While government jobs provide a solid economic foundation for Lewis and Clark County, reliance on a shrinking public sector will probably lead to slower-than-the-state-average economic growth in coming years, experts say.
Tuesday, the University of Montana Bureau of Business and Economic Research hosted the group’s 2013 Economic Outlook seminar at the Best Western Great Northern Hotel in Helena, offering economic and industry analysis and projections for the U.S., the state as a whole and Lewis and Clark County specifically.
“The story with Montana is we’re really going into 2013 with a lot better momentum, surprisingly high momentum,” said Patrick M. Barkey, director of the Bureau of Economic Research, addressing an audience of several hundred people.
Last year nonfarm earnings — a bellwether indicator of economic performance — grew 2.7 percent statewide.
The bureau is predicting another 2.7 percent increase in nonfarm earnings in 2013 and growth rates of 3 percent annually from 2014 through 2016.
“That’s really getting to be fairly respectable growth, and it certainly outpaces the U.S. economy,” Barkey said.
The bureau is predicting that Lewis and Clark County will continue to grow economically — but at a slower pace than the rest of the state because the county’s economy depends so heavily on the public sector, which is shrinking.
“We’re not projecting Lewis and Clark to be leading the pack in terms of growth in Montana by any stretch of the imagination,” Barkey said.
“The great recession in Lewis and Clark County was only a couple of years of stability or slower than normal growth,” says Paul E. Polzin, director emeritus of the Bureau of Business and Economic Research in his outlook for the county.
That stability is attributed to government jobs acting as the cornerstone for the local economy — state and federal jobs contribute 71 percent of the basic earnings in Lewis and Clark County, according to the Bureau of Business and Economic Research.
“The dependence on government is both good news and bad news for the Lewis and Clark economy,” Polzin wrote in his outlook for the county.
The good news is that when the economy in other parts of the state tumbled dramatically during the economic downturn, government jobs helped the economy in Lewis and Clark County remain stable and even see moderate growth.
Last year nonfarm earnings grew by 2.2 in Lewis and Clark County, according to the Bureau of Business and Economic Research.
“The bad news is that government is not likely to be a prosperous industry in the near future, and this may lead to slower overall growth in Lewis and Clark County economy,” Polzin reports.
The Bureau is predicting nonfarm jobs earnings to grow by 1.4 percent this year, 1.7 percent the following in year and by 2 percent in 2015 and 2016.
“That’s how we want government to act,” said Barb Wagner, senior economist with the Montana Department of Labor. “We want them to add jobs during the recession and then start to lose those jobs as the stimulus dollars leave.”
Another facet in the shrinking public sector is that looming federal budget cuts targeted at defense spending could dramatically shift the landscape of the military’s presence in Montana.
Despite the Bureau’s lower growth projections for the Lewis and Clark County, there are still many positives to be found in the local economy, said Cathy Burwell, president of the Helena Area Chamber of Commerce, as she presented her analysis of the county’s economy.
“Paul (Polzin) and I always have the joke that he does the doom and gloom and then I get up and do the positive report on Helena,” she said.
She pointed out that POLICOM Corporation, an independent economic research firm based out of Palm City, Fla., that specializes in analyzing state and local governments, has ranked Helena as the second strongest micropolitan area in the country for the second year in a row.
She also added that the unemployment rate in the Helena area was reported at 4.4 percent in December — well below the statewide 5.8 percent unemployment rate reported in the same month.
She also reported moderate growth in residential and commercial construction in Lewis and Clark County.
Within the city, 195 residential permits were issued totaling $27.4 million in 2012. That’s 16 fewer permits than the 211 that were issued in 2011, but those permits only totaled $26.5 million in value.
Outside the city, 254 septic permits were issued last year — up from 198 issued in 2011.
In 2012, 209 commercial permits were issued in the county, totaling $50.4 million in value. In 2011, 215 permits were issued with a total valuation of $42 million.
“Historically Helena has the most stable economy of the larger cities in Montana, we have higher median income levels,” Burwell said. “It’s still great to live the capital city.”