CHANGING TIMES CHANGING VALUES

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Montanas Regionally Diverse Economy   By Dr.
Larry Swanson, OConnor Center for the Rocky
Mountain West, U. of MT   While Montanans often
speak of the states economy, in reality, there
is no such thing as a Montana economy. Montana
is a large state with widely varying terrain, a
widely dispersed population and many different
area economies. These differences cut along
lines east and west, as well as urban and
rural. While Montana is sometimes thought of
as being two states, one East and one West,
it can more accurately be seen as three somewhat
distinct regions   -         - Western
Mountain region - areas of the state west of the
eastern front of the Rocky Mountains
(21 cos.)   -         - Eastern Plains region -
areas of the state east of the Rockies extending
from the far- flung Plains (21
cos.)   -         - Central Front region -
transition area where the Plains meet the Rocky
Mountains (14 cos.)   These three
general regions can be defined by geography and
terrain, but differences extend into climate,
population density, and underlying economies.
Vast differences also are evident in comparing
largely urban areas in Montana with largely
rural ones. Few Montanans think of the state
as urban, but much of the states recent
economic growth is urban in character, while much
of the states ongoing economic contraction or
decline is centered in largely rural areas.
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Patterns of Net Migration in Montana   During the
decade of the 1980s, 53,000 more people moved
from Montana than the number moving to Montana,
changing their permanent residence in the
process. However, this pattern of out migration
dramatically reversed itself during the decade of
the 1990s with nearly 51,000 more people moving
to the state than away between 1990 and 1999.
  While this migration shift is a dramatic
reversal, not all areas of Montana are sharing
evenly in this net migration. The chart on the
upper right shows how net migration statewide
during the last two decades is allocated by the
three general regions. During the 80s all three
regions experienced net out-migration. However,
most population loss resulting from this was in
Montanas Central Front, with net out-migration
of 24,847. and Eastern Plains, with net
out-migration of 23,072. Out-migration from the
West was relatively small at just over
5,000.   In the 90s when the direction of net
migration reversed, the Western Mountains saw
most of the gain with net in-migration of 57,493.
The chart below shows net migration during the
1990s by county, with individual counties in the
West at the left and counties in the East at the
right. The three counties with the highest net
in-migration are Flathead (10,920), Ravalli
(10,377), and Gallatin (9,534), all in the West.
Yellowstone County had the 4th highest net
in-migration (7,850), followed by Missoula
(6,208), Lewis and Clark (4,308), and Lake
(4,158). The county with the single highest net
out-migration is Cascade (-5,411). Virtually all
of the counties in the Eastern Plains region
continue to see net out-migration.
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Montanas Lop-sided Population
Growth   Montanas population grew by only
12,375 people in the 1980s. However, fueled by
shifts in population migration, Montanas
population grew by 103,000 people during the
1990s, an eightfold increase in population
growth over the previous decade. About 85 of
this population growth resulted from net
in-migration, which was concentrated in the
states Western Mountain region. The chart at
the right shows population growth during the 90s
by individual county from west to east in
Montana. Montanas fastest-growing counties are
Ravalli (44 growth), Gallatin (34), Broadwater
(32), Jefferson (27), Lake (26), Flathead
(25), Stillwater (25), and Missoula (22) the
only counties with gains of over 20 and counties
all located in the Western Mountain region.
  Population growth in Montana declines almost
systematically in going from west to east, with
all but two of the 21 Eastern Plains counties
losing population. The county with the single
greatest percentage loss in population is
Garfield County (-20).   The chart in the lower
right shows total population change by major
region for the last two decades. Population
growth in the Western Mountains surged from
23,303 in the 1980s to over 88,000 in the 1990s.
Significant growth also returned in the Central
Front region. However, population decline
continues in the Eastern Plains, although at a
lower level. In all likelihood, a similar
pattern of regional population change will
continue in Montana, at least for the next ten to
fifteen years.
