Gazette staff | Posted: Monday, February 15, 2010 12:05 am
A clear understanding of how well Montana is doing compared with other states and a dose of optimism may be among the best remedies for our state's economic slowdown.
An Associated Press report last week quoted national tax and small-business experts saying that what U.S. business needs most now is more customers. Until demand for goods and services rebounds, businesses won't be doing a lot of hiring, even if offered tax breaks to create new jobs. Montana businesses and consumers are being cautious with purchases, too.
"Psychology can slow the economy down," said Larry Swanson, economist and director of the Center for the Rocky Mountain West at the University of Montana. "Uncertainty is what really hangs over Montana. A whole lot of what's happening in Montana is psychologically linked to the national recession."
An article published recently by the Kansas City Federal Reserve notes that Montana, Wyoming and other energy states "managed to avoid the early stages of the recent national recession, buoyed by record-high crude oil and natural gas prices." Nearly every recession since World War II has been preceded by rising energy prices, which helps states that derive a substantial chunk of their revenue from energy and hurts other states.
Economist Mark C. Snead of the Denver Fed branch continued that strong performance "subsequently reversed itself under the weight of collapsing energy prices." By the end of June 2009, energy states were underperforming nonenergy states.
Montana's experience reflects Snead's conclusions. State revenue collections have dropped sharply since last summer, and projections for the state's checking account balance at the end of the biennium in June 2011 also have plunged. Gov. Brian Schweitzer has asked state departments to submit plans for cutting 5 percent of their general fund budgets, and many Montanans fear that deeper cuts may be required.
Yet all isn't gloom and doom for Montana.
"The energy-producing regions of the nation tend to enter recessions later and exit earlier," Snead of the Fed noted.
"Montana will be among the first to emerge," Swanson said last week in a phone interview with The Billings Gazette. He points to Montana's unemployment rate, which has risen, but remains better than the nation's. In December when the U.S. jobless rate was 10 percent, Montana's was 6.8 percent. Yellowstone County is doing well compared to most of Montana. Yellowstone posted a 5.2 percent unemployment rate, the lowest among the state's more populated counties, according to the Montana Department of Labor and Industry.
"My guess is the problem (dwindling state revenues) will start to disappear this summer. Right now we're probably overreacting to negative news," Swanson said. The weakened economy makes people vulnerable to negative news.
"Billings has been very fortunate," Swanson added. "You guys have done as well as any place in Montana."
It will take more than positive thinking to lift our state and nation out of this downturn, but low expectations can slow recovery. We Montanans should start counting our blessings and keeping the latest economic news in perspective.