After something of a boom year in 2015, Montana's economy slowed in 2016. Growing just short of four percent in 2015, growth in 2016 was just a little over half that. Economist Pat Barkey, Director of the Bureau of Business and Economic, projects that 2016 growth will be about 2.6 percent, but the final data is not yet available to know for sure. The final number will undoubtedly be less than the positive projection of 2.9 percent, made during the Bureau's Economic Outlook Seminar, last year. During this year's Seminar on Jan. 31, Barkey projected that Montana's economy will continue to grow slowly in 2017, coming in at about the same rate as 2016, around 2.5 percent. Barkey's projections are based on data regarding wages and earnings and on Montana tax collections.
So after showing dramatic recovery from the Great Recession, starting in 2014 and through 2015, why did Montana's economy suddenly slow down? Because of declines in mining, energy, agriculture, wholesale trade, and construction. Nationally, the country has had weak economic growth fueled mostly by consumer debt, according to Barkey; it was not due to exports which dropped three percent. The federal deficit has widened, due mostly to weak tax revenues, said Barkey. In 2016, the nation started to see its "first meaningful signs of wage growth and interest rates perked up." Because interest rate increases are pushing up inflation, concerns of deflation have disappeared. And, while there are significant economic risks in the world, Barkey does not think a recession will develop in the next year. Because of the "oil bust" business spending is down nationwide. Manufacturing picked up, but "just barely."
Homebuilding rose tentative, but it is "barely half of the mid-point of the last decade." And, technology and innovation have stalled in the US. For Montana in 2017, Barkey noted that energy and natural resources are "still mired in a deep slump," and agriculture prices are likely to remain low. On a brighter note, he said, "home-building's best days are still ahead." The state's "big picture" shows that beginning in 2014, growth began to return to the western counties in the state, said Barkey, while eastern counties have "hit economic turbulence." And, the growth that is happening in Montana is due to a wider variety of industries than just energy, mining, agriculture and manufacturing. "Some of the state's urbanized areas are performing better than others." In fact, the growth in Gallatin County accounts for about two-thirds of all the economic growth in the state. "Gallatin County's total payroll was about $73 million higher during the first half of 2015 than the same period of the preceding year." Yellowstone County's growth was "on a par" with Gallatin County until the slowdown hit mid-year, said Barkey. Western counties, Missoula and Flathead, followed in a second tier of growth, followed by Cascade and Lewis and Clark Counties. Silver Bow County suffered a decline in economic growth due mostly to low metal prices. Gallatin County shows signs of "strain on the regions housing and transportation infrastructure.
Its growth continues to be driven by strong home construction, software, technology, and tourism. The sudden cooing of the Billings economy in 2016 was centered in its traditionally dominant goods distribution and energy services employers. "The big decline in construction-related wages came about as refinery projects came to a conclusion, but it exposed the weakness of residential building in the region. Other important sectors like health care have performed better, but declines in distribution and energy have been hard to overcome. "Missoula's stronger growth in 2015, was helped by a robust expansion in health care that moderated in 2016. Manufacturing picked up the baton and helped growth in 2016. The growth in retail, and accommodations activity were signs of continued strong visitor spending." Government employment grew in Missoula County more than in any other part of the state. There is weakness in professional services and construction. Flathead County growth was helped along by the same in-migration - related construction and visitor spending that boosted Gallatin County.
Professional services growth was strong, as was health care. A strong dollar restrained the spending impacts of Canadians, and the merger of Weyerhaeuser and Plum Creek was a blow to the City of Columbia Falls. Cascade County's manufacturing growth remained one of the strongest in the state. Growth was harder to find in the rest of the county's economy, except for health care which remained steady. A dwindling population is being felt in industries like construction and retail trade. Lewis and Clark County's growth is almost the inverse of the rest of the state - expansion during recession and only weak growth afterward. The performance of health care and manufacturing were bright spots. Construction, retail and visitor spending were sluggish. Government growth played its usual stabilizing role in the state's capital. Because of the decline of copper prices and their impact on the profitability of Montana Resources mine, wages dropped in Silver Bow County by 28 percent.
Visitor spending helped to counterbalance the decline, but net growth was still negative. Declines in the state's remaining 49 counties, taken as a whole, were a big contributor to the state's stumble in 2016. There were some bright spots, like Ravalli and Madison counties, which enjoyed good construction activity, but they were outstripped by drops in the oil patch. Declines in the agriculture market is expected to start showing up in data related to spending by that sector producing "an additional headwind" for 2017.