Mixed news from the Economic Outlook Seminar

During the Montana Economic Outlook Seminar this week, multiple economists from the Bureau of Business and Economic Research gave status updates on Montana and the U.S.’s key industries delivering a mix of good and bad news.

The Bureau of Business and Economic Research 2020 Montana Economic Outlook seminar set for Havre Tuesday was moved to an online presentation to reduce exposure to novel coronavirus 2019.

BBER Director Patrick Barkey said that before COVID-19, Montana had economic momentum going into 2020, despite mine closures in Colstrip and the uncertainty that comes with them. He said that the budgets the federal government has been putting in place have been good for Montana’s economy, especially in Havre.

He also said recent strides in the tech market and construction businesses have been propelling growth in the western part of the state.

Before the events of the last few weeks, the commodities market; except palladium, was seeing price declines, that have since plummeted.

“I said before the virus that residential construction would be the wild card, but I think the wild card has already been played,” Barkey said.

He said that all but two counties in Montana had seen economic growth in the past year.

“With the exception of Hill and Silver Bow there’s been growth around the state,” Barkey said.

He added that government contraction had overshadowed much of the progress that Hill County had made in 2019.

Tourism

Norma Nickerson, director of the Institute for Tourism and Recreational Research, discussed the labor shortage occurring in Montana’s tourism, recreation and hospitality industries.

“It’s not just Bozeman, it’s not just Whitefish, it’s all over, this shortage of workers,” Nickerson said.

She said 70 percent of business owners in these industries said they are having difficulty finding quality year-round workers, and 80 percent are having trouble finding quality seasonal workers.

She said the labor shortage has caused a lot of businesses to shorten their business hours and cut back on meals offered because they don’t have enough staff.

Nickerson said that she’s spoken with business owners who are trying remedy this problem by raising wages and offering better benefits, as well as hiring retirees and using contractors. She also said many businesses were trying to hire more J-1 work visa employees, but the current presidential administration is making that more difficult by lowering the number that can enter the country.

She said others have considered keeping their businesses sustainable rather than actively trying to grow in an attempt to weather the proverbial storm. A storm she says is only going to get worse in the wake of the last month’s events.

Nickerson also expressed concern about the recent, and impending arrival of invasive species that can cause major damage to the state’s recreational economies. She said she’s especially concerned about the prospect of feral pigs coming down from Canada.

“We really don’t want to be saying ‘hindsight is 2020’ with this one,” she said, “… scientist say that these pigs are an ecological train wreck.”

Nickerson said there is some good news for the industry in the form of airline growth. She said recent airline expansions have made many smaller communities in Montana accessible by plane.

She said this will help increase the number of non-resident visitors to Montana and potentially provide a major boost for the industries she has been studying.

Manufacturing

BBER’s Director of Forest Industry Research Todd Morgan said he had similar concerns with the manufacturing industry, but there was good news to offset them.

“Montana’s growth in manufacturing output is faster than the U.S. as a whole,” he said.

Morgan said that while there has been a decline in manufacturing employment throughout the U.S., manufacturing productivity has nearly doubled since the ’80s, and this is a major driving force behind the last few years of growth in Montana’s economy.

He said that much like the industries Nickerson spoke about, manufacturers in Montana are having difficulty hiring quality workers.

Seventy-one percent of business owners in the industry said they were having hiring troubles in 2017, although that number has decreased significantly to 27 percent in the past two years. Morgan said manufacturers still consider this labor shortage the greatest challenge for their businesses in the immediate future.

He said the data collected from the industry shows that the primary issue is not a lack of applicants or of unreasonable salary demands by them, but a lack of qualified applicants. Morgan suggests that business owners in the industry could work with local educational institutions to solve this problem.

“Most of the manufacturers we talked to, 73 percent said they have not worked with a local school, or community college, or university in the last five years to develop workforce or train employees, so I think there’s a point there we can think about,” said Morgan.

Despite the staffing challenges he said manufacturers, by and large, were optimistic about the coming year with more than 90 percent saying they expected their businesses to stay the same or grow in 2020.

Housing and construction

BBER Director of Forecasting Brandon Bridge said that, until recent events, he was optimistic about the housing and construction markets in Montana and the U.S., with high volumes and steadily increasing prices.

But he said those weren’t the only positive indicators.

“Something interesting was that mortgage risk was subsiding,” he said.

He also said the industry sentiment was at a 15-year high. But Bridge said jokingly that his reasons for optimism have become reasons for panic in the last few weeks with the COVID-19.

Bridge also raised concerns that the housing market in recent years was becoming increasingly divided into two semi-distinct markets.

“We were really seeing a bifurcated market in housing,” he said, “A lot of places around the United States, particularly in the west, and certainly a lot of the markets in Montana, we’re seeing different markets for housing between kind of low-tier, entry-level, housing and the upper-level upgraded homes.”

Bridge said that while both markets are seeing increased prices, entry-level buyers are facing the most difficulties.

“What we’re seeing is that nationwide is … the lower price homes, the entry-level homes have been increasing in price at a much greater rate than the higher priced homes,” he said.

Hi-tech added to seminar

Later in the seminar Barkey introduced a brand new “hi-tech” segment to the seminar and called tech in Montana an “under-reported good news story.”

“The outlook for 2020 in hi-tech is very optimistic,” Montana High Tech Business Alliance Executive Director Christina Henderson said, “We anticipate record revenue, jobs and venture capital investment this year. But I believe the biggest indication that hi-tech has made it in Montana is that Pat Barkey and BBER finally gave us our own spot in the program, so I feel like we’ve have the seal of approval that we’ve really established ourself as an industry in Montana.”

She said the hi-tech industry has traditionally been centered in Bozeman and Missoula, though recently Flathead Valley has become a third hub for tech in Montana.

Henderson said the state is quickly growing as an ideal place for tech start-ups, citing the recent influx of venture capital.

“In 2015, Montana was dead last in the country for venture capital invested per capita,” she said, “We were behind every state and Puerto Rico. But that same year Next Frontier Capital launched in Bozeman.”

She said after Next Frontier partnered with local venture capital firms Montana’s venture capital investment increased ten-fold, recently reaching 150 million dollars statewide.

“We have a strong entrepreneurial ecosystem in Montana that’s supporting this (tech industry) growth as well,” Henderson said, “For four straight years Montana was the number one state for start-ups per capita in the nation.”

She added that tech firms tend to thrive in population centers but are not exclusive to them.

“Hi-tech can happen anywhere,” she said, “We do have some great examples of companies operating in tribal and rural communities.”

Among others, Henderson highlighted iResponse, a tribally owned company in Rocky Boy’s Indian Reservation, which is using ground-penetrating radar and advanced databases to locate and identify cultural and historic sites on tribal lands. She said their technology is being used across the country and in Canada, and they now have a dozen employees in Box Elder. The alliance has designated them a company to watch in the coming years.