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Economists Say Federal Dollars Were Soothing Balm On Pandemic Pain In Montana

A 'Welcome To Montana' sign near the U.S.-Canada border norther of Browning, Mont. on Sept. 11, 2016.
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A 'Welcome To Montana' sign near the U.S.-Canada border norther of Browning, Mont. on Sept. 11, 2016.

Montana’s economic performance in 2020 will go down as the worst in its post war history, but economists say a flood of federal relief dollars have largely buoyed incomes and the state’s recovery from the COVID-19 pandemic.

The Bureau of Business and Economic Research at the University of Montana held its annual economic outlook seminar this week and told the story of Montana’s industries. Rachel Cramer with Yellowstone Public Radio News and Montana Public Radio’s Megan Myscofski have this summary and what economists project for Montana in the year ahead.

Rachel Cramer: During the two day seminar this week, Patrick Barkey, director of the Bureau of Business and Economic Research, says Montana experienced a jobs recession more than an income recession.

Megan Myscofski: That means Montanans lost jobs, but aid from the federal government went a long way in keeping many people afloat.

So when you look at the numbers, personal income actually looks like it skyrocketed last year, but Barkey says, “In fact, it masks the pain felt by wage and salary earners with the soothing balm, if you will, of deficit-fueled transfer payments by the federal government.”

Rachel Cramer: Megan, what are some other aspects that make this recession from the COVID-19 pandemic unique?

Megan Myscofski: Wages for Montanans working in accommodations and food generally fell across the state since we traveled and ate out less this last year.

The healthcare industry in Montana stumbled early on in the pandemic, which is surprising because there was high demand for those services and it’s a sector that’s normally thought to be recession-proof.

Rachel Cramer: BBER economists say they can point to a reason why that didn’t happen last year. During the early stage of the pandemic, health care providers delayed or cancelled non emergency, elective or routine medical services to shore up personal protective equipment and prepare for a surge in COVID-19 patients.

And then even when they did offer those services again, a lot of people were hesitant to seek out care. That led to really substantial revenue losses for many health care providers and furloughs and reduced hours for some health care workers last spring.

“This irony came up that during the most severe health crisis of our lifetimes, of the past 100 years, that health employment would actually be dropping off,” Robert Sonora, director of Health Care Research at BBER, says.

Rachel Cramer: In April, Kalispell Regional Healthcare, which employs more than 4,000 people furloughed roughly 600 employees.

Sonora says Montana’s health care employment saw a sharp recovery in the summer and by November, health care employment was actually higher than it had been in early March for Cascade, Gallatin, Ravalli and Yellowstone counties. Silver Bow and Missoula counties were still a little behind those pre pandemic numbers.

Megan, tech is a hot topic in Montana and was featured prominently in plans released by Governor Greg Gianforte about increasing wages in the state. How has that industry done through the pandemic?

Megan Myscofski: Christina Henderson, who’s the executive director of the Montana High Tech Alliance, says the industry is, in her words, “holding steady” since many workers in that industry can work from home and that it will likely bounce back quickly as the pandemic ends. She also says Montana’s tech industry is growing at nine times the rate of the rest of the economy and pays twice Montana’s median wage.

Rachel Cramer: It’s important to point out here that not all tech companies in Montana did well during the pandemic. Class Pass and Submittable, both based in Missoula, had significant layoffs in the spring.

Megan Myscofski: That’s right. And not all areas can benefit from the growth that is happening.

Henderson says the lack of broadband in some parts of the state hold them back.

Though, the rise in remote work this past year has also made it easier for tech workers to move to Montana. It’s an attractive place to live. But the influx of people to the state puts a strain on the housing market.

Rachel Cramer: Speaking of housing, this is another area where the recession caused by the pandemic is different than other recessions.

Megan Myscofski: When economic uncertainty spikes, demand for housing and durable goods typically goes down. The opposite happened in 2020.

BBER Economist and Director of Forecasting Brandon Bridge says Montana, like a lot of the country right now, has a “booming seller’s market.” He says the number of days houses spend on the market has kept falling, even into the winter, when sales typically take longer than the rest of the year.

That competition means higher prices.

We're seeing affordability continue to get worse, and on top of all that, we still have all the economic uncertainty of 2020 still kind of looming over our heads,” Bridge says.

Megan Myscofski: Bridge says construction on homes is lagging behind demand and first-time home buyers are struggling to find homes in their price range.

John Brauer, the Managing Broker at Windermere Real Estate, says that one in three sales his company made in 2020 was to an out-of-state buyer.

To say that Missoula, Montana has not been discovered would just not be true anymore,” Brauer says.

Rachel Cramer: Of course, all of that construction requires a lot of lumber. Todd Morgan, director of the Forest Industry Research Program at BBER, says the lumber market in the U.S. saw historic price spikes in 2020, partly due to a boom in home renovations and construction.

“New housing starts slowed down in March and April but came back pretty strong the rest of the year,” Morgan says.

Rachel Cramer: Morgan says high demand coupled with low supply drove up lumber prices.

Major timber regions of the U.S suffered production slowdowns last spring and British Columbia has had a lower supply of timber with bark beetle kill off and wildfires. In MT, log prices were roughly 8 percent higher than they were in 2019.

But Morgan says Montana’s forest industry experienced some slight declines in earnings and employment in 2020. RY Timber indefinitely closed its sawmill in Townsend mid year, which affected 70 employees. In St. Regis, Idaho Forest Group closed its sawmill for several months as part of a planned equipment upgrade.

