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Economic seminar highlights strong Montana growth, challenges with housing & labor

Economic Outlook Seminar
Posted at 7:03 PM, Jan 26, 2022
and last updated 2022-01-27 13:28:29-05

HELENA — Economists say there’s reason to expect another strong economic year in Montana, but challenges like housing and labor shortages aren’t going away.

The University of Montana’s Bureau of Business and Economic Research is hitting the road this winter for its annual Economic Outlook Seminar – sharing their latest economic data and forecasts for the state. On Wednesday, analysts brought the tour to the Delta Colonial Hotel in Helena.

BBER director Patrick Barkey said they’re predicting at least two more years of above-trend growth in the state, and in Lewis and Clark County. He said, for years, Helena’s economy was relatively stable, but its growth began to heat up even before the pandemic.

“I’m not sure we understand all of it,” he said. “It’s been the real wild card that has moved Lewis and Clark County employment up into the tier of growth closer to Missoula and Flathead and Yellowstone.”

That growth is coming with challenges, including a very tight labor market. Montana’s unemployment rate has fallen to a very low 2.5%, but the overall percentage of adults actively working or looking for a job is lower than it was before the pandemic. Barkey said, if the labor force participation was back at pre-pandemic levels, it would mean another 13,000 available workers.

One reason for the lower workforce participation rate has been older workers not taking another job. Federal data shows the participation rate among those 55 and older has declined 5% since the pandemic.

Cost of living has also increased. Barkey said the influx of federal spending and other government programs after the pandemic is likely to boost the Helena economy in the short term. However, he argued the burst of stimulus has also contributed to inflation, as it led to continued demand even as economic production fell during the height of COVID.

The main topic, though, was the need for more affordable housing. This year’s seminar is titled “Where Housing Is Headed.”

Barkey argued the huge spike in demand over the last two years only exacerbated existing housing issues in Montana – particularly that communities hadn’t built enough housing to keep up with needs.

“It accelerated the problem to the point where even people who aren’t in the market –even people who already own homes, were making their payments, they’re not impacted by price increases – have seen the impact of housing shortfalls in their local markets,” he said. “Why? Because their schools can’t hire teachers, because the company they work for can’t expand.”

Data shows home prices nationwide have increased by around 20% in 2021. That has been significantly higher in parts of Montana, especially Gallatin and Flathead Counties.

Cathy Burwell, president and CEO of the Helena Area Chamber of Commerce, says she’s seen a growing trend of people moving from the Bozeman area to Helena in search of more affordable housing.

“We think that prices are outrageously high right now,” she said. “They’re like a Californian coming to Montana; they think this is a hell of a bargain.”

There were an estimated 350 new single-family homes that began construction in Lewis and Clark County last year. However, Burwell said they would need 450 to 500 just to keep up with the demand.

“The builders are working as fast as they can,” she said. “They said that, if they do start a spec home, it’s sold before the foundation cures.”

During Wednesday’s presentation, those in attendance also heard a panel discussion on the housing issue, including state Rep. Llew Jones, R-Conrad; Liz Mogstad, Rocky Mountain Development Council’s affordable housing director; and Helena city manager Rachel Harlow-Schalk.

Mogstad questioned whether it’s feasible to build affordable housing in this market climate without grants or subsidies. She said the last couple of years have been difficult for their housing programs – especially after the institution of the eviction moratorium, when she says more than half of the residents in three of their properties stopped paying rent.

“I think it was a good intention that sort of spiraled out of control a little bit,” Mogstad said.

Jones, who owns a number of rental properties, echoed that concern, and he said the cost of building and maintenance has skyrocketed. He argued the housing issue is a “supply-side” problem, and subsidies won’t resolve it.

Harlow-Schalk said one major obstacle to affordable housing projects has been building the infrastructure needed to service them. She said the influx of federal American Rescue Plan Act funding will help them address the long backlog of water and sewer projects and provide new service for the affordable housing development planned adjacent to Our Redeemer’s Lutheran Church.

Helena was the second city to host the seminar this year, following Great Falls. They will also visit Missoula, Billings, Bozeman, Butte, Kalispell, Lewistown and Havre this winter.