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Missoula County's economy is slightly underperforming the statewide average, and housing affordability here has declined since 2012. However, the construction and manufacturing industries have been bright spots recently, powering job and wage growth.

The Bureau of Business and Economic Research presented its 41st annual Economic Outlook Seminar at the Hilton Garden Inn on Friday morning, and BBER Director Emeritus Paul Polzin said Missoula County's construction industry started strong in the first half of 2015, the most recent period for which reliable data is available.

"It looks like we finally have a little life in the construction industry in Missoula," he said.

Todd Morgan, the director of forest industry research at BBER, said Missoula County has the brightest outlook for growth in manufacturing in the state. Since 2012, growth has occurred in manufacturing in Missoula, in both worker earnings and employment.

"The outlook in Missoula is the best statewide," Morgan said. "It's very positive. Half of the firms here said they expect to increase employment, and 56 percent of firms said they expect to make a major capital improvement in 2016, and nearly half did last year."

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In Missoula, UM and other state government accounts for 24 percent of the economy, while trade and medical accounts for 17 percent. Those industries are both predicted to have stable growth in the coming year.

There has been a definite softening in the trucking and rail industries because fewer goods are being transported across Montana, Polzin added. Growth has occurred in professional services like law offices and financial advising, and retail and wood products are predicted to be stable in 2016.

Ravalli County's growth is right about average for the state.

"The good news for Ravalli County is there is growth in Missoula County, because commuters who work in Missoula make up 54 percent of the economy in Ravalli County," Polzin said. "Those are people who work in Missoula but live and spend in Ravalli County."

Bryce Ward, the director of health care research at the BBER, talked about the future of the industry, which is hugely important to the Missoula economy.

He said the national health care economy is projected to grow faster than the nation's gross domestic product during the next decade because of insurance expansion, aging populations and innovation. Montana's population could add $2.3 billion to health care spending by the year 2030, Ward said, but the big unknown is whether health care spending per capita will grow, shrink or remain constant.

It is almost certain that in the next 10 years the number of health care jobs in the state will expand by 7,000, he said, and because the average age of physicians in Montana is the oldest in the nation, 16,000 jobs in the industry will need to be filled.

In Missoula, health care employment accounts for 15 percent of both payroll and employment. From 2004 to 2014, there was a 24 percent increase in health care employment.

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Patrick Barkey, director of the BBER, gave an overview of the state and U.S. economy.

"Growth in Montana has shifted west," he said. "Growth is in Missoula, Ravalli County and Flathead County."

The labor market slackness has largely disappeared and the state has reached full employment, he said. Wage growth far outpaced job growth in Montana last year.

"That, to me, is evidence that Montanans are working more hours and more Montanans are working," Barkey said.

Single-family housing starts are trending upward in the western part of the state, but still down from the peak in 2005.

"We still have along way to go for our housing starts to get back to where we were in '05," Barkey explained. "But 2005 was kind of a frothy time."

There has been a remarkable recovery in the retail industry, powered both by visitors and Montanans buying more merchandise from brick-and-mortar stores, he said.

"Construction, manufacturing and visitor spending will continue to be bright spots," he said. "Impacts of the energy price drop have yet to be fully felt."

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The keynote speaker was Doug Young, a professor emeritus at Montana State University. He gave a speech on how rising property taxes are affecting the economy.

Young said many people don't understand the property tax system and Montana has one of the most complicated classification systems in the country. He added that most of the money comes from residential property and the majority of it – $851 million in Montana – pays for education.

The tax rate varies from city to city due to mill levies and special improvement districts, he said. Residential property tax rates have increased from 1.5 percent of average personal income to 2 percent over the past 20 years. Missoula County has 800 mills levied including SIDs, behind only Lewis and Clark County and Silver Bow County. Bozeman has the lowest tax rate in the state of any major city.

"If you have two houses of equal value, one in Missoula and one in Bozeman, the Missoula house pays 26 percent more in taxes than the one in Bozeman," Young said. However, Missoula only gets $1.57 per person for each mill levied compared with $2.15 in Bozeman.

The city of Missoula spent $807 per capita in fiscal year 2014, more than any city in the state. Young's point was that some places choose to tax and spend more than others.

"This is a nice place," Young said of Missoula. "My kids came here for swim meets outdoors. It's nice. There are benefits to spending."

Norma Nickerson, the director of the UM Institute for Tourism and Recreation Research, said tourism spending was down last year despite predictions of growth.

Nonresident visitor numbers were up 8 percent, but they spent 8 percent less money. However, she said only 5 percent of tourism business owners expect a decrease in 2016.

She said Missoula's plans for a fully connected bike path over Reserve Street to the Bitterroot Valley probably will boost tourism here.

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