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Slow economic growth forecast for 2010; Missoula will soon be largest city in Montana

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We are inching our way out of the recession, and in 2010 Missoula will see slow economic growth.

That was the message given by regional economist Larry Swanson and several leaders of Missoula's business community at Thursday's winter Missoula Business Forum.

The quarterly presentation focused on what happened to the Missoula economy in 2009 and where it is headed in 2010.

At Southgate Mall, which draws 800,000 shoppers from across Idaho and western Montana, stores started seeing an increase in sales - up 2 percent - in the last fiscal quarter of 2009 and early holiday sales look strong, said Tim Winger, mall manager.

The coming year holds more promise, he said, as national retailers talk about expanding in the next 24 months.

Sales at Missoula's downtown businesses have been down, but profits have been up, said Kim Klages-Johns, owner of J. Elaine's and a member of Missoula's many downtown business organizations. This trend, she said, was due in large part to business owners who have streamlined operations.

In general, retailers who are hardest hit by the recession are shops that specialize in women's ready-to-wear clothing, Johns said.

Women tend to provide for their families before they spend money on themselves; in a tight economy, women don't buy for themselves, Johns said.

That trend holds true at the mall, Winger said, adding: "Mom is going through a recession, but the kids aren't."


Missoula's home sales have become more robust toward the end of 2009, said Brint Wahlberg, president of the Missoula Organization of Realtors.

During November 2008, there were 32 sales in the Missoula urban area compared to 83 during November 2009.

The median price of homes dropped by $14,000 in 2009, and the median sale price was $200,000, compared to $214,000 in 2008.

"Right now we are looking at these sales numbers, and we have some closings," Wahlberg said. "With those closings we will be at 900 sales for the year, and that's a 2 percent volume increase from last year."

The heart of the home sales market is the $275,000-and-under market, he said, and that will likely continue in 2010.


From a banking perspective, the economy will have a slow and steady recovery, said Sheila Lund, a real estate loan officer and vice president of First Security Bank. While lending practices have tightened considerably over the past year, loans are still being made.

About 70 percent of the bank's lending last year was associated with refinancing mortgages and 30 percent was connected to new home purchases. That's the experience of many of the region's lenders, Lund said.

Borrowing from an adage used within her industry, Lund told the audience the economic recovery can be summed up this way: "You can chill the champagne, but don't uncork it yet."

Because Montana was among the last states in the nation to be pulled into the recession, it will be among the first ones out, Swanson said.

As employment trends have proved for the past three decades, Missoula's unemployment rate will peak during January and February, and then fall substantially through the spring and summer.


The closure of Smurfit-Stone Container Corp. at the end of the month will have an impact on the new year, but because Missoula's economy has grown at a rapid pace over the past 20 years and has become a diversified economic hub, the mill's closure and the ripple effect of the unemployed 417 workers won't derail the local economy, according to Swanson, director of the Center for the Rocky Mountain West at the University of Montana.

Statistical data also shows that on a month-to-month basis, Missoula can add or subtract 1,500 jobs because of the seasonal nature of the region's jobs.

"We can absorb those fluctuations, Swanson said, because "we've worked into a larger employment base."

"Closures (like Smurfit) are a hit, but not as big as they once were when we were a smaller economy" 25 to 30 years ago.

Much of Montana's economic growth will continue to come from population clusters in small urban centers, like Missoula, and growth for the next 20 years will continue to spring from expansion in the sectors of education, health care, business and professional services, and retail.

According to data from the last U.S. Census, Missoula's population, including the 50-mile zone around the urban corridor, was 140,000, making it the second-largest community in the state after Billings, which was counted at 142,000.

When the 2010 census is completed and the data is released in 2012, Missoula's population within the 50-mile zone will be around 160,000, making Missoula the largest community in the state.


The size of our economy is measured by personal income, and Missoula has evolved into a $3.4 billion economy.

In 2008 and 2009 personal income levels flattened out, and that trend will continue through out 2010, Swanson said.

It's not good when that happens, but it's not the end of the world, he said.

"We've been through this before in the late 1980s and early 1990s," he said.

As Missoula moves forward, the service sector - such as non-hospital-related health care services - will see growth, while manufacturing will continue to decrease as it has for the past 30 years.

In the past three decades as the economy has expanded, manufacturing, which once represented 14 percent of Missoula's business sector, has shrunk to 6 percent of the economy.

The single biggest piece of the growing economy is in professional and business services, and health care services represent 50 percent of our economy, Swanson said.

This is good news.

According to national economic surveys, these are the areas that will see the most expansion, and because Missoula is already moving in that direction, it will benefit all the more as demands and funding increase in these areas.

Moving forward, Missoula would be well-served if the community invests in expanding and leveraging the things that make this community unique and attractive, Swanson said.

Missoula is known for its recreational opportunities and as a cultural hub.

Working to embellish Missoula's core strengths will not only make the city more attractive to new businesses, but it will attract younger residents and ensure a quality workforce.

Three things that will best assure our future, Swanson said, is to invest in workforce development and education, improve our infrastructure and transportation systems, and continue to build up our arts and cultural amenities.


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