By CHARLES S. JOHNSON Lee State Bureau | Posted: Saturday, October 24, 2009 1:50 pm
HELENA - Last year started out optimistically for Montana's economy. Buoyed by high prices for the state's oil, natural gas and wheat and booming construction industry, things were finally looking up in a state that tends to trail the national pack.
Then came fall 2008.
Swept up in a national and global recession, Montana faltered. Pink slips started going out by the hundreds, particularly in mining, lumber and construction. Montana's nationally low unemployment rate began to rise.
Across Montana last fall, people started battening down the hatches to prepare for the economic storm.
Economists now say the trend is beginning to reverse but caution that Montana may never regain some of the unsustainable peaks it saw only a few years ago. And Montanans say they are spending less these days and expect this belt-tightening to be a permanent part of their lives.
"There were notable declines in the fall," said Patrick Barkey, director of the University of Montana Bureau of Business and Economic Research. "We think probably the worst of the job losses came in the early part of this year."
"We were coming off a decade and a half of fairly high and almost uninterrupted economic expansion," said Larry Swanson, another economist and director of the O'Connor Center for the Rocky Mountain West. "We were seeing fast personal income growth and fairly rapid employment growth, which squeezed down the unemployment rate."
The timber, construction and mining industries have been hit especially hard, with others also feeling the pinch.
Montana has yet to fully recover.
Economists are spotting some encouraging signs in the statistical trends. They warn, however, that Montana likely won't rebound to the full level of economic activity it enjoyed before the recession hit.
Barkey said he believes the economic recovery in Montana is much closer than many think. He projects an end to the job declines in the second half of this year.
"Right now, the preliminary data shows we're down about 9,000 payroll jobs from the pre-recession peak," Barkey said. "That's not nearly as bad as the nation and our neighboring states, with the exception of North Dakota, which is doing pretty well."
However, Barkey predicted that the recovery will be "a little bit difficult."
"Any recovery is fragile," he said. "The way things look to us is we're going to come back to rates of growth of 2 percent, which is glacially slow, 2 percent vs. 4 percent in non-farm labor income."
Swanson offered a similar assessment.
"We're kind of moving sideways again," Swanson said. "I think that's where we are with this economy. We're not in decline. We're recovering a little bit, but the recovery is not as healthy as we had hoped it would be."
He said the state's average unemployment rate, which was at 6.6 percent in August when seasonally adjusted, will start to rise in the fall and winter. That shouldn't be interpreted as part of the slowdown but just normal economic trends.
"Much of our recovery here in Montana gets put off into next spring and summer," Swanson added. "As we go into spring and summer, I really think our unemployment rate will get back closer to normal."
Swanson said he doesn't even call this a recession. He prefers the term "slowdown."
Construction takes hit
Call the downturn whatever you want, but it slapped the construction industry harder than most economic sectors. Construction employment in Montana is down 17 percent from a year ago.
"Things are slow," said Cary Hegreberg, executive director of the Montana Contractors' Association. "Commercial, industrial, public works construction is down considerably from where it was at its peak."
The federal stimulus money proposed by President Barack Obama and approved by Congress has helped.
"Stimulus projects have definitely been a welcome relief," he said. "The unfortunate thing is that the stimulus projects are the only game in town."
Construction will come back but at a slower pace than the high growth levels of the previous two or three years, Swanson said.
"The pace of construction activity, housing and spending were at very high levels but couldn't be sustained indefinitely," he said. "I don't know if we'll really go back to that high level. Construction climbed in Montana over 15, 16, 17 years."
Around Montana, some small businesses have fared better than others.
"Actually, we've been doing fairly good," said Gene Meier, who with his wife owns Lewistown Propane and Fertilizer Co. "We've actually had two pretty good years. We're kind of an inflation-proof business. People have to keep warm. If they farm, they have to fertilize."
But Meier said he knows times are tougher for other businesses. He said a friend sold his recreational-vehicle business because of falling sales.
Staying even
Hertha Voorhis, who owns First Pharmacy in Billings, is also hanging in there.
"I have pretty much stayed even," she said. "We're more recession-proof because of the medicine. I haven't had to lay anyone off."
Montanans remain very concerned about the economy, according to a poll released last month by the Northwest Area Foundation, a nonprofit group.
Two-thirds said they fear that their local economy might worsen in the next year, the poll said.
It also showed that 62 percent of Montanans reported cutting back on spending because of the recession. Of those saying they had reduced their expenses, two out of three said they believe this change will be permanent.
Results showed that 49 percent of Montanans said they had reduced spending on food, 47 percent on retirement savings, while 30 percent said they had problems paying for basic necessities such as mortgages, rent and utilities.
In the same poll, 65 percent said they see more people struggling to make ends meet. Twenty-one percent said they have had a friend or relative stay with them because of a lack of funds.
The poll of 401 Montanans was taken June 18-July 13 as part of a national poll done by Lake Research Partners and has a margin of error of plus or minus 5 percentage points.
For workers, many have found it hard to find jobs after layoffs or their construction work on a project ended.
Chuck Maffei, a union iron worker from Missoula, hasn't found any work since he finished working on REC Silicon's new polysilicon plant in Moses Lake, Wash., July 23.
He's collecting unemployment from Washington state, and it's about $200 a week more than in Montana.
"We can survive for a couple of months, but I need to get back to work," he said.
He and his wife, a nurse consultant for workers' compensation, have pretty much stopped eating in restaurants and are watching what groceries they buy.
"I just hope and pray the economy picks up soon," he said. "It's the greatest economy in the world."