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Regional Differences in Income and Employment
Growth  Just as population growth is
concentrating in the states Western Mountain
region, so is income and employment growth. The
chart in the upper right shows gains in total
personal income during the last two decades by
major region of Montana. In the last decade
total personal income in statewide grew by
almost 4 billion and about 73 percent in the
income growth occurred in the Western Mountain
region where personal income grew by almost 2.9
billion. This rise in total personal income in
the West represented a 250 percent increase over
the gain of the previous decade. So, income
growth in the Western Mountain region has greatly
accelerated, following a similar pattern in
population growth.   Personal income grew by 974
million in the Central Front region, an increase
of 270 percent over the previous decade. The 21
counties in Montanas Eastern Plains region
accounted for only 2.5 percent of all income
growth in the last decade.   During the 1990s,
total employment in Montana grew by over 126,000
jobs, including both full and part-time
employment. Seventy-three percent of this job
growth occurred in the Western Mountain region.
Another 24 percent of the growth occurred in the
Central Front.   Quite clearly, all major
measures of economic growth and expansion
indicate that this growth is occurring
overwhelmingly in the Western Mountain region.
It is highly likely that income and employment
growth are following in the footsteps of
population expansion in the West, which is
resulting from changes in the larger pattern of
migration.    
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Net Migration Among Non-metro Forestland Counties
in the West 1980-1990 versus 1990-1999   Populat
ion growth in these forestland counties has been
spurred by a sea change in migration patterns
in the West, with more and more people moving to
these types of areas. This growth coincides with
significant declines in the wood products
manufacturing industry in these areas, which is
resulting in large-scale economic restructuring
in the economies of these areas.
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Areas Nearby National Parks In the West
There are 80 western counties whose geographic
center is within 40 miles of a major national
park in the West. The majority of these (51) are
non-metropolitan in character. The map shows
major national parks in the 22 contiguous states
west of the Mississippi River. Other federal
lands adjacent to these parks are also shown.
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Recent Employment Change in the Fast-growing
Rockies and in Montana  In the last decade when
the economy of the Rocky Mountain West became one
of the fastest-growing regional economies in the
nation, employment growth in the broad services
sector accounted for 37 percent of all new jobs
in the region. The top chart shows employment
change in the five-state region by major sector
over the course of the last twenty years. There
are 13 major sectors of the economy and two of
these, services and retail trade, now account for
nearly half of all employment. The sector with
the third highest employment is Finance,
Insurance, and Real Estate, or the F.I.R.E.
sector, which is followed by manufacturing,
construction, and local government (which
includes public education).   There is a common
perception in Montana that the states economy is
deteriorating, with many citing the growth in
service and retail trade jobs and the loss of
other good jobs in the economy. In actuality,
the changing mix of jobs in Montana closely
parallels the changing mix of jobs in the larger
Rocky Mountain West region which has seen
significant gains in economic performance in
recent years. In the last decade while service
jobs grew by 37 percent in the fast-growing
Rockies, they grew by 42 percent in Montana.
And, while services and retail trade now account
for nearly half of all jobs in the Rockies, they
accounted for 49 percent of jobs in Montana in
2000.   When you compare employment trends in
Montana with the larger Rocky Mountain region,
there are differences. F.I.R.E. is also the
fourth highest major sector of employment rather
than third as in the Rockies. Manufacturing is
seventh, rather than fourth. And farm and ranch
employment is sixth in Montana rather than
twelfth.
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Region Economic Restructuring Greatest Growth
and Greatest Decline
SUB-SECTOR CHANGE IN ROCKIES, 87
97   Fast-Growing Sub-Sectors (2000 dollars) 1
Business services 5.8 bil. 130 2
F.I.R.E., other than depos. 4.5 bil. 108 3
Health care services 4.4 bil. 64 4
Special trade contractors 3.4 bil. 88 5
Communications 2.8 bil. 103 6
Engineering managmt serv. 2.6 bil. 78 7
Eating drinking places 1.4 bil. 57 8
Electric, gas sanitary serv. 1.0 bil.
