Barkey, one of the state's top economists, responded, "We have enormous problems to work out. There are a lot of things to worry about... We are managing short term problems so they are no longer impeding short term growth. We would all feel better if we knew where Congress was going to land in regulatory reform."
The economists believe that Montana's economy actually turned around last summer, following a year of minus one percent negative growth, a dip that was about 1.5 percent worse than they predicted for the state last year. But, that's only if we don't have a "double-dip recession," warned Barkey. A double-dipper could happen if the monetary authorities decide to tighten the economy too early, he explained – or if there are more job losses, and the savings rates increase significantly, which will leave consumer spending weak.
So even though the 1.3 percent projected growth rate is considerably less than the three to five percent growth rates the state has been enjoying since about 2003, it may be pushing the envelope of optimism. But said Barkey, "We think the worse is solidly behind us and headed in a new direction." Whatever recovery comes, it will be different than that experienced in the past by the state, said Barkey, "because this recession has been different."
The recession has been "longer, more sever and more global" than past recessions. "It wiped out wealth that will have an impact on recovery, said Barkey. It impacted confidence in the financial market. US households lost $17 trillion in net worth. "Because we wiped out so much of our net worth, we are still doing repair work," said Barkey.
It's been "the longest and deepest recession since World War II, but it's still nothing like what our grandparents experienced," said Barkey.
More countries are in a recession at the same time, since the Great Depression. Before the recession hit almost no country was in a recession, said Barkey.
The recession was unusual for Montana in the fact that Montana was caught up in it from the start. The state did not lag behind, as has often been the case in recessions and in recoveries of the past.
The recession produced, in Montana, the first back-to-back declines in consecutive years of labor earnings since 1986. "What began as downturns in construction and wood products industries in 2008 spread out into nearly every segment of the economy in 2009, as well as into every corner of the state," said Barkey.
Job declines peaked in the third month of 2009, but as of yet there has been no recovery in job growth, and it will likely not improve much in 2010. "It is rather remarkable how bad the job declines were in Montana," said Barkey.
Construction activity declined by 40 percent in Montana, while nationally it dropped 70 percent. The industry may never come back to its pre-recession levels.
Asked, "Can you find any industry that is doing well?" Barkey said that there are "pockets of growth, especially in areas of energy."
What helped Montana and saved it from the same level of declines as other states, said Barkey, "was the remarkable rebound in commodity prices. But it's hard to hang your hat on commodities in forecasting." Commodity prices jumped because of what is happening in China and its 10 percent rate of growth. "Perhaps they have over shot," speculated Barkey.
Agriculture helped to stabilize the state, as did employment levels in federal government. Agriculture contributes 8 percent to the state's economic base, while federal jobs, including the military, comprise 30 percent of its base.
But there were also some serious setbacks, especially in the wood products industries. The state will long suffer from the recent closure of Smurfit-Stone, said Barkey.
The state's transportation and warehousing industry suffered a decline of about four percent. It comprises about 13 percent of the state's economic base.
Manufacturing and tourism, while suffering some, in general held steady. They represent 16 percent and 13 percent, respectively, of the state's economic base.
The annual percent of change for Montana's single family home prices increased 4.5 percent while nationally it declined -4.2 percent, over the past year.