 - just not at the same rate as in recent years, said Larry Swanson, regional economist and director of the University of Montana's O'Connor Center for the Rocky Mountain West.

The swell of in-migration that has been propelling western Montana's growth appears to be subsiding, he said. For instance, population growth in the Bitterroot Valley and Missoula has slowed considerably, and now rests at about 1 percent, Swanson noted. That's actually welcome news to many residents who felt the region's recent population growth has been a little too rapid to be healthy or manageable.

While most of the state's growth continues to pool around the largest urban areas, it's also concentrating in those areas with the greatest number of amenities, such as national parks, forests, rivers and lakes, he said.

All signs point to a state that's increasingly advancing down two different roads, with eastern Montana largely sticking to its economic roots and western Montana forging a new path in the high-tech and service sectors, said Tyler Turner, an economist for the state Department of Labor and Industry.

Montana's economy has been linked to natural resource extraction for more than 100 years, but increasingly that's no longer the case in the portion of the state Gov. Brian Schweitzer refers to as the “cowboy boot,” Turner concluded in his October 2006 report by the same name.

The “cowboy boot” is comprised of 14 counties extending from the northwestern corner of the state to the southwestern edge, with its toe wrapping around Billings. This region, Turner noted, contains the state's largest cities, its three largest universities and the majority of its government workers.

While the area outside the boot once counted more than half the state's population, population declined by 6 percent from 1969 to 2004 and now comprises only 38 percent of Montana's total population.

Meanwhile, the population inside the boot has grown by more than 82 percent. Likewise, employment inside the boot grew by 173 percent, while outside the boot it grew only 23 percent. Inside the boot, wages have grown 2.6 times faster than in the rest of the state.

That's a pretty strong divergence, Turner said, but Montana's bisections haven't completely abandoned their commonalities. Western Montana remains home to a number of extraction-related industries, including some large timber and mining operations, “but in the cowboy boot that is becoming less and less the heart of the economy,” Turner said.

Overall, he expects the statewide economy to swing primarily on two hinges in 2007: the housing and commodities markets.

Prices for Montana-produced commodities such as oil and coal, but also for hard minerals like copper, gold and silver, have soared for at least the last three years, he pointed out.

Most of Montana is still an extraction-based state, and high commodity prices have a tremendous ripple effect on growth - even more so than a booming construction industry, because construction tends to be seasonal and typically pays lower wages, Turner said. A miner who has $70,000 to burn in town will have a bigger impact than a painter with $35,000, he explained.

It's hard to determine just how the real estate market will play out at this point, he continued, but currently, analysts are certain the industry will remain uncertain - and that's hardly good news.

That said, if people continue to buy and build second homes and commercial buildings in Montana the state won't see the dramatic downturn being felt elsewhere in the nation, Turner said. And that construction would have a moderating effect on other areas of real estate.

The state's aging population is also expected to have an impact on the construction industry, Swanson said. An older population will shift housing demands from single-family to condos, townhouses and apartments, he said.

“The aging population is going to cause growth in parts of our economy, health care in particular, but it's also going to reshape housing,” he said. “Probably half the housing built in Missoula over the next 15 years will be something other than single-family housing.”

An older populace will also reshape the work force,

he added.

The nation as a whole is bracing for a projected labor shortage of about 10 million workers. By some estimates, Montana will have the fourth-oldest residency in the nation by 2025; one in four Montanans will be 65 years old or older. Western Montana's demographics and expected rate of economic growth add up to a particularly acute labor shortage, Swanson said.

Montana's employers are already having trouble recruiting workers, he noted. Many counties are at full employment. The state isn't currently attracting enough new blood to replace the older workers who are beginning to retire.

“That's a big new factor that's in front of us, and it will become more and more acute each year over the course of the next 10 years,” Swanson said. “It's going to be one of those situations where businesses that see this coming are going to want to make sure they hang on to their best employees. When I go down to campus to speak to students I just tell them point-blank, ‘you are going to be moving into a seller's market for the rest of your lives.' ”

In an increasingly competitive labor market, wage and salary rates will have to rise, he added.

“It's going to be a little challenging, but I think we're up for it,” Swanson said.

Reporter Tyler Christensen can be reached at 523-5215 or tyler.christensen@lee.net.

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