60 9 Auto dealers service stations 1.0
bi. 51 27.0 (53) Declining Sub-Sectors
Oil gas expl. extract. - 38 mil. - 2
Coal Mining - 116 mil. - 13 Railroads -
136 mil. - 13 Net farm income - 216
mil. - 10 Transpt. Equip. mfg., not autos-
439 mil. - 25 U.S. Military - 570 mil. -
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There are more than 70 different sub-sectors of
the economy and the ways in which the economy is
restructuring can be viewed by identifying
where the biggest gains and biggest losses
are occurring.   In the fast-growing Rocky
Mountain West region, labor income growth has
been focused in business services (including
such areas as accounting, advertising, computer,
management services, etc.), F.I.R.E.
non-depositories (insurance, real estate,
brokers, etc.), health care services (doctors and
hospitals), special trade contractors
(carpenters, plumbers, electricians, etc.),
communications (telephone, radio and television,
etc.), and engineering and management services
all with gains in excess of 2 billion.
  Declines were focused in U.S. military,
transportation equipment manufacturing other than
autos, agriculture, railroads, and mining.
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Area Economic Restructuring Greatest Growth and
Greatest Decline
SUB-SECTOR CHANGE IN MONTANA, 87
97   Fast-Growing Sub-Sectors (2000 dollars) 1
Health care services 408 mil. 49 2
F.I.R.E., other than depos. 223 mil. 96 3
Special trade contractors 197 mil. 67 4
Business services 177 mil. 85 5
Engineering managmt serv. 127 mil. 69 6
Eating drinking places 106 mil. 41 7
Auto dealers/service stations 91 mil.
44 8 Social services 90 mil. 117 9
General building contractors 78 mil.
54 1.5 bil. (64)   Declining Sub-Sectors
U.S. Military - 14 mil. - 6 Coal
mining - 18 mil. - 20 Trucking
warehousing - 21 mil. - 7 Railroads -
28 mil. - 13 Lumber wood prod. Mfg - 48
mil. - 15 Net farm income - 173 mil. - 45
There are more than 70 different sub-sectors of
the economy and the way in which the economy is
restructuring can be viewed by identifying
where the biggest gains and biggest losses
are occurring.   In Montana, the five
fastest-growing sub-sectors of the economy during
the period from the late 80s to the late 90s
are health care services, F.I.R.E.
non-depositories, special trade contractors,
business services, and engineering and management
services all with gains of over 100 million in
labor earnings.   Declining sub-sectors in
Montana include production agriculture, lumber
and wood products. railroads, trucking and
warehousing, coal mining, and the U.S. military.
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Major Population Centers or Region Cores and
Closely-Linked Counties in the West
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Urban/Rural Features of Population Growth in
Montana   While most Montanans dont think of
the state as being urban, most of the states
population lives in or nearby one of the states
seven principal population centers. Montana has
seven major population centers including Billings
(Yellowstone), Missoula (Missoula), Great Falls
(Cascade), Helena (Lewis and Clark), Butte
(Silver Bow), Bozeman (Gallatin), and
Kalispell/Whitefish (Flathead). While small by
national standards, most of these cities and the
city regions surrounding them are growing. As
they do, theyre achieving market area population
thresholds necessary for sustained growth and
economic diversification.   The chart at the
right shows population growth among Montanas
city regions. The multi-county areas included in
each, shown in the previous map, include the
areas regional center or core county and
surrounding counties closely-linked to these
regional centers. Twenty-eight of Montanas 56
counties are closely-linked to one of the states
seven regional centers. The remaining 21
counties are more isolated and rural areas,
largely in the north central and eastern half of
the state.   The lower chart shows population
growth in Montana since 1980 by county type
regional centers, closely-linked, and rest of
state. Recent population growth is focused in
regional centers and their surrounding areas.
