HELENA – Montana’s economy will outperform the U.S. economy in 2012 with projected annual growth for the state of 2 percent to 2 1/2 percent in nonfarm earnings for the next four years, economic forecasters told an overflow crowd Tuesday.
Patrick M. Barkey, director of the University of Montana’s Bureau of Business and Economic Research, told several hundred people at the Great Northern Best Western Hotel that economic recovery from the “great recession” has been slow and sometimes on “very thin ice.”
His remarks were reflected in the title of his presentation: “Montana’s Hesitant Recovery.”
The Helena visit was the first in a nine-city tour, which includes Billings on Tuesday. For details, see the Insider Calendar in this week’s issue.
Barkey said this recession, which started in 2008, was different from previous recessions in which the economy bounced back strongly. While the economy is back to where it was in 2007, it has not grown. And he said this recession was different in that it was coupled with a banking crisis.
“We’re doing about as well as you can expect,” he said, adding the United States will avoid another recession, but came “doggone close.”
The report was released on the same day the state reported that Montana’s unemployment rate dropped 0.3 percent to 6.8 percent in December. The unemployment rate has dropped a full percentage point since August. The U.S. rate fell by 0.2 percent to 8.5 percent in December.
Barkey said the U.S. economy practically stalled in the first six months of 2011, growing less than 1 percent. He said he now estimates that Montana’s nonfarm earning were lower in 2011 than 2010.
He said that was due to inflation, which “blew up” to about 4 percent, mostly from increases in food and fuel prices.
Barkey said growth was not evenly distributed around Montana. Eastern counties are seeing growth from Bakken-related oil activity. But he said that growth in retail and commercial activity was “sluggish.”
“Housing will not lead us out of the recession,” he said. “But it will be last.”
He said Montana’s energy and natural resource sectors were doing well; there were increases in farm gross receipts, labor markets were healing, there was high consumer confidence, a housing “hangover” lingers and government cutbacks were being felt.
Barkey said 2010 and 2011 had the same up-and-down unemployment cycles.
Paul E. Polzin, former UM Bureau of Business and Economic Research director, focused more locally on the economy. He said Lewis and Clark County weathered the recession fairly well, as there were no significant layoffs in a job force made largely of state and federal workers.
In the Outlook 2012 report distributed at the seminar, Polzin wrote: “From the recession’s onset until the statewide low point at the end of 2009, Helena-area inflation-corrected wages and salaries managed to grow by 3.7 percent, the highest in the state. Despite this growth, the recession remained apparent from declines in construction, retail and goods distribution industries.”
“Two years into a state pay freeze and recession-induced pressures on state spending, the performance of the Helena-area economy has been better than expected,” Polzin wrote. “Our baseline forecast calls for renewed growth in 2012 and beyond at just below the state average.”
Tom Richmond, administrator and petroleum engineer for the Montana Board of Oil and Gas, gave the keynote address and said Montana’s oil production doubled from 2000 to 2006, as the oil industry implemented variations of the horizontal drilling technique.
He also said that most of the oil found in Montana is shipped elsewhere, such as Minnesota or Illinois, to be refined.
Richmond noted that the Tax Foundation ranked Montana higher than North Dakota for business tax friendly. But in the end, it is geology, where the oil is located, that brings about business.