COVID-19 concerns affect Montana's Economic Outlook Seminar

The Bureau of Business and Economic Research held its 45th Annual Economic Outlook Seminar over the internet instead of in Havre Tuesday due to concerns about COVID-19, which was a major theme of the event.

Most of the speakers in the seminar, the seventh in its nine-presentation schedule and the first held remotely, addressed the coronavirus issue.

Over the five-hour seminar, economists from BBER presented outlooks on the economies of the country and Montana, but many said COVID-19 has made many of their projections outdated, if not irrelevant.

The theme of this year’s seminar was “Finding Good Workers,” an examination of the difficulties and possible solutions regarding the staffing issues that many businesses in Montana and the U.S.

Discussion turns to coronavius

But when the presentation turned to the current outlook for the economy, COVID-19 was the dominant subject of discussion and concern.

“A lot of what’s in this presentation quite frankly is no longer exactly relevant because so much has changed in the last few weeks,” BBER Director Patric Barkey said.

Many other presenters also said much of their recent predictions have become virtually irrelevant, at least in the immediate sense, with regards to predicting how the economy is developing.

“Is economic growth going to continue, or is the expansion coming to an end? A month ago, I had a different answer to that question … my answer a month ago was probably not, but I have to say the answer is different today, and the answer is yes, the economic expansion is ending as I am talking,” he said.

He said that until a month ago he thought the economy was doing well and would continue to improve heading into 2020, with homebuilding on the rise, and the global economy becoming increasingly stable.

Barkey said problems still exist regarding trade tariffs, general anxiety over the upcoming election, and a continually contracting manufacturing industry nationwide, but the overall outlook was positive. But, he said the last few weeks have destabilized the economy with disrupted Asian supply-lines, falling consumer spending, and general financial uncertainty.

“We see a recession unfolding in front of us,” he said.

Barkey said there are things the country’s financial institutions and government can do to help, but there are also some potential pitfalls along the way.

He said the Federal Reserve is going to need to “get creative,” and find a way to be forgiving in the months ahead. He said large corporations are going to be hurt by the COVID-19 outbreak, but they are much more likely to weather the finical storm than small to medium sized business, and the government needs to look into financially supporting them specifically.

Barkey said crony-capitalism will not help the country in the long run, and the government will need to inject money into households directly if they want to stem the tide of the upcoming financial difficulties.

He also suggested that all trade tariffs be suspended until everything stabilizes, and that this will be especially important for Montana which is particularly vulnerable to being adversely affected by retaliatory tariffs.

Barkey said that until recent developments Montana was looking at another year of economic growth, despite the troubles with the coal industry, but now little is certain aside from the imminent arrival of a recession.

“The events that have happened up till today have already sent us into a recession. Now the question is how deep, and how quickly will we come back,” he said.

Other presenters expressed concern about how COVID-19 will affect specific industries.

BBER Associate Director of Health Research Robert “Tino” Sonora said health care costs in the U.S. have been rising for years without wages keeping up and depending on how the COVID-19 situation progresses those prices might rise even more. He said he foresees an increase in foreclosures due to these rising medical costs since so many Americans are living paycheck to paycheck.

“This may have repercussions not just in the immediate future but maybe over the longer term,” he said.

Director of the Institute for Tourism and Recreation Research Norma Nickerson had concerns regarding the tourism and hospitality industries, particularly in Montana.

“Up until a few weeks ago I was saying I expected a 2 percent growth,” Nickerson said.

She said according to a survey that closed last Friday, 72 percent of businesses in the industry have said they’ve been negatively affected by the virus and she expects that number to climb. Nickerson also said 23 percent of business owners said they will likely have to close temporarily, and some of them had grim predictions for the future of their businesses.

“A few people said, ‘this might be it, this might be the end,’” she said.

BBER Director of Forecasting Brandon Bridge brought news of uncertainty from the housing market.

“The balance of the indicators was looking pretty optimistic in terms of real estate and construction,” Bridge said, but in the last few weeks the balance has shifted causing great uncertainty in the housing market.

“The last couple of weeks has really precipitated the 2020 financial crisis,” he said, “We have financial authorities everywhere trying to stem this thing, which is definitely going to result in some liquidity difficulties and I don’t really see any way around a lot of mortgage defaults coming in the next couple of months, and the next couple of years.”

A shortage of workers

Barkey’s presentation looked at multiple issues that make finding qualified employees difficult for businesses.

He said that many developed nations including the U.S. have, to varying degrees, an aging population, which has led to a general shortage of workers. He said raising the retirement age could help to solve this problem, though he did admit that this idea is politically unpopular.

Barkey also said, as the labor market changes, many people are finding the skills they have are no longer as relevant.

“There’s an impact which I call ‘the skill mismatch,’ that’s something that has occurred in the workforce as the nature of jobs change,” he said.

Barkey cited the ongoing contraction of the coal industry, and the difficulty it’s workers face finding new employment as an example of this phenomenon.

He also said that the upcoming generation has increasingly different ideas about the kinds of jobs they want to get. Barkey said about 50 percent of Gen Z is looking for tech jobs, and very few are considering jobs in a number of industries that are still necessary for the economy to continue functioning. He said 63 percent of people who were undecided about their future profession said they would not consider a job in construction even if the pay was six-figures.

“This is a huge issue for those kinds of employers,” he said.

Barkey said there was some cause for optimism since the bottom 25 percent of jobs in terms of pay, have been steadily increasing their wages, which will help the situation.

“There is some evidence that the labor market is self-healing a little bit,” he said.

Barkey also said that Montana specifically has the advantage of a growing population.

He suggested a number of measures that employers might consider to help attract new employees and expand their workforce.

This includes expanding childcare availability which will help women especially enter the workforce more easily, loosening licensing requirements to increase economic mobility and making more accommodations for teleworking when possible.

He also suggested that given the current political and economic landscape some industries should rethink their stance on drug-testing especially when it comes to cannabis.

Watch for more on this week’s seminar in upcoming editions of the Havre Daily News.