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The shifting place of trade in Montana.

Major restructuring is underway in the U.S. economy. Among trade or non-good producing sectors such as retailing and services, employment is steadily increasing. Among nontrade sectors such as manufacturing, mining, and agriculture, employment is steadily declining. This shift in employment, underway since the late 1940s, greatly accelerated in the last decade.

Between 1979 and 1989, total employment in the United States increased by over 24 million, including both full- and part-time workers. Three-fourths of these new jobs are in retail trade or services, the nation's two largest trade sectors. Employment in retail trade increased by 27 percent, and in services by a whopping 56 percent. Meanwhile, in other sectors of the national economy, manufacturing employment (which reached an all-time peak in 1979) fell by 7 percent; mining employment fell by 16 percent; and employment in agriculture (excluding agricultural services) fell by 18 percent.

It's important to point out that this "continued shift of jobs into the service economy was not at the expense of manufacturing output, which remained at about 23 percent of GNP (Gross National Product) over the decade."[1] However, these employment trends reflect considerable restructuring of the U.S. economy, with major implications for the economic well-being of many American families and communities.[2]

Industry employment trends during the last two decades are portrayed in figure 1. Annual employment indexes are calculated for major sectors of the economy by dividing a sector's employment in a given year by its employment in a base year in this case, 1979. Employment is clearly shifting from nontrade sectors to services and retail trade in both the U.S. and Montana economies.

Figure 13 shows employment changes in the U.S. and Montana during the last ten years using more detailed, Standard Industry Classification (SIC) categories. Under this system, the economy is subdivided into ten major divisions and eighty-three different industry groups. The nation's single fastest growing industry among these eighty-three industry groups, as measured by employment, is "business services" (SIC 73). Since 1979, this industry has added nearly five million full- and part-time employees, an increase of over 120 percent.

Nine of the nation's fifteen fastest growing employment sectors are within the services division. Half the remainder (agricultural services and transport services) are service providers in other industry divisions. None is in manufacturing or mining.

Conversely, of the fifteen fastest declining industry employers, nine are manufacturing sectors and two are mining sectors. The single fastest is railroad transport, with a 46 percent decline in employment. The single greatest employment loss occurred in primary metals manufacturing; that industry lost 480,000 workers in the last ten years. This group of declining industries includes only one service industry - private household services (SIC 88).

While employment nationwide grew by 22 percent during the 1980s, overall employment increased by only 7 percent in Montana. Employment in Montana's trade sectors expanded considerably over the last ten years, but less than nationally. Services employment increased by 38 percent vs. 56 percent nationwide. Retail trade employment increased by only 9 percent in Montana vs. 27 percent nationwide. At the same time, percentage employment declines in both manufacturing and mining in Montana were greater than nationwide declines in these industries.

Nearly half (seven in fifteen) of Montana's fastest growing industry employers are in the services division (see figure 13). Another three are service providers in other industry divisions (forestry services, fisheries services, and agricultural services). Four are manufacturing sectors, but three of these are relatively small, with fewer than 1,000 employees.

Montana's single greatest employment gain was in business services, adding nearly 10,000 additional employees since 1979. This 131 percent increase slightly exceeds the nationwide growth rate. Some larger segments of Montana's business services sector are management and business consulting, temporary help and other personnel supply services, building maintenance services, and equipment rental and leasing. Health services employment in the state increased by 8,800 workers, up 44 percent vs. 52 percent for health services nationally.

Conversely, five of Montana's fifteen fastest declining industry employers are manufacturing sectors and two are mining sectors. Only one is in the services division; two are in retail trade. The single fastest declining industry employer in the state is primary metals manufacturing; since 1979 it has lost 64 percent of its employees, or 2,100 jobs. Montana's greatest job loss occurred in railroad transport, where employment fell by nearly 4,600 jobs - 60 percent of its workers. Farm employment fell by 3,000 workers. Major declines also occurred among general building construction contractors (2,600 jobs lost) and among lumber and wood products manufacturers (over 2,400 jobs lost).

