Local outlook: recession impacts different in every county.

• Author: Polzin, Paul E.

There is almost no place in Montana that escaped this recession, but the recession impacts do vary from city to city. This article looks at the way the recession is playing out in the various cities around the state.

Before looking at the recession, let's look at where we were when the recession began in late 2007. The period from 2001 to 2007 was the recovery phase of the business cycle which began with the post-Sept. 11 recession.

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As shown in Figure 1, statewide economic growth averaged about 3.2 percent per year from 2001 to 2007. This growth was above the long-term figure because it was fueled by the energy and commodity boom of the mid-2000s. From 2004 to 2006, Montana experienced some of the fastest statewide growth since the 1970s.

Figure 1 also presents the average annual growth for Montana's communities, arranged from the slowest to the fastest. These counties may be roughly categorized into three groups. The slowest growing were Missoula and Cascade counties. Five counties were growing at about the statewide average, including Butte-Silver Bow, Fergus, Hill, Lewis and Clark, and Yellowstone. The fastest growing areas of the state were Flathead and Gallatin counties. For the most part, this rapid growth was due to the construction/real estate bubble, which was most pronounced in these two counties.

Missoula County's low ranking may be surprising because is often portrayed as a fast growth economy. The data in Figure 1 suggest that Missoula County was lagging even before the onset of the recession. The major reason for this relatively slow growth is that most of the energy/commodity growth occurred in eastern Montana, and Missoula's role as a regional trade center began to surfer.

Figure 2 examines the impacts of the recession on Montana communities. It presents the percent change in wage and salary employment from Match 2008 to March 2009. This does not exactly correspond to a peak-to-trough measure, but it is a good approximation for most Montana communities. The cycle peak has been established as the fourth quarter of 2007. The cycle trough has not yet been dated, but many economic variables appear to have bottomed during the first quarter of 2009.

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It takes only a quick glance to see what happened in Gallatin and Flathead counties. They were the fastest growing during the recovery phase and experienced the largest declines during this recession. Nonfarm wage and salary employment declined 11.1 percent in Gallatin County and 8.4 percent in Flathead County between March 2008 and March 2009.

Lewis and Clark, Cascade, Fergus, and Hill counties experienced the least recession impacts. The decline in nonfarm wage and salary employment was less than 2 percent in each county. Two of the counties (Lewis and Clark and Cascade) are dominated by the federal or state governments, which helped to stabilize the local economies, and two counties (Hill and Fergus) are smaller communities and are home to noncyclical industries such as agriculture.

The employment declines in Yellowstone, Missoula, and Butte-Silver Bow counties were 2 to 6 percent, in between the greatest and least impacted counties. The 2.8 percent decline in employment in Missoula County probably understates the overall recession impact on this community because the recession began earlier and is likely to last longer than elsewhere. There were layoffs and closures in the wood products industry before the official cycle peak in late 2007, and the shutdown of Smufit-Stone occurred in early 2010.

Another way to look at the recession impacts across Montana communities is to examine trends in the construction and retail trade industries--two of the hardest hit industries. The housing and construction bubble was one of the headline events of this cycle, and the loss of wealth significantly affected consumer spending.

Figure 3 presents the change in construction employment between June 2007 and June 2009. As expected, the greatest decreases were in the areas where the housing bubble was the largest. Construction...