Local outlook: stronger growth ahead.

• Author: Polzin, Paul E.

There is almost no place in Montana that escaped the Great Recession. But the course of the recession did vary from county to county within the state. How did the recession play out in different parts of the state?

To put things into perspective, the pre-recession economic conditions need to be addressed. Figure 1 presents the average annual rates of growth for selected Montana counties from 2001 to 2007. This period represents the recovery phase of the business cycle that began with the 2001 recession.

Statewide, economic growth averaged about 3.3 percent from 2001 to 2007. This was a period of relatively rapid growth fueled by the energy and commodity boom. The period from 2004 to 2006 included some of the fastest statewide growth since the 1970s.

The Montana counties can be roughly divided into three groups. The fastest growing were Richland, Gallatin, and Flathead counties. The second group consists of Yellowstone, Silver Bow, and Lewis and Clark - all growing at about the statewide average. The slowest growing were Missoula, Ravalli, Cascade, and Custer counties. Richland County was benefitting from increased oil exploration while the house price/construction boom was greatest in Flathead and Gallatin counties. The reason Missoula lagged behind the rest of the state is that most of the energy/commodity growth occurred in eastern Montana. Additionally, Missoula's role as a regional trade center was suffering because of competition from other communities.

Figure 2 presents the trends during the recession years of 2008 and 2009. Flathead and Gallatin counties were the fastest growing during the recovery phase and the hardest hit by the recession and the bursting of the house price/ construction bubble. Even though the bubble was not as big in Ravalli County, its bursting had significant impacts on the local economy.

The counties that suffered the fewest recession impacts were Cascade, Custer, and Lewis and Clark counties, all dependent on government. Malmstrom Air Force Base dominates the Cascade County economy; Lewis and Clark County is home for much of Montana state government; and, Custer County has many of the regional offices for both federal and state agencies.

The recession impacts were moderate in Silver Bow, Yellowstone, Richland, and Missoula counties. The relatively modest declines in Missoula County may paint a too optimistic picture. Missoula County was the only major city in Montana to post three straight years of decline - 2008, 2009, and 2010. Richland County experienced only one year of decline in 2009, and this may have had more to do with a slowdown in oil exploration rather than the recession.

The forecasts for 2010 to 2014 are summarized in Figure 3. Gallatin County is projected to, once again, be the fastest growing major county in the state. Despite the significant declines in construction and housing, none of Gallatin County's major basic industries were permanently impacted by the recession. The high-tech sector, combined with Bozeman's growing role as a regional trade center and Montana State University's stabilizing influence, should lead to continued growth. Custer and Lewis and Clark counties are projected to be the slowest growing. Both are dependent on government, which is unlikely to be a growing industry in the next few years.

Figure 1 Annual Percent Change in Nonfarm Labor income, Montana and Selected Counties, 2001-2007 (in Constant Dollars) Cluster 2.2 Missoula 2.4 Cascade 2.5 Ravalli 2.7 Silver Bow 3.2 Yellostone 3.5 Lewis & Clark 3.5 Flathead 4.7 Gallatin 5.6 Richland 7.9 Montana 3.3 Source: Bureau of Economic Analysis, U.S. Department of Commerce. Note: Table made from bar graph. Figure 2 Annual Percent Change in Nonfarm Labor Income, Montana and Selected Counties, 2008-2009 (in Constant Dollars) Lewis & Clark 2.3 Cluster 2.3 Cascade 1.2 Silver Bow 0.3 Yellostone -0.8 Missoula -1.2 Richland -3.2 Gallatin -3.7 Ravalli -4.9 Flathead -6.0 Montana -1.3...