Q&A: with Montana's top economists and industry experts.

• Author: Barkey, Patrick M.
• Position: Economic Outlook - Discussion

Editor's note:

During the 2015 Montana Economic Outlook Seminar series, bureau economists and industry experts presented the latest economic trends and forecasts. The keynote speaker, Bill W hitsitt, retired Devon Energy executive vice president and executive in residence at BBER, discussed the new American energy revolution and how it is reshaping Montana communities. Following is a Q&A with the seminar speakers--Montana's leading economic experts.

The Economy

Patrick M. Barkey, Paul E. Polzin

Q We've been expecting better growth in the U.S. economy for the past few years, but it has remained sluggish until recently. What has changed?

Patrick Barkey: The U.S. economy recently experienced its best six-month performance since well before the recession. And for the first time in recent memory, growth has extended to smaller businesses, which report increased optimism and borrowing. That is especially important for Montana, which is a small business state. Summarizing the U.S. economy, I think we've gotten to a point where we've seen enough job creation and income growth that we've hit what I would call a self-sustaining cycle of income growth, which is producing more consumer spending and, in turn, supporting more job growth. People expected 2015 to be better than 2014--this is the year where those expectations will finally be met. It looks like the national economy is moving into a higher gear.

Q Plunging oil prices have been a big story in the global economy. What are some of the other developments that have affected the global and U.S. economies?

Patrick Barkey: What's not very well-known is the fact that the global economy is, in fact, getting worse. So the global economy is slowing down, we're seeing essentially no growth in once high-flying countries like Brazil and Russia, while the growth in India and China is only about half of what it was seven years ago. This is a big change that will affect export markets for Montana agricultural and commodity exports.

Q For the past few years, we've witnessed something of an economic miracle in the eastern third of our state. Towns and communities that were shrinking have come back roaring --thanks to the Bakken oil boom--and portions of Eastern Montana were growing faster than Western Montana. Is that still the case?

Patrick Barkey: That was beginning to change even before the crude oil price swoon hit global markets in the fall of 2014. Cost control in the Bakken was already bringing down oil activity measures such as counts of drilling rigs, while the drivers of growth in the more populous western parts of the state were getting healthier. Taken together, these forces were already bringing growth rates around the state into closer balance. The sudden tumble in crude oil prices that began in earnest last September kicks this process into high gear. Lower energy costs can breathe life into consumer spending and confidence, while they are certain to curtail exploration and development. It all adds up to a short-term outlook for the Montana economy that has more balanced, but possibly slower, economic growth.

Q Which counties are growing the fastest and which ones are growing the slowest?

Paul Polzin: Missoula, Flathead, and Ravalli counties were particularly hard hit by the Great Recession and were very slow to recover. In the past two years, these counties have shown growth and are digging themselves out of some very deep holes. Flathead County, for example, is one of the few areas of the state where construction has almost recovered to pre-recession levels.

There are three economies that have been growing right at the state average--Great Falls, Helena, and Butte-Anaconda. These communities did not experience significant declines during the recession. But on the other hand, their recovery has been very lethargic. One explanation is that that Great Falls and Helena are government towns, which tend to be non-cyclic and slow-growing, at least in the current environment. Butte-Anaconda is a little more difficult to explain because so much of their economy is associated with natural resource extraction. The fact of the matter is that mining in Butte-Anaconda has been relatively stable over this particular business cycle.

Yellowstone and Gallatin counties both have been exceeding the statewide average in terms of growth, likely due to the indirect impact of the Bakken. Gallatin County has experienced very rapid recovery in construction, growth in the high-tech sector, and favorable enrollment trends at Montana State University.

The dramatic drop of crude oil prices means increased uncertainty for several economies in Eastern Montana. In Richland County, the agricultural sector, especially irrigated sugar beets, may help buffer the decreases in oil-related employment. Custer County--and especially Miles City has become home to several large companies serving the oil industry in the Bakken area. The amount of the indirect impacts on these firms is not yet known.

Q What is the outlook for Montana's economy for 2015?

Patrick Barkey: We thought the state economy was going to grow by 3 percent, but in the last two years it has only been 2.1 percent. With booming oil development putting on the brakes, overall statewide growth will be slower than we forecast last year. Our forecast is for growth of about 2.3 percent over the next few years.

Health Care

Bryce Ward

Q It's been about a year since the Affordable Care Act's main access provisions went into effect. What sort of impacts has the ACA had on Montana?

Bryce Ward: More people have health insurance because of the ACA. According to Gallup, the share of adults without health insurance in Montana declined from 20.7 percent in 2013 to 13.8 percent in 2014. This suggests that more than 39,000 Montanans gained health insurance during 2014. Montana had the ninth largest decline in its uninsured rate, and the largest among states that did not expand Medicaid in 2014. Such a large decline is somewhat surprising because, in general, states that expanded Medicaid saw larger declines in the number of...