Montana economic outlook: more balanced, but slower growth ahead.

• Author: Barkey, Patrick M.
• Position: Statistical data

For the past five years, we've witnessed something of an economic miracle in the eastern third of our state.

Even more so in the western third of North Dakota. Towns and communities that were once depopulating and shrinking to the point where their schools and basic institutions were threatened have come roaring back, thanks to the Bakken oil boom. And for the first time in living memory, the rural portions of Montana--particularly in the east--were growing faster collectively than any of the urban areas.

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.

Montana's Recent Economic Performance

The pattern and the strength of economic growth continued to evolve in Montana in 2014. The data that are available on wages and salaries paid to workers show an increase of $287.5 million in fiscal year 2014 on an inflation-corrected basis, compared to the previous fiscal year. Thanks mainly to a slowdown in some of the oil-related construction and capital spending, wage growth has slowed substantially, as shown in Figure 1. The most recent data put current wage growth at about 40 percent of the peak growth the state economy experienced before the recession began.

The distribution of growth across industries has changed as well. Two years ago, substantial growth in construction and mining industries helped offset sluggish or even negative growth in other industries. Economic growth in Montana is now much more widespread across the major industries, with health care, professional business services, and retail trade posting the biggest gains in inflation-corrected wages. A more durable trend has been the continued decline in government payrolls, which contracted for the fourth consecutive year.

The data do not yet reflect the...