Morgan says Montana had more than 7,600 mill and forest workers in 2020, which is about a 10 percent increase from a decade ago. He says most of the growth has been in the forestry support side, which includes wildland firefighting, tree planting and consulting.

Looking ahead, Morgan predicts demand for wood products will stay strong in 2021 with new home construction and repairs.

Megan Myscofski: So, we all know more people were sticking close to home last year. How did that affect Montana’s tourism industry?

Rachel Cramer: Jeremy Sage with the Institute for Tourism and Recreation Research says out of state travelers dropped by ten percent in 2020 compared to the year prior. But the impact of the pandemic on Montana’s tourism industry is really a story of the haves and have-nots. It depends on the industry sector and the location.

For example, a lot of hotels took a really big hit without conferences, weddings, sports tournaments and a lot of tourists who came to Montana also opted to camp rather than stay in hotels. From April through June, the bed tax from hotels and other forms of lodging fell by 57 percent.

During the seminar, a hotel manager in Helena said she missed Canadian tourists, something that was echoed by the executive director of the Bear Paw Development Corporation in Havre. The U.S. Canadian border has been closed to non-essential travel since mid March.

But a lot of outfitters, guides and retailers around Yellowstone and Glacier national parks reported doing better than they expected.

After its 7 week COVID-19 related closure in the spring, Yellowstone experienced increased visitation over 2019 in every month from Jul. to Nov., and Sept. and Oct. set visitation records. Glacier National saw fewer visitors than normal during the summer but record visitation in Oct. and Nov.

ITRR’s Jeremy Sage says there’s a lot of uncertainty in the tourism sector, but some of the trends from last year, like more people going on road trips in the U.S., travelling in small groups, are expected to continue for a while.

“We expect through 2021 to see leisure travel returning a bit sooner than business travel so that family vacation starting sooner than large conferences, than the large seminars taking place in person,” Sage says.

Rachel Cramer: Sage says travel spending in the U.S. is not expected to return to pre-pandemic levels until at least 2023.

Megan Myscofski: Fewer travellers, more people working from home also took a toll on the oil and gas industry.

Rachel Cramer. That’s right: Last year we saw global demand for petroleum fall which suppressed prices. The oil collapse dominated Richland County’s wage losses during the first half of 2020.

And coal production in Montana fell about 20 percent last year compared to the year prior. Some of the factors are decreased economic activity during the pandemic, competition with natural gas and renewables, and growing pressure to reduce greenhouse gas emissions.

At the beginning of 2020, the Colstrip power plant in Rosebud County ceased operations for two of its four coal fired electricity generation units as part of a settlement. Puget Sound Energy and Talen Energy in 2019 said the units were uneconomical due to rising coal costs and competition with natural gas and renewables. Northwestern Energy decided not to try to buy Puget Sound Energy’s share of unit 4.

BBER predicts hard times ahead for coal and oil.

Megan Myscofski: What about agriculture?

Rachel Cramer: Montana State University Economist Kate Fuller says the data for 2020 is still coming in.

“But the big story here is government payments. They are a lot larger than any time in recent history. The U.S. expects government payments as a whole to go up 107 percent from 2019,” Fuller says.

Rachel Cramer: Federal payments are projected to account for 40 percent of U.S. net farm income. Fuller says the majority of those payments are related to programs funded with federal coronavirus relief dollars.

The big one was the Coronavirus Food Assistance Program or CFAP, which provides direct relief to producers who have faced price declines and additional marketing costs due to COVID-19. The bulk of CFAP money that came into Montana was for cattle producers.

The second was the Paycheck Protection Program, which offered forgivable loans to keep people on payroll during the pandemic. The early part of 2020 also included some spillover payments from a program created to help ag producers hurting from retaliatory tariffs from the trade wars.

Looking ahead, Fuller says prices for wheat, barley, pulse crops and hay are looking steady to slightly higher while prices for cattle are expected to be higher.

Megan Myscofski: BBER’s Patrick Barkey says the impacts of the pandemic last year looked slightly different in each county, but there were some interesting outliers.

Rachel Cramer: Yep, one was Hill County up on the Hi-Line.

“Many pieces of Hill County actually rode out in terms of the worst part of the downturn, rode out the downturn in fairly good shape, with the huge exception of accommodations and food, and to some extent healthcare,” Barley says.

Rachel Cramer: Barkey says the border closure with Canada to non essential travel hit Havre’s hospitality sector, but jobs related to government, the railroad, construction and manufacturing did well.

He says Fergus County was also an outlier in the state.

“In Fergus County you had a very different pattern, you had some very, very significant interruptions in construction projects and also in manufacturing. Many of these were supply chain related,” Barkey says.

Rachel Cramer: Lewis and Clark County, saw a much bigger downturn in earnings from government jobs compared to other counties. Patrick Barkey said that was connected to the shutdown of schools and lack of childcare options, meaning people with government jobs scaled back on work to take care of their kids.

Gallatin County also saw a greater hemorrhaging of accomodation and food industry wages compared to other counties in Montana.

Megan Myscofski: Looking ahead, BBER is forecasting an economic growth rebound in 2021 with people eager to go out and spend money, but COVID-19 remains the wildcard.

For Montana Public Radio, I’m Megan Myscofski.

Rachel Cramer: And for Yellowstone Public Radio, I’m Rachel Cramer.