U.S. employment forecasts indicate growth will be much slower in the current decade than the past decade, largely because of slower labor force expansion. About 70 percent of new jobs will be in services and retail trade. Continuing declines are expected in manufacturing, mining, and agriculture.[3]

Composition of Montana's Trade Sectors

During the last two decades, services and retail trade sectors accounted for nearly 70 percent of Montana's employment growth and 56 percent of the state's labor income growth. Services account for most of the trade sector growth. Moreover, the service sector's 38 percent employment gain was matched by a 39 percent gain in services labor income. Health services, the state's single largest service industry, is growing rapidly. But labor income in both business services and legal services is actually growing faster. Together with personal services, these three large service providers account for 53 percent of the employment in Montana's service sector and 64 percent of services labor income.

The state's retail trade employment has gradually increased, but wages and self-employment income received by these workers has declined considerably. Measured in inflation-adjusted dollars, retailing labor income fell from $983 million in 1979 to $850 million in 1989. Montana's single largest retailing sector is "eating and drinking places," currently employing more than 26,000 full- and part-time workers who earn about $200 million annually. Automobile dealers and service stations (SIC 55), food stores (SIC 54), and general merchandise stores (SIC 53) are other major retail sectors in Montana.

Together, retail trade and services currently provide employment to over 45 percent of the state's workers, up from 35 percent in 1970. By the year 2000, over half the state's workforce will be employed in these two trade sectors. However, growth in these trade sectors isn't occurring in both large and small communities alike.

Spatial Ordering of Trade Activity

Many regions of the United States have numerous small communities and towns with area populations of under a few thousand people. These are interspersed with a smaller number of larger communities and even fewer large cities or metropolitan centers that heavily influence the location of trade activity in these regions.

These villages, towns, and cities are the trading centers where most retail and services trade is conducted. Trade centers with progressively larger trade areas and trade area populations have progressively greater levels of retail and service trade activity. They also have progressively greater diversities of retailers and service providers. Together, various levels or "tiers" of similar size and similarly diverse trade centers form an overall regional trade center hierarchy.[4]

Using county population figures, a general trade center hierarchy for Montana has been identified and demarcated. The hierarchy is made up of six relatively distinct levels or tiers. These range from Montana's most rural counties (Tier 1 - twenty counties having populations less than 5,000) to the state's three most populated and dominant trade center counties, each with a population exceeding 60,000 (Tier 6 - Yellowstone, Cascade, and Missoula). Figure 6 shows this trade center hierarchy, its levels, and the counties associated with each of these tiers.

Figure 7 shows the level of trade sector activity in each of Montana's counties, measured by retail sales and services receipts in relation to each county's population. As can be seen, the level of local trade activity in Montana as elsewhere - largely varies in relation to the size of area populations.

Rural-to-Urban "Shifts" in Trade Activity

Over time, trade activity and functions have shifted steadily up the trade center hierarchy, away from smaller, rural trade centers - many times with shrinking populations - to larger trade centers with steadily growing trade areas. Figure 8 illustrates the degree to which this shift has been occurring in Montana since the early 1970s.

Between 1970 and 1988, the state's population increased by 16 percent or 110,300 people. The combined populations of counties in Tiers 4, 5, and 6, the state's more populated areas, increased by 20 to 30 percent. Together, these upper-tier counties accounted for 90 percent of the state's population growth. Among the lower tiers, the combined population of Tier 1 counties fell by 4 percent and grew only modestly in Tier 2 and 3 counties.

Between 1972 and 1987 (years in which Censuses of Retail Trade were conducted), retail sales increased by 11 percent statewide (in inflation-adjusted dollars). However, sales gains were heavily concentrated in the larger trade centers; sales losses were heavily concentrated in the smaller trade centers. Combined retail sales in the state's seven largest trade center counties (Tiers 5 and 6) increased by over 20 percent. Among the lower tiers in the hierarchy, sales fell progressively - by 14 percent in Tier 2 counties and by over 30 percent in Tier I counties. Another measure of retail trade activity, retail labor income, reveals a similar pattern: Payroll and self-employment income among retail workers fell by 20 to 30 percent among trade centers in the lower three tiers while increasing by 18 percent in Tiers 5 and 6.

