Rome wasn’t built in a day, it is said. But residents of Gallatin County might be forgiven if they sometimes feel that each day’s passing brings on growth that is visible – a new building shell, a new store opening or a new traffic light. Since recovering the ground it lost in the Great Recession in 2012, the region has grown to become the second largest economy in the state.
Given that the previous No. 2, Missoula County, hasn’t exactly been standing still in that same interval of time, that is quite an accomplishment. Since 2007, Missoula’s economy has grown by about 24 percent, roughly in line with Yellowstone County (Billings) and slightly faster than Flathead County (Kalispell). Growth in Gallatin County over this same period has been more than 47 percent, almost double what the state’s other two largest cities have registered.
Factors Driving Regional Growth
One of the oldest questions in regional economics is understanding what drives growth. Do cities and regions grow because the industries that they specialize in are thriving? Or do they grow by attracting talent and investment that grows the businesses those talented people bring with them? Montana’s economies feature a little of both.
Agriculture, natural resources, mining and tourism industries are important drivers, to one degree or another, of the local economies around the state. The stabilization and gradual rise of oil prices has helped end the free fall of oil patch counties on Montana’s eastern border, just as the heavy visitor volumes at our national parks have given a push to the economies of the nearby urban areas.
But there is also a robust inflow of new residents to many Montana communities – especially in the West – that has invigorated the construction sectors of those areas. Flathead and especially Gallatin counties have a higher concentration of construction employment and earnings than the rest of the state. In the past two years, Missoula, Ravalli and Madison counties, among others, have also seen healthy in-migration and new construction focused on residential and commercial markets.
Growth Around the State
Data on economic activity in Montana’s counties and regions through the midpoint of calendar year 2019 reveal some changes to the three-year-old pattern of western growth and eastern challenges within the state. Western urban areas continue to grow, with growth extending across the border to neighboring counties. But growth in Billings has resumed as well. And the steep declines in oil patch counties have ended, with communities like Sidney and Glendive in eastern Montana now posting positive growth.
The Great Falls economy saw inflation-corrected nonfarm earnings grow a bit faster in 2018. Growth in personal income, which includes both earned and nonearned (property) income, rose by 5 percent before correcting for inflation. The better performance stemmed from a number of factors: a better construction season, continued strength in health care, and respectable growth in the region’s military and government facilities. There was also a surge in temp help earnings, related to tech and manufacturing activities.
Great Falls has been challenged by the financial hardships faced by Montana grain and cattle producers, due to both lower prices and retaliatory tariffs placed on U.S. exports. Retail trade, especially equipment dealers, as well as transportation industries have experienced some hardships. The new manufacturing growth that took place in 2014-15 has tapered off and no significant growth has occurred in that segment of the economy.
The faster growth that resumed in the Flathead County economy with the resumption of strong in-migration after the Great Recession showed signs of cooling in 2018 and through the first half of 2019. A third of its $66 million increase in inflation-corrected nonfarm earnings came from growth in the construction industries. Strong housing markets also showed up in growth in finance and insurance businesses. Visitor spending supported robust accommodations and retail trade activity.
On the other side of the ledger are the setbacks for regional health care, which shows some signs of possible overbuilding. In contrast to the impacts of Medicaid expansion showing up around the rest of the state, health care earnings in Flathead County were virtually flat in 2018, and wage growth actually turned negative through the first half of 2019.
The Bozeman-area economy continued to fire on all cylinders in 2018 and through the first half of 2019, posting the state’s strongest growth both in dollar and percent terms. In addition to the growth drivers of the past few years, which have included advanced manufacturing, professional services, Montana State University and visitor-related spending, more recent growth has been spurred on by expansion in health care and retail trade.
One aspect of the area’s rapid growth that shows some change is the spread of growth beyond Bozeman. There were more residential housing starts in Belgrade than all but four other cities in the state, one of which is Bozeman itself. As recently as 2012, less than 10 houses were built there. Madison County to the west and Park County to the east have pushed up the rankings and are now in the top quarter of Montana counties in terms of earnings growth.
Lewis and Clark County
The county including the state’s capital city experienced another sideways year in earnings growth in 2018. But the more fragmentary data available for 2019 suggests that the pace of growth picked up more recently. Growth in health care and manufacturing, the latter solidified by the growing footprint of Boeing, helped push wage growth in 2019 above recent trends. The region’s most important driver continues to be state government, which has seen modest growth.
With the urbanized area (Helena city) located at the southern edge of a county that’s two and half times larger than the state of Rhode Island, closely bordered by the northern edges of Jefferson and Broadwater counties, the Helena region is one that is not served well by county-level economic statistics.
Missoula’s growth trajectory ratcheted up significantly two years ago as tech-related growth and a commercial construction surge helped offset reductions at the University of Montana to produce faster overall growth. The county’s nonfarm earnings growth was the third fastest in the state in 2018, helped along by a one-time injection of cash when technology consulting company ATG was acquired by Cognizant. The latter event made professional services growth in Missoula the highest in the state.
Like other areas in the western third of the state, evidence of strong real estate markets is showing up in the earnings data for Missoula County. There was a two-year spurt of rapid construction in multi-family dwellings that fell back to earth in 2018. Finance and insurance industries, health care and building trades continue to prosper, with wage growth data showing no slowdown in growth through the midpoint of 2019.
Silver Bow County
The smallest of the state’s seven urbanized counties, both in terms of income and area, has shown more volatility in its overall growth since the Great Recession. Not only does its overall size limit the degree to which it can diversify, but the continued importance of mining earnings in its economic mix exposes it to the fluctuations of global commodity price swings. Butte-Silver Bow’s overall economic trajectory has been roughly flat for the past several years. Yet 2018 was the second consecutive year of modest growth in nonfarm earnings, largely due to a $21.5 million increase in mining earnings, and to a lesser extent growth in visitor spending related activities.
Masked by the volatility has been growth in the county’s professional services and manufacturing employers, partially offset by turbulence in health care businesses and at Montana Tech. Recent expansions and upgrades in the area’s accommodations facilities has led to noticeable growth in that sector.
After experiencing a fairly mild recession followed by some of the super-fueled growth related to the Bakken boom, the state’s largest economy has endured a much more lethargic economic performance following the oil price declines at the end of 2014. The low point came in 2016 when nonfarm earnings declined by more than 2 percent, headlining a statewide weakness that ultimately provoked a special session of the Legislature to address its budget implications.
2018 marked the second consecutive year of inflation-corrected growth above 3 percent for the Billings region, with partial data indicating an extension of growth into 2019. A pickup in construction, continued strength in transportation and warehousing, and a second consecutive year of earnings growth in the region’s three oil refineries helped produce this result. Since a big chunk of Billings construction is industrial, subject to swings as large projects are started and completed, the prospects of continued strong growth in 2019 are less certain.
Remainder of the State
Montana is one of the few states in the country that is not dominated by its largest cities, in contrast to Idaho (Boise), Washington (Seattle) or Oregon (Portland). The 49 counties not directly discussed here make up an incredibly diverse spectrum of agriculture-based, natural resource-oriented, amenity-focused counties of all types, some of which are closely linked to the state’s larger counties. The drivers of their economic activity are similarly diverse, but in aggregate the remainder of the state has seen an improvement in growth through the midpoint of 2019, helped along by construction, services and health care growth.