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Economic future looks good, but different, say experts

By Victoria Howell

The prognosis for the still ailing U.S. and Montana economies is fairly good, according to two economists who spoke to about 250 businesspeople at this year’s annual Business Success Symposium sponsored last week by Farmers State Bank.

Dr. Christopher Thornberg, founding partner of Beacon Economics, LLC and an expert in economic forecasting, said he was “oddly optimistic” and generally more positive then his forecasting peers about the future of the U.S. economy.

“We’re in a sustainable recovery,” said Thornberg. Almost everything is better than it was a year ago, consumer spending is stable, employment continues to rise, real estate is in recovery mode, state and local governments are “turning the corner,” and in many places the housing sector “is on fire,” he said.

However, said Thornberg, the lack of available credit continues to be a problem. The current tight regulation of the banking system by the federal government is causing lending to lag. Thornberg said it was unfortunate that the many community banks that played no part in the national crisis were still having to pay the price.

In regard to the effect of the federal budget sequestration, Thornberg said much of the effects have already been felt and that “it’s not nearly as bad as had been suggested.”

In regards to Montana, Thornberg pointed out that the latest employment figures show that Montana is number 12 in the nation in terms of job growth, at 1.8%. Although jobs in the oil and gas industry were up 28%, he said that accounted for only 1400 total jobs. The largest job sectors in Montana are education and health care, with 9900 jobs. Construction jobs in Montana are still at the very bottom of the list. In all sectors, Montana has added about 3000 jobs between 2005 and 2012. Thornberg also noted that the tourism and travel industry in Montana has “bounced back nicely.”

Thornberg said that in due time the construction jobs will be coming back, and that he supports U.S. energy production such as what’s going on in the Bakken because we should be producing, and using, our own energy to reduce our dependence on Middle East oil.

Thornberg faulted the politicians as well as the press for inaccurate portrayals of economic issues. For example, he said, during the last election, there was a lot of wrangling over cutting taxes and what that might do, or not do, for the economy. “Cut taxes?” said Thornberg. “Taxes do not hurt economic growth. In the 1990s we had the highest taxes ever and the biggest economic growth ever.” It’s not taxes and spending that hinder or drive economic growth, said Thornberg, it’s “trade and construction.” Thornberg also said there exists “an amazingly unfair tax rate based on corporate contributions to [members of] Congress.” He said, “Reagan’s genius was that he didn’t cut taxes, he flattened them and made them more fair.”

In the big picture, what’s really wrong, said Thornberg, is that “the government has been borrowing billions of dollars from China – to stimulate the Chinese economy!” That money instead needs to be spent on American-made goods and infrastructure, said Thornberg. He also reminded the audience that America’s top trading partners are still Canada and Mexico.

Dr. Larry Swanson, an economist at the O’Connor Center for the Rocky Mountain West and an expert on Montana’s economy, offered a more in-depth perspective on Montana’s economy, especially Missoula and Ravalli Counties. He said prior to this recession – which hit Montana about a year later than the rest of the nation, and also started its recovery a year later than the rest of the nation – the Rocky Mountain West had been the highest performing region of the country. He predicts that, although “in Montana we’re still wary,” jobs will now continue to be slowly added, but that there will be a shift in what kind of jobs over the next few years because of a change in demographics. Swanson said that natural resource jobs will never come back to this area like they were in the past, and that they have been replaced by professional services, health care and tourism. The population of aging Baby Boomers in western Montana continues to grow, and Swanson predicts they will account for 25% of the population by 2020 and 30% by 2030. This, coupled with the passage of the Affordable Health Care Act, will cause a huge increase in jobs in the health care industry. But, said Swanson, it will be a real challenge to provide the education and training that these jobs require. If that challenge could be met, it would also go a long way towards stemming the out-migration of the younger generations.

The symposium also featured two panels, one on financial services and one on media and marketing. Financial panelists included Joseph Adams, Senator Baucus’ National Economic Director, Tom Copley, accountant and business valuation specialist with Galusha, Higgins and Galusha, Jerry Dworak, President and CEO of Montana Health Co-op, Linda Onestinghel, Vice President of Business Development at Jack Henry and Associates and Greg Yockey, Chief Lending Officer at Farmers State Bank. Media and marketing panelists included Sean Benton of Partners Creative advertising agency, Todd Frank, owner of The Trail Head and current president of the Missoula Downtown Association, and Cynthia Rademacher, independent marketing consultant.

The Montana Radio Company was a partner in sponsoring the seminar. The goal of the symposium, according to Owen Robbins, Marketing Director for Farmers State Bank, was “to give business owners, managers and staff information and tools that they can put to work in their various roles immediately.”

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