At the invitation of the Bitterroot Chamber of Commerce, Patrick Barkey, Director of the Bureau of Business and Economic Research (BBER) at the University of Montana, offered the Bitterroot valley community “ten observations on the Ravalli County economy from an outsider’s perspective.” He spoke last Wednesday at the North Valley Public Library in Stevensville.
It is not exactly because he comes from Missoula, however, that he is an “outsider.” It turns out that Missoula plays a major role in the Ravalli County economy. That’s one of the observations he came to share with us. It is being an economist that makes him an “outsider,” more than anything else.
Barkey said that the BBER has been studying the state’s economy since 1948. It offers an Outlook Report every year and this year it will be presented in Missoula on February 1. In his work, Barkey said he analyzes information from lots of different places around the state.
“Part of my job is a little weird if you think about it,” he said. “I get in my car and drive to places and tell the people who live there what makes their economy tick.”
And what makes Ravalli County’s economy tick?
Barkey started off by offering a profile of both Ravalli and Missoula counties:
Ravalli County, according to Barkey, is the 7th largest county in the state in terms of population. It has also enjoyed decent population growth since the last census in 2010, making it the 13th fastest growing county in the state. The median age in Ravalli County of 48.5 years is about average for the state, but Missoula’s median age of 35.4, one of the lowest in the state, reflects the fact that it is a college town, according to Barkey. 23.4% of Ravalli County’s population is over 65 years old, while Missoula’s over 65 population comprises only 14.1% of that county’s total population. The statewide average is 16%.
Missoula County being home to a college may also account for the high percentage of 42.5% who hold bachelor degrees and higher, making it the second highest percentage in the state. But for a rural county, Ravalli County ranks fairly high at 16th in the state with 26.5%. Although Ravalli County has a lower number of bachelor degrees than the state average, it has a higher than average number of doctoral degrees, probably due to the major laboratories operating the county.
Ravalli County has a higher percentage of people without health insurance coverage than Missoula. Ravalli County’s is 12.7%, while Missoula’s is estimated at 9.7%. Barkey said it probably has to do with poverty and with the kinds of jobs that dominate the market, that is, low paying jobs that don’t provide insurance coverage.
While Ravalli County has the 7th largest population for any county in the state, it ranks 46th in terms of average earnings. Missoula County on the other hand ranks 9th in the state for average earnings. Missoula County ranks higher than Ravalli County in terms of average earned wages in the areas of construction, manufacturing, retail, and information services, with Missoula also showing a hefty average earnings figure in the transportation and warehousing sectors.
If you are looking to make economic forecasts, according to Barkey, you need to look at the best economic indicators. That means you focus in on the parts of the economy that are “driving” things, because some businesses are “leaders” in driving the economy while others are essentially “followers.” He said the government sector of the economy is a classic example of a “follower.”
“It doesn’t grow by itself, it grows as the economy grows,” he said, like most retail businesses. He said there is generally a small circle of businesses in the economy that are really driving it, which means they are bringing money into the community from outside it. If you track the drivers, he said, you see how the rest of the economy is going to go.
Over half the money coming into the county from outside the county is from commuters living in Ravalli County but working in Missoula.
“That’s a force that’s helping local Ravalli County businesses prosper,” he said.
The other drivers identified are medical research at 17%, federal government at 8%, agriculture and mining (mostly gravel) at 6%, and wood products at 3%.
In response to the suggestion that such a large number of people living here but working in Missoula was a “problem” for the economy, Barkey said it was just a part of the economy and an essential part in driving it.
He said, “There’s a political boundary there but when you cross it nothing changes. You breathe the same air, spend the same dollars, it’s just that there is a boundary there.” He said the commute goes both ways and the figure quoted is the net difference. So, Ravalli County is profiting on the exchange, since a bulk of those wages will be spent here in Ravalli County. He said people were also relocating in both directions. He said some people move to a place with lower taxes but maybe less services. Other people are moving because they want more services and are willing to pay more taxes to get them.
“I don’t call it good or bad, a problem or an opportunity,” said Barkey. “It’s an economic linkage that exists.” He said it’s also a very strong linkage, so strong that economists can look at the Missoula economy to help forecast how Ravalli County will be faring. He said total household income in Ravalli County annually was about $900 million and out of that about $200 million comes from outside the county.
What aspects of the economy in Ravalli County are growing and how much?
Everything over the 100-point mark in the below graph has grown and everything under 100 has shrunk since 2007. Head and shoulders above the rest in terms of growth were the health care and real estate industries. Professional services, federal civil jobs, retail trade, administrative support, and wholesale trade all had expanded earnings. State and local government remained steady. Earnings in construction, finance and other services shrank and the manufacturing sector took a nose dive.
Ravalli County’s economy took a big hit during the last recession around 2008 but it is pulling out of it, you might even say it’s booming, right now. Over the last four to five years the construction industry in Ravalli County, a major driver, has shown remarkable growth in wages.
Housing starts are also going up and the real estate market is robust.
Wages in the county have also shown a dramatic increase although that appears to be cooling:
On the down side, the rate of recent job gains is not forecast to continue:
One thing that is unique about Ravalli County and that also plays a significant role in the economy is the “roller coaster ride of population growth” it has experienced.
The county’s growth rate peaked in the 1990’s with a 45% increase over that decade. In 2009, the county lost population. That turned around in 2010 and growth since then has been modestly increasing every year.
Barkey notes, however, that “there is nothing to say that the kind of growth in the 90s can’t happen again.” He said the Bitterroot valley remains a very attractive place to re-locate.
“You are a postcard waiting to be discovered,” he said. He also noted that such an erratic growth rate can make it very difficult to plan for infrastructure development.
Barkey said that the way to change the economy and create more high-paying jobs was a question he usually ducks because there is no obvious answer. But he offered a few comments on the subject.
He said the key to higher paying jobs starts with increasing productivity, that is producing something of value.
“Without high productivity, you cannot have high wages,” he said. “If your wages are low then it means your productivity is low.”
He called it an especially disturbing message. He said to imagine two bankers, one in a small rural community and one in a large urban area. The small community banker makes a decision and it has some local effect. But when the banker in the large community makes a decision it can have much wider repercussions. He said smaller communities often lack “scalability” in their businesses as well. He used an outfitter business as an example. An outfitter can only handle so much work. He can’t double the size of his business because he can’t double himself.
In conclusion, Barkey said that increasing the high paying jobs in the community depends on both the business environment and the people.
“It requires people to take the risk,” he said, “and the business environment to support them.”
On the whole, Ravalli County’s economy is on the up and up right now. You could almost say it’s booming. But then, it could also really boom. Depending.