UM Report – State will Lose 50,000 Jobs – $3.9 Billion in Income
Just how badly will Montana's economy be affected by the COVID 19 pandemic?
The University of Montana’s Bureau of Business and Economic Research has completed a study of the predicted effects on the state’s overall economy.
Following are the main points in the report:
In calendar year 2020, the Montana economy will suffer an average employment decline of more than 50,000 jobs (including payroll, proprietor, and contract workers), which represents a decline of 7.3 percent. Job losses will exceed that average in the second quarter of the year, with some improvement expected in the final quarter.
- Personal income (not inflation-corrected) in 2020 will be $3.9 billion lower in Montana than was projected in December, a downward revision of 7.1 percent.
- Almost every major industry in Montana will have lower employment in 2020 due to the Covid19 contraction, with job losses particularly severe for accommodations and food, retail, arts and entertainment and personal services businesses. Job losses will be greatest in the northwest region of the state, but every region will experience a significant downturn.
- Stronger economic growth in 2021, and to a lesser extent, 2022 will mostly close the gap and bring economic activity back within range of the medium term growth projection made before the crisis.
During a press conference on ZOOM on Tuesday afternoon, BBER Director Patrick Barkey laid out the details of the just completed study which featured expected declines in several categories, the hardest hit being food and accommodations.
“For some of these categories of consumption such as on-premises food, clothing and Footwear and recreation there are very, very large declines in consumer spending, including over 40 percent in on-premises food,” said Barkey. “Now, that is an average of the entire year, so that decline today might be 80 percent, but if you average over the whole year with all four quarters it’s a 45 percent decline, which is unprecedented.”
Barkey laid out the unemployment numbers expected from the study.
“How big is that decline?” asked Barkey. “That decline on average is about 50,000 jobs. Now, that is average over the entire year. Again, that average decline right now is expected to be steeper than that as we hit the spring of 2020, and that by the time we get to the last three months of the year the expectation is that there will be some return to growth to end 2020, so by the time you average it all by the end of 2020, you get a 50,000 job decline.”
As the report moves on past 2020 into the following two years, Barkey said there will be some improvements.
“What you see is a decline in year 2020, a stronger than trend growth in 2021 with some make up to 2022,” he said. “I remind you that that is a three year period in which the state economy will underperform and particularly for this year, substantially underperform what was forecast just four months ago.”
Barkey said the optimism that conditions will greatly improve as time goes by may be overly optimistic.
“We feel that perhaps the most problematic part of this prediction is our forecast of pretty strong growth thorough the end of this year, and certainly by year 2021,” he said. “We’re experiencing something that is completely out of the norm for economic models, but that’s the way things look as of today.”
The report concludes with the following statement:
‘There is little doubt that the Covid-19 pandemic has produced a recession that is more severe than anything Montana has experienced in the postwar period. While events remain extraordinarily fluid and much uncertainty remains, even an optimistic forecast where growth resumes at the end of this year puts the state economy in a hole that takes years to refill. The risks to this forecast are biased, we feel, on the negative side of this projection, with still-to-be-learned aspects of this destructive virus challenging Montana’s economy in ways not yet anticipated.’