Hill County's economic outlook not so rosy, but has opportunities

Hill County is expected to see job growth close to historical averages of about 1.5 percent in 2018, but then see a slowdown in the years ahead, Patrick Barkey, director of the University of Montana's Bureau of Business and Economic Research said Wednesday during the bureau's 43rd Economic Outlook Seminar at Montana State University-Northern.

Barkey presented the data about Hill County in Hensler Auditorium in Northern's Applied Technology Center.

He said that in 2017, the county saw less than a percentage point of growth. When the bureau did their forecast in 2016, they thought Hill County would experience better job growth.

Growth in inflation-corrected earnings rose for local, state and federal government employees in the county in 2016, offsetting losses in the retail and whole trade sectors, he said.

Barkey said he is not quite sure what the source of the growth in government in Hill County is.

A measured recovery in the freight and rail business that began in 2017 will likely help the area, he said.

The forecast for Hill County has contradicted the rest of the state, he said.

Wages during the Great Recession - roughly 2007 to 2010 - rose quite a bit in Hill County, Barkey said. They then fell after the Great Recession while the rest of Montana was growing.

More recently, Barkey said, wage growth has been more erratic spiking in 2016 and then tapering off.

Barkey said that Hill County has a very different pattern when it comes to wage growth, which is consistent with trends when, during the Great Recession, beef and grain prices were high as with oil- and gas-driven activity on the railroads at the time.

He said sparks for economic growth are hard to find in Hill County, but there are some opportunities in transportation.

Bear Paw Development Corp. Executive Director Paul Tuss said Hill County and surrounding counties have both opportunities and challenges going forward.

Montana's oldest economic development agency, Bear Paw covers Blaine, Chouteau, Hill, Liberty and Phillips counties and the Fort Belknap and Rocky Boy's Indian reservations.

Tuss said trade with Canada is an important part of the area economy.

"Even in Havre, when we think of big cities we think of Salt Lake City or Seattle, or Minneapolis or Denver, we have a city that is just as easy to get to as those in Calgary," he said.

Tuss said he thinks there is incredible opportunity for trade and business with Canada.

He said that several years ago Bear Paw, in collaboration with the Havre Area Chamber of Commerce, did a survey where they asked businesses in the Havre region how important Canadian business is.

"Amazingly, we got some results that there were businesses in Havre who said that over 50 percent of their bottom line came from Canadian business," he said,

Because of the monetary exchange rate, trade with Canada is both an opportunity and a challenge, he said.

Value-added agriculture is something that has become a big deal, Tuss said. Bear Paw has a department devoted to value-added agriculture. The department helps agriculture producers and other opportunities to turn their products into business ventures. Ideas range from making beef jerky to breweries.

"If you think about where we were in this state with breweries 15 years ago, 20 years ago, there were six, seven right? There are now 70 or 75 breweries in Montana," he said.

Many of the breweries, he said, use Montana-grown wheat, barley and hops.

"We think from a value-added ag perspective that there is incredible opportunity with this burgeoning industry in microbrewing," he said.

Pulse crops are another area of potential for the region's economy. About 25 years ago, the number of pulses grown in Montana was pretty low, Tuss said.

The growth is evident, Tuss said, with some pulse crop facilities in Montana, bagging crops in containers with labels in other languages because they are being sent to Asian markets.

"That is exactly what we need more of," Tuss said. "I think it is an incredible opportunity for us to take advantage of here on the Hi-Line and throughout Montana."

The quality of life the region offers is another asset, Tuss said. He added that two of his neighbors are a doctor who moved to Havre to work at Northern Montana Hospital and another a Border Patrol agent relocated to the area with his family.  

"And I can't tell you how many conversations I have had across the back fence with both of my neighbors about the quality of life that they enjoy in Havre that they didn't enjoy where they came from," he said.

Broadband development is also important, Tuss said. He said a married couple who once worked for Bear Paw left to work from home in Havre, one for a company with a corporate headquarters in Atlanta and the other with a headquarters in North Carolina.

"So I think that we cannot underestimate the importance of broadband deployment in the area," he said,

Distance to markets is something companies and entrepreneurs also have to deal with, he added. Because making a product in Havre can be difficult, when you have to ship it to far off places from such a remote location.

Climate change is something Tuss said also could present opportunities and challenges for the regional economy. Whether the type of wildfires that torched the region will be the new normal is something that has to be determined,

"I don't know if that is going to be the new normal or not, but when you combine that type of event with drought and some of the other effects of climate change, you just wonder whether that is going to be permanent. It is certainly going to have an impact on our economy," Tuss said.

Havre and surrounding communities must also find a way to deal with aging infrastructure, Tuss said, a concern to many cities and small communities across Montana.

"You cannot build your community without a solid infrastructure, and we need to work with our public partners at the state and federal level to do something about the aging infrastructure whether it be water, sewer, streets and schools and all those public amenities," he said.

The region must also deal with demographics that are leading to a population that is shrinking and aging. Tuss said the 2010 census shows Liberty County was the only county Bear Paw serves that gained population, while every other saw their population shrink.

With drought and wildfires, agriculture in Montana - the single largest industry in this region - had a tough year, said George Gaynes, a professor and agricultural specialist at Montana State University who spoke about the U.S. and Montana agriculture economy.

When the year began there was a lot of moisture, he said. By late June, levels of moisture began to fall off and all 56 counties in Montana were experiencing varying degrees of drought condition.

Agricultural producers also continued to deal with low prices, a trend that began in about January 2015 and lasted through the end of 2017, Gaynes said. Early this year, there was a small price improvement across crop and livestock sectors that should offer producers some relief.

Grain and pulse crop production fell last year, Gaynes said. There was a 40 percent drop in the number of pulses - lentils, dry peas and beans - that were produced.

Beef production rose about five percent in 2017 and is expected to rise another three percent in 2018, Gaynes said. Beef exports jumped 12 percent in 2017 and are anticipated to rise another four percent next year.

U.S. beef exports fell slightly, but are expected to rise by two percent in 2018, Gaynes said.

He said producers he has talked to are "pretty bullish" because they see U.S. demand for beef trending up slightly, though recent talk about tariffs have caused some concern in terms of export markets in the year ahead, he said.

Montana wheat production fell 40 percent in 2016 and 2017, and U.S. production fell 25 percent, Gaynes said. U.S. wheat exports are down 5 percent, while U.S. wheat imports rose 27 percent.

Wheat prices will likely be slightly better in 2018, but remain below historical averages.  

The number of acres dedicated to pulse crop growth has risen significantly in Montana in recent years, Gaynes said, and will likely soon approach a million and a half acres.

He added that he will continue looking for growth in pulse and oilseed crop acreage.  

Montana, he said, is now the top organic wheat producer in the U.S. with $28.4 million in gross sales, which make up 27 percent of U.S. organic wheat sales.