Rural areas left out of Montana's rapid job growth

By DAVID ERICKSON

Missoulian

MISSOULA (AP) — There’s a stark difference in the job growth around the Montana cities of Billings, Missoula, Bozeman, Kalispell and Helena compared to the rural areas in the state.

Huge portions of rural Montana are being left behind as the state’s economic growth — which is hotter than the U.S. overall — is restricted almost exclusively to counties with larger urban areas.

There are 56 counties in Montana, but from 2000-2016, just five counties have captured 75 percent of new jobs, according to data from the U.S. Bureau of Economic Analysis.

Gallatin (25 percent), Yellowstone (18 percent), Missoula (13 percent), Flathead (13 percent) and Lewis and Clark (8 percent) counties accounted for the lion’s share of job growth, adding a combined total of 84,505 new workers. Those counties, obviously, have five of the larger cities in the state.

In Missoula County, 15,704 new jobs were created in the 16 years after 2000, an increase of roughly 22 percent. Most of those were in government, health care, retail trade, hotel and food services, professional and tech services, and real estate, rental and leasing, in that order.

By comparison, in that same time period, more than two dozen rural counties saw no new job growth and eight counties saw negative job growth.

According to Mark Haggerty of Headwaters Economics in Bozeman, there is a widening gap between the state’s cities and rural areas. He compiled a report for the Montana Legislature’s Joint Subcommittee on the changing statewide economy and impacts to the long-term viability of Montana’s tax structure.

“Most of the high-wage services jobs are locating in cities that have access to national and global markets, clusters of like-minded businesses, and a larger educated workforce,” he wrote. “Rural areas are not competing for these new jobs as well, and are more acutely impacted by job losses in manufacturing and traditional resource sectors.”

Roni Phillips is the mayor of Superior, a small town about an hour northwest of Missoula. It’s the county seat of Mineral County with a population of 826. Phillips said she’s noticed jobs decreasing over the past decade as young people move away in search of work.

“It’s probably (the downturn in the) logging industry, but just in general Superior is more of an older generation and people in retirement,” she said. “There’s not a ton of jobs here.”

Phillips also works as an emergency call dispatcher, and she had to hang up before elaborating further.

“Innovation jobs including software, research and development, finance and technology require access to finance, educated labor and global markets — competitive advantages largely found in cities,” Haggerty said. “Tech firms also tend to locate near each other — there is a snowballing, or clustering effect. By comparison, rural areas are not competing as successfully for these innovation jobs and are disproportionately affected by job losses in manufacturing and traditional resource sectors.”

Montana’s economy is doing better than the U.S. overall. From 2000 to 2015, personal income here grew by 49 percent compared to 30 percent nationally, and Montana’s per capita income grew 30 percent compared to 14 percent for the United States.

The growth in Montana is being driven by an increase in higher-quality jobs and the rapid increase of investment and retirement income. That has big implications as state legislators ponder how to more fairly restructure the state’s tax system.

Since 1990, 80 percent of growth in personal income in Montana has come from either people who work in the service industries or from nonlabor income sources, such as dividends, interest, rent, Social Security, Medicare and Medicaid.

That means there’s a higher proportion of people in Montana who aren’t working but are still getting money in their bank accounts. They are not tethered to the slow growth of wages here when they factor in how much housing or land they can buy.

Investment-related income such as dividends, interest and rent account for the majority, 22.7 percent, of all non-labor income sources. Social Security payments, unemployment compensation insurance, veterans benefits and Medicare and Medicaid make up a smaller proportion. Nonlabor income now accounts for 42 percent of total personal income in Montana and accounts for nearly half of net new personal income growth in the last decade.

“Nonlabor income is one of the largest and fastest growing sources of income in Montana and the West,” Haggerty said. “Comprised of three main types — investments, age-related payments and hardship payments — non-labor income is affected by the stock market, retiring Baby Boomers, and changes to Medicare, Medicaid and Social Security. Nonlabor income is important because it stimulates growth in other sectors, such as construction, health care and retail trade.”

Stephanie Morrison and Sam Schaefer of the Montana Legislative Fiscal Division prepared a report for the finance committee that compared jobs, personal income, gross state product and general fund revenue share. They found the outlook for nonlabor income suggests that it will peak around the second half of the next decade and then decline, probably due in part to an aging population.

The service industries, including doctors, engineers, lawyers, real estate professionals, accountants, waiters and barbers, etc., account for 60 percent of the total labor income in Montana.

“Montana’s economy is growing and generating wealth and jobs, but the structural changes in services and nonservices industries are changing the state’s economic geography, workforce and competitive advantage,” Haggerty said. “The changing economy has implications for the state’s tax structure.”

Government workers account for 19.7 percent, extractive industries account for 5 percent and trades like construction, manufacturing and agriculture account for 15.3 percent.

“Nonservices sectors, such as mining, agriculture and manufacturing, remain important, particularly in terms of their contribution to GDP, but productivity gains and automation have shed jobs and led to stagnant wages,” Haggerty said.

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Information from: Missoulian, http://www.missoulian.com/.