The Region’s Tightening Labor Market Much of the Rocky Mountain West region has experienced more than 15 years of virtually uninterrupted economic expansion and the labor force of the region has grown to accommodate ever-increasing levels of employment. However, labor demand is steadily rising faster than labor supply and this is tightening labor markets throughout the region. The chart below shows monthly unemployment rates for a three-state region of the Rocky Mountain West (Idaho, Montana, and Wyoming). Monthly unemployment rates in a given year, once fluctuating between an annual low of 5% and high of 8%, are now ranging from 2% to 4%. It is very likely that the region’s labor markets will remain tight well into the future.

The larger five-state Rocky Mountain West region, that also includes Colorado and Utah, has had the fastest-growing income base in the U.S. This economic expansion, initially spurred by a dramatic turnaround and surge in net migration in the early and mid-90s, has been accommodated by a steadily growing labor force. The chart below shows monthly labor force and employment counts since the early ‘90s for a three-state region including Idaho, Montana, and Wyoming. Yearly ups and downs in labor force and employment levels reflect the seasonality of employment in the region. As the region’s economy has grown and changed, these swings have compressed, meaning the economy is becoming less seasonal. The labor force has grown from 1.2 million in the early ‘90s to 1.4 million in the late ‘90s and to almost 1.6 million more recently. Falling unemployment rates reflect the shrinking margin between the labor force size and employment – the “slack” in the labor market is nearly gone.

In July of 2007 Idaho had the lowest unemployment rate of all U.S. states at 1.9%. Montana had the second lowest at 2.3%. Wyoming had the seventh lowest at 3.1%. These compare with unemployment of 7.9% in Michigan – the highest among states – and 7.2% in Mississippi – next highest. The chart below shows states ranked from top-to-bottom based upon their July unemployment rates, with the five Rocky Mountain West states shown in purple.

This tightening of labor markets in the Rockies could eventually translate into more jobs being created in the region than can be filled with available workers. Rising demand for workers will push wage and salary rates higher, largely desirable for a region with relatively low average labor earnings, and also translate into improved fringe benefit programs for employees as growing businesses attempt to attract more workers. Workers also will be attracted into the region to fill these jobs. And while labor markets are already tight, they are likely to become even tighter as “baby boomers,” who represent a disproportionate share of the region’s labor force, move toward retirement in coming years.

In the midst of these tight labor market conditions, efforts at community and regional development will increasingly shift away from simply trying to create more jobs to much more strategically focused efforts at job creation and enhancement. Work force development programming will become the centerpiece of economic development efforts, finding ways to move more and more “under-employed” workers into fuller employment. Education at all levels will be increasingly seen as an “investment” in future economic prosperity, not a cost to be unduly repressed. If these efforts are successful, incomes in the region will continue to grow, even as shear job expansion slows. All of this will be part of how the region will mature economically and advance.

Source: Larry Swanson, O’Connor Center for the Rocky Mountain West, U. of Montana