Montana's services sector grew considerably between 1972 and 1987, but, here, too, the greatest growth is concentrated in larger trade centers. Services labor income more than doubled for trade centers in the state's top three tiers, with progressively smaller gains in the bottom three tiers.

Given that, over time, more of the state's workforce is shifting into trade sector jobs; and given that most trade sector growth is concentrated in the state's larger trade centers, the state's economy has become more "dual" in nature. Most larger trade centers are prospering while most rural trade centers decline. However, not all the state's major trade centers are sharing equally in this growth.

Population Trends Among Montana's Major Trade Centers

Recent population trends have varied considerably among Montana's major trade centers. The Billings' area population grew rapidly during the 1970s and early 1980s. But Yellowstone County's population has been declining in recent years; it fell from an estimated 120,000 people in the mid- 1980s to 113,420 in 1990. Cascade's population, stable during the early 1970s, has gradually declined since 1977. Several counties adjacent to Cascade County also have suffered population losses. Meanwhile, aside from an early-1980's lull, Missoula County's population has grown steadily, recently surpassing that of Cascade County. The Missoula trade area has been further buoyed by significant population gains in adjacent counties north and south of Missoula (Lake and Ravalli Counties).

The Butte trade area population as approximated by Silver Bow and Deer Lodge Counties has declined considerably, falling by 22 percent since 1969. It now has a smaller population than any major trade center county. On the positive side, evidence suggests this slide may have halted in the last few years.

Flathead and Gallatin are the fastest growing major trade center counties. Both increased in population by over 30 percent during the 1970s and by over 15 percent during the 1980s. These gains were closely followed by gains in Lewis and Clark County. In general, population trends are influenced by economic strengths or weaknesses in trade center areas. Periods of population decline in an area are strongly associated with preceding and accompanying periods of area economic decline.

Trends in Retail and Services Trade

Montana's population trends are reflected in retail and services activity levels among these major trade center counties. Figures 10 and 11 use several indicators to portray major trade sector trends in Montana's most populous counties. For each county, the first graph shows annual retail sales in 1977, 1982, and 1987 (the three most recent years in which economic censuses were conducted). The graph also shows annual totals for labor income received by retailing workers. In both cases, the data are adjusted for inflation. In general, less than 20 percent of area retail sales are dispersed locally as labor income to retail trade workers.

The second graph shows labor income earned by workers in each area's services sector, including health services, business and legal services, and all other private services. In general, 85 to 90 percent or more of service receipts are dispersed locally as labor income to service sector workers. The third graph shows employment levels since 1976 in the services and retail trade sectors.

It should be noted that the late 1970s and early 1980s (prior to the recession) were generally "good" years for Montana's overall economy. But in the mid-1980s, the state's economy slumped. It had recovered only moderately in 1987 and 1988 when some of this data was compiled. These general economic conditions are reflected in these trade sector trends - most particularly in retail sales.

Figure 12 summarizes varying trade sector trends among Montana's major trade centers since the mid-1970s. Between 1975 and 1988, the greatest population gains occurred in Yellowstone (17,500), Flathead (13,700), Missoula (11,200), and Gallatin (10,600) Counties. Flathead, Gallatin, and Lewis and Clark experienced the fastest rates of growth. Population fell by 8 percent in Cascade County and by an incredible 26 percent in Silver Bow and Deer Lodge Counties.

Based on economic census data for 1977 and 1987, the greatest retail sales growth occurred in Gallatin and Flathead; for both counties, sales increased by over 10 percent. Yellowstone, Missoula, and Lewis and Clark Counties experienced very little change in retail sales. Sales fell significantly in Cascade County, and Silver Bow and Deer Lodge Counties.

Between 1975 and 1988, retail trade workers in five of the seven trade areas experienced significant gains in labor earnings. Missoula and Lewis and Clark Counties made the largest absolute gains, up $18 million and $14 million, respectively. The largest percentage gains were in Lewis and Clark and Flathead Counties, up 32 percent and 25 percent, respectively. The Butte trade area sustained the greatest loss; retail labor income fell by 33 percent. Outside these major trade center counties, retail labor income fell by 21 percent.

