Montana economic outlook: the west is back.

AuthorBarkey, Patrick M.

The Bakken oil boom, good times for agriculture, and the Great Recession combined to produce an upside-down pattern of growth across Montana over the past few years. Reversing a decades-long trend, it was the rural, eastern counties that led the state in growth and the more populous western counties that suffered the steepest declines. Not much has happened to significantly slow the vigorous oil-related growth in the east, but the big news in this economic outlook is that declines in the west are over. The drivers of faster western growth are beginning to reappear, and Montana's metro areas west of the divide are again making a contribution to statewide growth.

Patterns of Growth in 2013

The past 12 months have seen rebounding economic fortunes across the western half of the country as well.

Measured by inflation-corrected total wages paid by employers to payroll employees, six of the 11 states in the Western Census region saw faster economic growth in the 12-month period ending in June 2013 than the rest of the country, led by the strong resurgence of the California economy, the nation's largest. As shown in Figure 1, Montana's growth of 2.1 percent for the fiscal year 2013 outpaced the non-western portion of the country by half a percentage point.

The various performances of the individual western states can be traced to developments specific to each, but two broad themes apply to all: the proximity to faster growing Asia and the recovery in residential housing markets. Those two themes help explain the better performance of the western portions of Montana as well. The bigger story in Montana, however, continues to be the roaring oil development on our eastern border.

Measured once again by growth in real wages, the state's two fastest growing urban areas continue to be Gallatin (Bozeman) and Yellowstone (Billings) counties (Figure 2), but the reasons for their superior performance are markedly different. As we detail in the local outlook pieces in this booklet, much of the froth in the Yellowstone County's economy of late is directly connected to Bakken-related activities, while Bozeman's growth stems more from its earlier housing recovery and strength in both university and tourism-related spending.

But the movement of the dots on the figure for Missoula and Flathead into the "expanding" quadrant of the graph--showing growth over the past year, ending with growth in the final quarter--does mark a new development for the state's...

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