(MTFP) Montana’s economy is rebounding quickly from the worst of the COVID-19 pandemic, Department of Labor & Industry economists write in a report released Wednesday — but between worker shortages, limited childcare options, rising housing costs and the persistent threat of the coronavirus, the state still has its share of storm clouds above the horizon.
The document, the 2021 installment of the department’s annual Labor Day report, is authored by staff economists and Chief Economist Barbara Wagner and compiles a wide array of statistics charting how Montana workers and businesses have fared since COVID-19 swung a wrecking ball through the state economy last year.
The key takeaway: The rebound is booming, to the point that tight labor markets are once again the most significant economic challenge facing Montana businesses.
“Montana’s economy is in the midst of a strong recovery from the pandemic recession, reflecting the enthusiasm of Montanans eager to see the end of the global pandemic,” the economists write.
They add: “The release of this pent-up demand, relaxed COVID-19 protocols, economic stimulus and higher income all contributed to surging customer demand this spring, leaving businesses scrambling to bring on enough workers to meet customer needs.”
The 2020 downturn, which saw Montana employment counts drop by 8.1% in a matter of weeks last year, was the fastest and largest downturn the state has seen since the early 1980s, the report says. However, the recovery has also been fast by historical standards, with employment returning to 2% below its pre-pandemic level by last September — a threshold that took more than two years to reach after the trough of the 2008 Great Recession.
Both the total payroll being paid to Montana workers and the state’s total employment levels are now within 1% of their pre-pandemic peaks, the economists say.
Montana ranked first in the nation for personal income growth in 2020, the report says, with average income in the state growing by 8.4%. The report attributes that trend to both wage growth and federal coronavirus relief programs like stimulus checks and the Paycheck Protection Program, the latter of which increased the income reported by business owners.
The economists attribute 2020’s notable wage growth in part to remote work, and in part to a tight labor market forcing employers to boost pay in an effort to attract and retain employees. They also say lower-wage jobs were disproportionately likely to be lost during the pandemic than higher-wage jobs, a trend that could be driving up the reported average.
On the whole, Montana wages grew 6.6% faster than inflation in 2020, the study authors say.
“Workers who were able to retain their employment throughout the pandemic likely experienced significant improvement in their standard of living with this extremely high real wage growth,” they write.
The economists also say the number of new businesses launched in Montana increased during the pandemic recovery, with more than 3,500 new business entities opening in Montana in 2020 representing the fastest rate of business creation in 10 years. They also say businesses opened in the last year provide work to more than 10,000 Montanans.
In part because of government assistance like the Paycheck Protection Program, the economists say, relatively few businesses seem to have closed as a result of the pandemic. The report says Montana’s business survival rate in 2020 was only 0.3% below the state’s long-term average.
On the flip side, the report notes that Montanans have had to contend with rising inflation, such as gas prices that are 20% higher in summer 2021 than in 2020. Home prices have also risen in much of the state. Citing a price index compiled by real estate company Zillow, the economists say Montana’s typical home price was $327,000 in the year ending in June 2021. That’s a 10.3% increase over the prior year, roughly on par with the typical increase nationally.
Home prices are significantly higher in some parts of Montana. In Gallatin County, which includes Bozeman, for example, the typical home value is now valued at more than $500,000.
“High home values in a state with one of the lowest average wages will be a primary challenge for Montana employers and workers in the coming years,” the authors write.
And then there’s the labor shortage, which the economists attribute to the state’s aging population, which means more retirement-age residents, as well as childcare shortages and lingering worker concerns about COVID-19.
“While vaccinations promise to minimize this labor force disruption, additional workers falling sick from COVID-19 reduces the number of work hours available to the Montana economy and creates uncertainties in staffing for many Montana businesses,” the economists write. “Keeping case counts low will benefit both the economy and worker health.”
Going forward, the state economists say Montana’s economic policy can look toward automation as a way to make the most of a limited worker supply. They say the state can also look for ways to make it easier for certain people to work by providing more training options, boosting childcare access, and helping employers find ways to accommodate workers with disabilities.
“The increased prevalence of remote work with flexible work hours offers great potential as a tool to tap into under-utilized workers and rural areas,” the economists write. “Finding solutions to engage more workers in the labor force will be a key part of continuing economic growth in Montana.”