Labor income in the fast-growing services sector increased by $154 million in Yellowstone County and by $111 million in Missoula County. Flathead and Gallatin Counties experienced the largest relative increases.

Figure 12 does not show changes in retail and services employment. Between 1975 and 1988, employment in these sectors grew by 14,000 workers in Yellowstone County (up 69 percent) and by 9,400 workers in Missoula County (up 79 percent). Flathead County had the largest percentage gain. It added 6,100 retail trade and services workers, a gain of 88 percent.


In just the last ten years, services and retail trade increased employment by 37,000 workers; the rest of Montana's economy lost 8,400 workers over the same period. This shift in employment from manufacturing and agriculture into trade and services is expected to continue.

Most trade sector growth is occurring in the state's larger trade centers. Billings is the state's largest and most dominant trade center and its trade sector is expanding. However, four other areas have clearly emerged as Montana's fastest growing trade centers. First among these is Flathead County and the Kalispell trade area, closely followed by Gallatin County and the Bozeman trade area. Next are the Missoula and Helena trade areas.

Steady losses in population reflect underlying weaknesses in the Great Falls area economy; these losses stifle trade sector expansion in Cascade County. This problem is particularly acute in the Butte trade area. Relative to the state's other major trade centers, Butte's position has slipped considerably.

Literature Cited

[1] Plunkert, Lois, "The 1980s: a decade of job growth and industry shifts," Monthly Labor Review, U.S. Dept. of Labor, Washington, D.C., September 1990.

[2] As service jobs replace manufacturing jobs, a major concern is that low-skilled, low-paying, often part-time jobs are being substituted for higher-skilled, better-paying, usually full-time jobs. While many service industry jobs are low-paying, "the annual wages of some services-producing industries with the highest employment growth rates are relatively high." However, in rural areas, "employment gains were more likely to be in services-producing industries with relatively low pay, while rural employment losses were in natural resource-based industries and higher paying manufacturers of durable goods."

Part-time employment in the United States is increasing with these employment shifts. However, so are the average number of weeks worked per year and average number of hours worked per week by the typical part-time employee ("the average high-technology manufacturing worker spends slightly more than 40 hours per week on the job, the work week of service employees varies from an average of 38.2 hours for business service workers to 25.6 hours for the average restaurant employee").

Part-time employees are generally paid less per hour than full-time workers and often do not receive fringe benefits ("a loss equivalent to up to 20 percent in additional pay"). At the same time, expansion of part-time employment has helped accommodate rising labor force participation by American women; a recent study by the National Planning Association found that 73 percent of part-time employees prefer part-time work. [Source: Porterfileld, Shirley, "Service Sector Offers More Jobs, Lower Pay," Rural Development Perspectives, Economic Research Service, U.S. Dept. of Agriculture, Washington, D.C., June-Sept. 1990]

[3] Personick, Valerie, "Industry output and employment: a slower trend for the nineties," Monthly Labor Review, U.S. Dept. of Labor, Washington, D.C., November 1989.

[4] Regional trade center hierarchies have been repeatedly verified in studies by regional scientists [see Conkling, Edgar and Maurice Yeates, Man's Economic Environment, New York: McGraw-Hill, Inc., 19761. A trade center hierarchy for the Upper Midwest region, including Montana, has been identified and described many times [including Borchert, John, and Russell Adams, Trade Centers and Trade Areas of the Upper Midwest, Mirineapolis: Upper Midwest Research and Development Council, 1963]. Montana's trade center hierarchy was more recently analyzed using county data [Swanson, Larry, "Modeling Economic Change in Nonmetropolitan Regions," paper presented at the North American Meetings, Regional Science Association International, Boston, MA, 1990].

Larry Swanson is director of economic analysis, Bureau of business and Economic Research, The University of Montana. Figuration Omitted.
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Author:Swanson, Larry D.
Publication:Montana Business Quarterly
Date:Jun 22, 1991
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