Q&A with Montana's leading experts.

• Position: ECONOMIC OUTLOOK - Questions and answers - Discussion

Editor's Note: Following is a Q & A with Bureau economists and industry experts throughout the state about the latest economic trends and forecasts, as well as the outlook for Montana's important sectors." health care, travel and recreation, agriculture, manufacturing, forest products, housing, and energy.

The Economy

Patrick Barkey and Paul Polzin

MBQ: What are the most pressing issues in Montana's economy today?

A: (Patrick Barkey) Two or three years ago that would have been a very easy question to answer. It was the national recession, which Montana did not escape. Now that the economy is growing, there are different issues. The labor force is one of those--in some parts of the state finding qualified workers for openings is getting difficult. Particularly as you move east. Other parts of the state still have high unemployment rates, including northwest Montana. Another issue that is front and center has to do with energy and natural resource development. Montana's energy and mining producers' response to sustained high commodity prices has been limited by their existing capacity and, in some cases, transportation bottlenecks. New mines, new pipelines, new rail --some or all of these things will be needed to grow further, and their development as things stand today is far from certain. On the public policy front, the big issues facing state government as it relates to the economy are pension reform and Medicaid expansion. And the biggest elephant in the room may be the potential for the federal government's growth trajectory--always up during our lifetimes--to start nosing downward. What that would mean for us in Montana--where the federal government has always been a big part of the economy--is unknown at the moment.

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MBQ: Montarla's economy grew about 2.7 percent in 2012. What's ahead for 20137

A: (Patrick Barkey) I think the state will be hard-pressed just to repeat that performance in 2013. But we think that it can. The 2012 growth came in so strongly in part because of one-time events--like the sale of Right Now Technologies at the beginning of the year--that gave a boost to income but are not likely to happen again. So, posting overall growth in inflation-corrected nonfarm earnings of 2.7 percent in 2013, as we are forecasting, represents slightly faster growth. And that growth will be substantially better than the U.S. economy, which should be around 2 percent. Our forecast reflects the continued strength in two sectors of the state economy that have been outperforming for the last two years: energy/mining and agriculture. Even though falling natural gas prices have caused drilling for new gas wells to dry up and have caused some headaches for competing fuels like coal and even wind, investments already are under way, and our proximity to the North Dakota Bakken boom has kept activity associated with oil development very brisk. And agriculture prices, particularly on the cattle side, have been very high, giving hope for another good year. Finally, the housing recovery looks to be building momentum.

MBQ: As Montana's economy recovers, which areas are doing well and which are struggling?

A: (Paul Polzin) In general, the eastern part of the state is doing better than the west. The reasons for this are not hard to find: energy and agriculture. We have boom conditions on the extreme eastern border associated with the developments associated with the Bakken formation. In particular, Richland and Fallon counties have experienced that greatest growth.

Among the state's major cities, Billings and Bozeman have been the fastest growing. Billings is benefiting from some of the indirect impacts of oil development. There are no oil wells in Yellowstone County, but some of the larger energy firms are locating their central offices and technical staff in Billings. Gallatin County has a diverse economy based on Montana State University, high-tech manufacturing, and nonresident travel. Bozeman is also developing into a second-order trade and service center.

Missoula and Ravalli counties continue to struggle. Even though the recession was not particularly severe in these two counties, they continue to lag behind the other urban areas in terms of growth. The major reason Missoula and Ravalli counties are lagging behind is that they have experienced significant permanent closures in their basic industries, primarily in the wood and paper products industry.

Health Care

Gregg Davis and Larry White

MBQ: How will the provisions of the Affordable Care Act affect the demand for health care in Montana? A: (Gregg Davis) Total health spending is driven by the number of consumers, the amount of health services individuals use, and the price of medical care. In 2014, 195,000 uninsured in Montana will have access to health insurance coverage from the insurance expansions under the Affordable Care Act. Most of these newly insured will enroll in either the Medicaid expansion, should Montana decide to expand Medicaid, or the Federally Facilitated Exchange where they may qualify for premium tax credits or cost-sharing subsidies. These new enrollees will contribute to faster spending growth for both Medicaid and private insurance, largely because of higher enrollment, leading to increased use of health care services.

MBQ: Many states have opted-out of the Medicaid expansion, based in part on the strain the expansion could place on existing health care providers. Can Montana health care providers accommodate the increased demand for their services due to the Medicaid expansion?

A: (Gregg Davis) While the reasons many states are drawing a line in the sand and saying no to the Medicaid expansion are varied, a central concern for many has been the ability of the health care system to absorb the demands placed on them from the newly insured. Many of the "no" states would, in...