U.S. and Montana Economic Outlook Patrick M. Barkey, Director Bureau of Business and Economic Research University of Montana
Is the Story of the U.S. Economy Changing? Old Story Better growth next year Where have all the workers gone? Inflation? What inflation? Real estate sellers market Central banks printing money 2018 Story U.S. growth expected to surge in 2 nd quarter of 2018 to > 4% Labor force finally registering meaningful growth Consumer price index up 2.8% in June from year ago levels Housing inventories creeping upward Europe, yes. U.S. monetary policy starting to look normal
U.S. Economic Growth in Context Second quarter surge in U.S. economy is temporary, impacted by one-time increases in exports to avoid new tariffs Normal U.S. growth is now stronger Signs point to global growth weakening Rhetoric of U.S. trade policy is harsh, reality is not as bad yet. Some tariffs have been good for U.S. industries. Labor markets are very tight will wage increases spark inflation?
155 145 Growth Much Slower Than Past Cycles Real GDP Index Apr '60 - Dec '69 Jul 90 Mar 01 135 125 Nov 73 Jan 80 Jul 81 Jul 90 115 Jan 80 Jul 81 Dec 69 Nov 73 Mar 01 Dec 07 Dec 07 - Now 105 95 1 2 3 4 5 6 7 8 9 10 Source: U.S Bureau of Economic Analysis Years
Do Inverted Yield Curves Predict Recessions?
Wage Growth Remains Subdued Contributions by Source, Percentage Points Percent 5 4 3 2 1 0-1 -2-3 -4 2000-07 2008-09 2010-11 2012-13 2014-15 2016-17 Inflation expectations Productivity Labor Share Slack Other Source: Standard and Poor
Montana s Economic Growth: Where Is The Sizzle? Job Growth Strong, Labor Markets are Tight Construction Cranes are Everywhere Eastern third of the state is suffering Agriculture producers and feeling pain State tax revenue growth improves, but below forecasts
Montana General Fund Revenue Collections, FY15-FY17, $ Millions Source: Montana Department of Revenue Fiscal Year FY2016/FY2017 2015 2016 2017 Change Pct. Change Individual Income Tax 1180.5 1181.0 1178.0-3.1-0.3% Estimated Payments 271.2 278.5 271.3-7.3-2.6% Refunds -256.1-275.3-289.1-13.8 5.0% Withholding 875.2 900.5 940.9 40.4 4.5% Property Tax 258.0 275.0 272.3-2.7-1.0% Corporation Tax 168.0 119.0 125.0 6.0 5.1% Oil and Gas Prod. Tax 187.8 95.5 98.1 2.6 2.7% Coal Severance Tax 61.8 54.5 55.4 0.8 1.5% General Fund Revenues 2169.1 2110.4 2134.7 24.3 1.1%
Montana General Fund Revenue Collections, FY15-FY18, $ Millions Fiscal Year FY2017/FY2018 2015 2016 2017 2018 Change Pct. Change Individual Income Tax 1180.5 1181.0 1178.0 1300.8 122.8 10.4% Estimated Payments 271.2 278.5 271.3 319.8 48.5 17.9% Refunds -256.1-275.3-289.1-295.5-6.4 2.2% Withholding 875.2 900.5 940.9 995.1 54.2 5.8% Property Tax 258.0 275.0 272.3 286.5 14.2 5.2% Corporation Tax 168.0 119.0 125.0 176.1 51.1 40.9% Oil and Gas Prod. Tax 187.8 95.5 98.1 111.3 13.2 13.4% Coal Severance Tax 61.8 54.5 55.4 58.3 2.9 5.3% General Fund Revenues 2169.1 2110.4 2134.7 2338.0 203.3 9.5% Source: Montana Department of Revenue
Relationship Between Tax Receipts and Personal Income Far From Perfect Source: BBER
Source: Bureau of Economic Analysis
Source: Bureau of Economic Analysis
Source: Bureau of Economic Analysis
Source: Bureau of Economic Analysis
Source: Bureau of Economic Analysis
3,000 2,500 2,000 1,500 1,000 500 0-500 -1,000 Western Montana Job Growth Strongest Growth in Jobs, 2017 and 2018 Source: Bureau of Labor Statistics 2017 2018
Flathead: 3.6% Fallon: -3.7% Gallatin: 5.1% Yellowstone: -0.3%
Valley County vs. Montana Real Payroll Wages Index, 2012Q3 = 100
Richland County vs. Montana Real Payroll Wages Index, 2012Q3 = 100
Flathead County vs. Montana Real Payroll Wages Index, 2012Q3 = 100
Yellowstone County vs. Montana Real Payroll Wages Index, 2012Q3 = 100
Gallatin County vs. Montana Real Payroll Wages Index, 2012Q3 = 100
Silver Bow County vs. Montana Real Payroll Wages Index, 2012Q3 = 100
Lewis & Clark County vs. Montana Real Payroll Wages Index, 2012Q3 = 100
Cascade County vs. Montana Real Payroll Wages Index, 2012Q3 = 100
Missoula County vs. Montana Real Payroll Wages Index, 2012Q3 = 100
Missoula: 25.2% Richland: -18.0% Gallatin: 9.4% Yellowstone: -10.1%
Montana Labor Market Still Tightening Unemployment Insurance Claims, 2014-18 18,000 16,000 14,000 12,000 10,000 2018 2015 2014 8,000 6,000 4,000 2017 2016 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: Montana Department of Labor and Industry
Montana s Key Industries Agriculture producers battered by prices, drought Wood products companies encouraged by prices, salvage sales Tech expansion, construction healthy in western Montana Uncertainties in DC weigh on land use, health care Labor shortages impacting construction Real estate, financial institutions performing well
Growth in Nonfarm Earnings, Montana, 2015-2021 Percent 5 4 3 2 1 0 Actual Projected 3.9 4.0 2.6 2.5 2.3 2.6 1.6 1.7 1.8 1.8 15 16 17 18 19 20 21 Source: BBER and U.S. Bureau of Economic Analysis Source: BBER and U.S. Bureau of Economic Analysis
Questions?