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Economic shake-up: some eastern and rural counties are growing faster than western and urban counties.

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Montana has experienced a radical shake-up in economic growth in the past few years, with some of the state's easternmost and rural counties growing faster than its western and urban counties.

Traditionally, western and urban counties such as Ravalli, Flathead, Gallatin, and Missoula have been in the top 10 for economic growth, while more rural counties have ranked lower. But newly released information from the U.S. Bureau of Economic Analysis paints a different picture.

New statistics show that the top three counties--in 2003-2004 percentage growth of nonfarm labor income--were Fallon (11.3 percent), Richland (10.7 percent), and Blaine (10.2 percent), all rural and eastern counties. Only Gallatin County--with the now-glitzy areas of Bozeman and Big Sky--squeaked into the top tier, at 6.8 percent, just barely making it No. 10. Other traditionally fast-growing counties were even lower than Gallatin. Flathead County ranked 14th at 5.5 percent; Ravalli County ranked 21st at 4.8 percent; and Missoula County was 40th at 2.3 percent.

The cause of this economic shake-up is the energy and natural resource boom that began in 2003. Fallon, Richland, and Blaine counties are all in Montana's "oil patch." Jefferson (No. 4) and Sweet Grass (No. 9) contain, or are adjacent to, major mining projects. Silver Bow County ranks an unexpected 17th because of the reopening of the Montana Resources Mine.

As mentioned in past issues of the Montana Business Quarterly, energy and other natural resource prices (especially copper) began to increase sharply in 2003, and have continued to rise since then. Almost immediately, oil exploration activity began in eastern Montana, and the copper mines in Silver Bow and Lincoln counties reopened. These activities have led to faster statewide economic growth and increased revenues to the state's treasury.

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For comparison, we have also presented the nonfarm labor income growth rates for 1999-2000 (Table 1). Note that six of the top 10 ranked counties are urban or in the western portion of the state: Ravalli, Gallatin, Flathead, Missoula, Sanders, and Lewis and Clark.

How long will the natural resource boom last? And when will we return to a rnore "normal" spatial pattern of economic growth? There are no easy answers. First of all, this natural resource boom is different from the oil price spikes the United States experienced in the 1980s and early 1990s. The recent rise in prices is attributed to rapid economic growth in China and other developing countries' increasing demand for energy and other natural resources. Increased worldwide capacity will require the opening of new mines and/or other methods to augment existing supplies. Past oil price spikes were mostly caused by supply restrictions associated with wars (the Gulf War) or geopolitical events (the OPEC oil boycott). Prices returned to "normal" once the supplies of crude oil were rebounded. Typically, price spikes related to demand factors last longer than those caused by supply restrictions.

There are, in addition, some very real risks associated with the current buoyant energy and natural resource prices. Anything that would reduce the worldwide demand for these items may bring the boom to an end. For example, the "Asian flu" (economic variety) outbreak of the late 1990s, sent Southeast Asian economies into a tailspin, creating a financial crisis. Also, China may be particularly susceptible to political instability; it is not a functioning democracy in the same league as the U.S. or European countries.

It will be interesting to compare trends in county non-farm labor income with those for county population in the coming years. The latest estimates still show western Montana leading in population growth. Population may be a lagging indicator, or--as we also think likely--the method used by the Census Bureau to make population estimates may take a while to incorporate economic changes.

Nonfarm labor income is used to measure the overall economic growth in an area.

A frustrating feature of federal statistics is that they may be out-of-date as soon as they are released. The 2004 county figures presented here are the latest available. 2005 numbers will not be available for another year. Based on the statewide data we do have, we are quite confident that the natural resources boom continued in 2005 and 2006.

Paul E. Polzin is director of The University of Montana Bureau of Business and Economic Research.
Table 1
Nonfarm Labor Income, Montana and Counties
2000-01 and 2003-04
(Percent Change in Constant Dollars)

 2004

 Percent
Rank Change County

 1 11.35 Fallon
 2 10.70 Richland
 3 10.15 Blaine
 4 9.05 Jefferson
 5 8.74 Carter
 6 7.72 Musselshell
 7 7.46 Madison
 8 6.96 Glacier
 9 6.85 Sweet Grass
10 6.81 Gallatin
11 6.59 Stillwater
12 6.47 Toole
13 5.56 Big Horn
14 5.52 Flathead
15 5.51 Golden Valley
16 5.23 Carbon
17 5.01 Silver Bow
18 4.99 Powder River
19 4.93 Chouteau
20 4.72 Park
21 4.67 Ravalli
22 4.52 Petroleum
23 4.41 Sheridan
24 4.17 Wibaux
 4.09 Montana
25 4.03 Yellowstone
26 3.86 Meagher
27 3.80 Lake
28 3.65 Cascade
29 3.63 Phillips
30 3.58 Wheatland
31 3.57 McCone
32 3.33 Hill
33 2.91 Custer
34 2.82 Prairie
35 2.74 Lewis and Clark
36 2.62 Garfield
37 2.60 Fergus
38 2.58 Lincoln
39 2.50 Deer Lodge
40 2.40 Missoula
41 2.23 Sanders
42 2.21 Treasure
43 2.20 Teton
44 2.17 Roosevelt
45 1.71 Daniels
46 1.70 Mineral
47 1.29 Valley
48 1.23 Dawson
49 1.04 Liberty
50 0.67 Judith Basin
51 0.51 Beaverhead
52 0.35 Broadwater
53 0.26 Powell
54 -0.73 Granite
55 -1.44 Rosebud
56 -1.44 Pondera

 2000

 Percent
Rank Change County

 1 24.21 Stillwater
 2 9.42 Ravalli
 3 8.20 Gallatin
 4 6.99 Toole
 5 6.52 Judith Basin
 6 6.44 Flathead
 7 6.11 Missoula
 8 6.02 Sanders
 9 5.54 Meagher
10 5.34 Lewis and Clark
11 5.05 Madison
12 4.58 DeerLodge
13 4.40 Lake
 4.25 Montana
14 4.24 McCone
15 4.03 Yellowstone
16 3.90 Prairie
17 3.75 Glacier
18 3.64 Blaine
19 3.44 Custer
20 3.23 Broadwater
21 3.22 Treasure
22 3.20 Big Horn
23 3.15 Golden Valley
24 3.08 Beaverhead
25 3.03 Fergus
26 2.82 Musselshell
27 2.22 Lincoln
28 2.19 Pondera
29 2.16 Hill
30 2.15 Powell
31 1.95 Jefferson
32 1.93 Liberty
33 1.77 Carter
34 1.47 Mineral
35 1.44 Rosebud
36 1.35 Chouteau
37 1.32 Valley
38 1.02 Cascade
39 0.54 Roosevelt
40 0.37 Wheatland
41 0.20 Phillips
42 0.12 Granite
43 -0.04 Sweet Grass
44 -0.42 Teton
45 -0.68 Dawson
46 -1.06 Sheridan
47 -1.20 Silver Bow
48 -1.35 Carbon
49 -1.45 Richland
50 -1.80 Daniels
51 -2.05 Park
52 -2.98 Petroleum
53 -3.97 Powder River
54 -6.35 Wibaux
55 -8.65 Fallon
56 -10.86 Garfield

Source: U.S. Bureau of Economic Analysis.
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Comment:Economic shake-up: some eastern and rural counties are growing faster than western and urban counties.
Author:Polzin, Paul E.
Publication:Montana Business Quarterly
Geographic Code:1U8MT
Date:Sep 22, 2006
Words:1224
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