BillingsGazette.com :: Economist says Billings faring well in recession

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Economist says Billings faring well in recession

By TOM HOWARD
Of The Gazette Staff

A Montana economist said Wednesday 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 Celebrate Billings Community Leadership breakfast at Montana State University Billings. In response, 300 people attending the breakfast broke into enthusiastic applause.

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 compared to other states, 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 4.6 percent in September. November's unemployment rate, to be released soon, could reach 5 percent, he said. By comparison, the national jobless rate has already reached 6.5 percent, and some national 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 backyard. 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 said.

Swanson has spent more than a decade studying the economies of Montana and other states in the Rocky Mountain West. One of the 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 1980s 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 growth, Swanson said.

Jobs in construction, health care, professional services and real estate accounted for much of the increase in jobs over the past decade. Those sectors have slowed, partly because some buyers are waiting to find out what will happen with the economy.

The 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 higher. 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 instead of renting one, she said. In Billings, the good news is that homes are still affordable, there are still jobs, and interest rates will be favorable.

Cook agreed that lower interest rates will coax 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.

Published on Thursday, December 18, 2008.
Last modified on 12/18/2008 at 12:51 am