Wage growth

What's driving growth in Missoula County.

Driven by a surge in the health care industry, Missoula County has experienced a rapid increase in wages recently. From 2014 to 2015, inflation-adjusted wages grew by 7.5 percent here.

Ravalli County actually experienced a higher wage growth, just over 8.5 percent, making it one of the fastest growing areas of the state in terms of the total dollars paid by employers to workers.

In 2014, the health care industry in Missoula County grew by slightly less than $5 million in inflation-adjusted wages. The industry then grew by roughly $23 million in 2015. There were also significant increases in the wages paid to temporary workers, public administration officials, retail and wholesale trade employees and those in the accommodation and food industry.

That’s according to Patrick Barkey, the director of the University of Montana’s Bureau of Business and Economic Research. He delivered the 2016 Economic Update at the Hilton Garden Inn in Missoula on Thursday, part of a multi-city tour to give business leaders and others insight into the state’s financial health.

“We're starting to see some more impressive growth here in Missoula County, but it’s very recent,” Barkey said. “It’s just starting up. Missoula County had a fairly mild but a fairly long recession. It wasn’t very deep, but it lasted an extra year because of (the closure of the Smurfit-Stone mill in 2010). We spent an extra year treading water.”

Barkey said that while the pickup in health care is primarily responsible for Missoula’s growth in wages, all industries except mining have produced wage growth.

“It’s been fairly broadly based,” he said. “Missoula’s growth has accelerated recently. Stay tuned. It’s short-lived but we sure like where it’s going.”

Barkey said tech activity has picked up here and the finance and business services industries are healthy. However, wood products manufacturers, Montana Rail Link and the University of Montana have been challenged financially.

“Residential construction is underwhelming,” he added. “It’s heavily tilted toward multi-family, but multi-family (construction) surges, then it’s gone. We would like to see more single-home construction.”

The numbers aren’t in for 2016 yet, but Barkey said he expects Missoula to outperform the state average for wage growth.

“That’s something Missoula County hasn’t done often in the last 10 years,” he said.

For Montana overall, Barkey said 2016 is not shaping up to be as good as 2015. Agricultural producers have seen prices for grain and other products drop, and the strong dollar means exports aren’t worth as much. Oil production activity, metal mining and coal mining have all slowed down considerably.

“It was a disastrous year for the U.S. coal industry,” Barkey said. Montana’s coal production dropped by a third from July 2015 to July 2016, which represents over 5,000 tons of coal. Wyoming, Illinois, Kentucky and West Virginia experienced similar drops.

A weak Canadian dollar means that fewer tourists are coming here, which Barkey said is “spoiling the party” for Montanans who depend on those dollars.

The bright spots for the state’s economy continue to be construction, manufacturing and visitor spending.

Wages grew faster than employment the past two years, and Montana’s unemployment rate was 4.2 percent in June. Barkey said that while some employers are struggling to find qualified workers, the labor market has been much smaller before.

“In 2007 just before the crash we had unemployment rates below 2 percent in some counties,” he said. “So we’ve seen tighter.”

While he wouldn’t call it a prediction, Barkey said he and other economists wouldn’t be surprised if the U.S. experienced an economic slowdown soon because the economy has, historically, been cyclical.

“There’s the old adage that what goes up must come down,” Barkey said. “If there were to be a downturn starting tomorrow, that would be historically about the right time for it to happen.

"Historically, we’re at the point where a business cycle might be ending. But the Federal Reserve still has their foot on the gas pedal because interest rates are very low.”

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