The economic outlook for Flathead County and Montana closely parallels that of the national economy: A long, slow recovery from a recession deeper and more damaging than anything Americans have grappled with in a generation.
That was the future described by Paul Polzin and Patrick Barkey, two economists with the University of Montana’s Bureau of Business and Economic Research at a seminar held Friday at Kalispell’s Hilton Garden Inn.
“We believe the worst is solidly behind us,” Barkey, the bureau’s director, said, adding that though it won’t be clear for another few months, he believes the national and Montana economy are growing now.
But “economists are surprisingly pessimistic” about the recovery he said. Referring to the downturn as a “net worth recession,” it was unique in that it targeted consumers’ personal wealth, wiping out some $17 trillion in household assets across the United States. And that explains why the recovery will be so gradual and fragile.
“It’s not that consumers don’t have confidence,” Barkey said. “It’s that there’s not enough fuel in the tank.”
Praising the response of the federal government and federal reserve bank, Barkey said those institutions responded relatively quickly to the recession in terms of monetary policy and stimulus spending than, by comparison, the Japanese government during the 1990s and the U.S. government following the Great Depression.
But this recession was broad in its global effect, as well as the many different economic sectors it damaged. And unlike other economic downturns, Montana proved less immune to the decline than is normally the case – particularly with regard to housing, which he predicted would not recover to pre-recession levels.
“It’s just been exactly the same in Montana in housing as the national average,” Barkey said. “In this recession, the U.S. and Montana have been moving much more in sync than is commonly thought.”
Montana unemployment peaked in the first quarter of 2009, according to Barkey, and the state has several positive economic factors going its way in coming years, including: a rebound in prices for commodity and energy industries; agriculture and the federal government as economic sectors will remain stable and foreclosures should be less of an issue.
But on the negative side, Barkey sees the closures occurring in the wood products industry as permanent, no sign of a construction recovery and consumers are still reluctant to spend.
Some of the graphs Barkey revealed were greeted with audible gasps and sighs from the audience members, like one showing Flathead County’s nonfarm labor income plummeting 6 percent in 2009. (It increased by 6.3 percent as recently as 2006.)
“I can’t think of anything good about 2009 other than it’s over,” Barkey said.
Polzin provided more breathtaking statistics, like one showing employment in Flathead County dropping 11.1 percent between March 2008 and March 2009. Another showed construction employment dropping 37.4 percent between June 2007 and June 2008.
As for recovery, Polzin reiterated that it would be slow and small, predicting 0.7 percent growth in wages next year.
“We think that the declines are now behind us,” Polzin said. “We think that there’s going to be modest, very modest growth in 2010.”