Montana economist: ‘The economy is running very warm, if not hot’

(Daily Montanan) The unemployment rate dropped 0.1 percent to 3.6 percent in one month, and economist Patrick Barkey said Montana is “dabbling with full employment.”

“There’s lots of cash in the economy, everything from personal income gains, savings that people accumulated over the pandemic, strong demand for labor, (and) wages going up for entry-level jobs,” said Barkey, head of the Bureau of Business and Economic Research at the University of Montana. “There’s every indication that the economy is running very warm, if not hot.”

Gov. Greg Gianforte’s office released the unemployment figures Friday, also noting the corresponding rate for the U.S. was 5.4 percent. The news release said the labor force grew as well, although inflation did too, 4.3 percent in July over the year.

“Montana continues to attract workers back into our labor force, helping to alleviate pressure on employers who are looking to hire,” said Gianforte, a Republican, in a statement. “This report is good news for Montana businesses in the midst of the summer travel season and good news for workers who are enjoying higher wages as our economy makes a comeback from the COVID-19 pandemic.”

The coronavirus also is making a comeback in Montana and across the country, with hospitals seeing shortages of ventilators, beds and linens, and cases spiking. Public health officials are renewing calls on the public to mask up, get vaccinated and tighten their social circles.

Barkey said uncertainty exists, as does a continuing public health crisis. However, he said COVID-19 and the economy are much less connected than they were during the first wave of the pandemic.

“The issue from the business point of view is workforce,” he said. “I’ve been talking to business people for the last week, and it’s just amazing, the workforce issues. There are companies paying really high wages in Montana that cannot attract workers. And it’s not totally a new problem. It existed before the pandemic. But it has caught a lot of people by surprise.”

The balance of power between workers and employers has swung in favor of workers, he said. People are quitting their jobs to take better jobs, retiring, or leaving the workforce because a spouse is earning more or their stock portfolio is healthy enough.

“And most of this is quite surprising because the old cliche about recessions is the economy takes the elevator down and the stairs back up,” Barkey said. “And this is almost — not quite, but almost — taking the elevator both ways.”

The recession was brief, lasting two months, although it created a lot of disruption in many industries, he said. But he said wages to people who still worked in aggregate were higher, although he did not want to be unsympathetic to those in the minority who have been unable to return to the labor market because of fear of infections.

“We have continued to have an economy that has some capacity issues and some supply issues,” he said. “We’ve got issues in housing. We’ve got issues in workforce. And I’m just starting to see the first glimmer of stories about things possibly cooling off.”