A Tale of Two Years: Montanas Economic Slowdown Patrick M. Barkey, - - PowerPoint PPT Presentation

A Tale of Two Years: Montana’s Economic Slowdown

Patrick M. Barkey, Director Bureau of Business and Economic Research University of Montana

4%

FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Change $123.668 ($145.572) ($180.823) $155.413 $88.396 $206.668 ($0.578) $122.609 ($78.365) ($250) ($200) ($150) ($100) ($50) $0 $50 $100 $150 $200 $250 Millions

Figure 1 (Source: Legislative Fiscal Division) State General Fund Revenue Collections Year over Year Change

Was 2016 as Bad as Tax Data Suggest?

• Weak growth coincided with extraordinarily weak growth in the U.S.

economy

• 2016 will be the second consecutive year of double-digit declines in

Montana farm net earnings

• Energy woes continue
• Dollar’s surge continues to pressure exports

Examining the Growth Slowdown

• Complete economic data not yet available
• Data through the first half of 2016 consistent with much weaker

growth

• Wage growth is weak, job growth is reasonable
• Predicting tax collections is much more complicated than predicting

economic growth

QCEW Wages Average 63.5% of NonFarm Earnings

10 20 30 40 50 60 70 80 90 100

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Growth Between Non-Farm Earnings and QCEW Wages is High (correlation = .9)

• 4
• 2

2 4 6 8 10

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Non-Farm QCEW

Wage Growth, Percent, Montana 2015H1 – 2016H1

• 4
• 2

2 4 6 8 10

Total Construction Wholesale Trade

• Transp. and Warehousing

2015H1 2015H2 2016H1

Real Wage Growth, Total 2015H1 – 2016H1

• 40
• 20

20 40 60 80 100 120 Cascade Flathead Gallatin Lewis & Clark Missoula Silver Bow Yellowstone Rest of MT 2015H1 2015H2 2016H1 $ Millions Growth Computed Versus Year-Ago Levels

Real Wage Growth, Construction 2015H1 – 2016H1

• 5

5 10 15 20 25 30 35 40 Cascade Flathead Gallatin Lewis & Clark Missoula Silver Bow Yellowstone Rest of MT 2015H1 2015H2 2016H1 $ Millions Growth Computed Versus Year-Ago Levels

Real Wage Growth, Mining 2015H1 – 2016H1

• 60
• 50
• 40
• 30
• 20
• 10

10 Cascade Flathead Gallatin Lewis & Clark Missoula Silver Bow Yellowstone Rest of MT 2015H1 2015H2 2016H1 $ Millions Growth Computed Versus Year-Ago Levels

Real Wage Growth, Manufacturing 2015H1 – 2016H1

• 4
• 2

2 4 6 8 10 Cascade Flathead Gallatin Lewis & Clark Missoula Silver Bow Yellowstone Rest of MT 2015H1 2015H2 2016H1 $ Millions Growth Computed Versus Year-Ago Levels

Real Wage Growth, Wholesale Trade 2015H1 – 2016H1

• 8
• 6
• 4
• 2

2 4 6 8 10 12 Cascade Flathead Gallatin Lewis & Clark Missoula Silver Bow Yellowstone Rest of MT 2015H1 2015H2 2016H1 $ Millions Growth Computed Versus Year-Ago Levels

Real Wage Growth, Retail Trade 2015H1 – 2016H1

2 4 6 8 10 12 Cascade Flathead Gallatin Lewis & Clark Missoula Silver Bow Yellowstone Rest of MT 2015H1 2015H2 2016H1 $ Millions Growth Computed Versus Year-Ago Levels

Real Wage Growth, Professional Services 2015H1 – 2016H1

• 4
• 2

2 4 6 8 10 12 14 16 Cascade Flathead Gallatin Lewis & Clark Missoula Silver Bow Yellowstone Rest of MT 2015H1 2015H2 2016H1 $ Millions Growth Computed Versus Year-Ago Levels

Real Wage Growth, Health Care 2015H1 – 2016H1

• 5

5 10 15 20 25 Cascade Flathead Gallatin Lewis & Clark Missoula Silver Bow Yellowstone Rest of MT 2015H1 2015H2 2016H1 $ Millions Growth Computed Versus Year-Ago Levels

Growth in Income Tax Withholding Often Exceeds Wage Growth

• 15
• 10
• 5

5 10 15 20 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 Withholding Wages 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 Percent

Percent Change, Wages and Withholding by Fiscal Year

• 2

2 4 6 8 10 12 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Wages Withholding 2004-2015 Average Percent Growth: Wages: 4.5% Withholding: 5.7%

Looking to 2017

• U.S. economic growth is a wild card
• Global growth looks weak
• Prospects for exports are mixed
• Another weak year for commodities
• Consumer spending, residential construction, visitor spending, and

health care have upside potential

• New leadership in DC brings change and uncertainty