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

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Figure 1 (Source: Legislative Fiscal Division) State General Fund Revenue Collections Year over Year Change Millions $250 $200 $150 $100 $50 $0 ($50) ($100) ($150) ($200) ($250) 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)

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 100 90 80 70 60 50 40 30 20 10 0 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) 10 8 6 4 2 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 -2 -4 Non-Farm QCEW

Wage Growth, Percent, Montana 2015H1 – 2016H1 10 8 6 4 2 0 Total Construction Wholesale Trade Transp. and Warehousing -2 -4 2015H1 2015H2 2016H1

Real Wage Growth, Total 2015H1 – 2016H1 $ Millions 120 100 80 60 40 20 0 Cascade Flathead Gallatin Lewis & Missoula Silver Bow Yellowstone Rest of MT -20 Clark -40 2015H1 2015H2 2016H1 Growth Computed Versus Year-Ago Levels

Real Wage Growth, Construction 2015H1 – 2016H1 $ Millions 40 35 30 25 20 15 10 5 0 Cascade Flathead Gallatin Lewis & Missoula Silver Bow Yellowstone Rest of MT -5 Clark 2015H1 2015H2 2016H1 Growth Computed Versus Year-Ago Levels

Real Wage Growth, Mining 2015H1 – 2016H1 $ Millions 10 0 Cascade Flathead Gallatin Lewis & Missoula Silver Bow Yellowstone Rest of MT -10 Clark -20 -30 -40 -50 -60 2015H1 2015H2 2016H1 Growth Computed Versus Year-Ago Levels

Real Wage Growth, Manufacturing 2015H1 – 2016H1 $ Millions 10 8 6 4 2 0 Cascade Flathead Gallatin Lewis & Missoula Silver Bow Yellowstone Rest of MT -2 Clark -4 2015H1 2015H2 2016H1 Growth Computed Versus Year-Ago Levels

Real Wage Growth, Wholesale Trade 2015H1 – 2016H1 $ Millions 12 10 8 6 4 2 0 Cascade Flathead Gallatin Lewis & Missoula Silver Bow Yellowstone Rest of MT -2 Clark -4 -6 -8 2015H1 2015H2 2016H1 Growth Computed Versus Year-Ago Levels

Real Wage Growth, Retail Trade 2015H1 – 2016H1 $ Millions 12 10 8 6 4 2 0 Cascade Flathead Gallatin Lewis & Missoula Silver Bow Yellowstone Rest of MT Clark 2015H1 2015H2 2016H1 Growth Computed Versus Year-Ago Levels

Real Wage Growth, Professional Services 2015H1 – 2016H1 $ Millions 16 14 12 10 8 6 4 2 0 Cascade Flathead Gallatin Lewis & Missoula Silver Bow Yellowstone Rest of MT -2 Clark -4 2015H1 2015H2 2016H1 Growth Computed Versus Year-Ago Levels

Real Wage Growth, Health Care 2015H1 – 2016H1 $ Millions 25 20 15 10 5 0 Cascade Flathead Gallatin Lewis & Missoula Silver Bow Yellowstone Rest of MT Clark -5 2015H1 2015H2 2016H1 Growth Computed Versus Year-Ago Levels

Growth in Income Tax Withholding Often Exceeds Wage Growth Percent 20 15 10 5 0 Withholding -5 Wages -10 -15 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 2006 2012 2013 2014 2015 2016 2007 2008 2009 2010 2011

Percent Change, Wages and Withholding by Fiscal Year 2004-2015 Average Percent Growth: 12 Wages: 4.5% Withholding: 5.7% 10 8 6 4 2 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 -2 Wages Withholding

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