The greatest growth is in the Billings, Missoula,
Kalispell, Bozeman, and Helena regions. Growth
is flat in the Great Falls region, heavily
dependent upon agriculture and the Malmstrom Air
Base. The Butte region, historical center of
Montanas mining industry, also is flat. Much of
the rest of Montana the more isolated, more
rural, and more agriculturally dependent portions
of the state, largely in the East is
experiencing steady population decline.
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Urban/Rural Features of Income and Employment
Growth in Montana   Just as population growth in
Montana is increasingly focusing in the states
largest cities and their surrounding areas, so is
overall growth in income and employment. As
shown in the chart at the right, personal income
in the states seven regional center counties,
which grew by over 1 billion in the 80s, grew
by more than 3 billion in the 90s, a threefold
increase in growth. Personal income in counties
closely-linked to these regional centers, which
grew by 450 million in the 80s, grew by nearly
745 million in the 90s. Together, the regional
centers and their closely-linked areas accounted
for over 96 percent of all income growth in the
state in the last decade. With concentrated
growth in these city regions, Montanas more
urban areas now account for 87 percent of
statewide personal income and this concentration
will continue to grow in the future.   Statewide
employment also is concentrating in the states
city regions. During the last decade, total
employment both full and part-time employment
of all types grew by over 92,000 jobs in the
seven regional centers, by over 28,000 jobs in
closely-linked counties, and by only 5,700 jobs
in the rest of the state. As with population
growth and personal income growth, employment
growth has been greatest in the Billings and
Missoula regions. Employment also is sharply
rising in the Bozeman and Kalispell regions, and
to a lesser degree, in the Helena region. Total
employment is growing at a much more modest rate
in the Great Falls and Butte regions, the states
two city regions with very flat population growth.
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Long-term Consolidation and Decline in the
Regions Natural Resource Industries   For much
of the states history, Montana has depended on
three pillars of the economy - agriculture,
mining, and wood products. The chart at the
right shows inflation-adjusted labor earnings for
each of Montanas natural resource industries
since 1980. Included in the chart are farm and
ranch production (net farm income), wood
products manufacturing, and three sub-sectors of
mining (metals and non-metal/non-fuels, oil and
gas, and coal mining). Year-by-year earnings in
agriculture have been erratic. Wood products
earnings are flat or declining, as is the case
with metals and non-metals mining and oil and
gas. And while more coal is mined in Montana
almost each year, it is usually done with fewer
workers and labor earnings by these workers are
flat or declining.   In spite of this decline
or stagnation in the states natural resource
industries, the larger economy of the state has
continued to grow. The chart in the lower right
shows total personal income and statewide labor
earnings in relation to the combined labor
earnings of all natural resource industries for
each year since 1980. Whats more, growth in
income and labor earnings has accelerated over
the course of the last decade. The states
resource industries continue to be important to
Montanas overall economic prosperity. However,
the states narrow dependence on these
industries is declining and future growth will
largely occur in other segments of the economy.
However, some areas of Montana, particularly
isolated rural areas in the East, will continue
to be narrowly dependent on one or more of these
industries.
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Montanas Natural Resource Industry
Dependence While the states resource industries
are very important components of the economy,
Montanas economic dependence on these industries
is steadily declining. This reflects both
long-term decline in these industries and
expansion and diversification of the economy in
other sectors.
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Montanas Struggling Farm and Ranch Sector In
Montana as in most other agricultural regions of
the U.S., production agriculture has been
struggling. Total cash receipts from
agricultural sales on a year-to-year basis
regularly fall below total production expenses
and the difference in net gains or losses is
determined by income of agricultural producers
from other sources including government farm
programs.
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Regional Distribution of the Fast-growing
Services Sector   With service sector growth
dominating all other sectors in employment growth
in Montana and the larger region, it alone is
having a major impact on the distribution of the
larger economy of the state. The chart at the
right shows major sub-sectors of the services
sector and their labor earnings growth since the
last 80s. Health care services are the single
largest component and dwarf all other service
sub-sectors. Far behind in second place within
this sector is business services, followed by
engineering and management services.   There is
little doubt that growth in these areas would
favor urban areas and city-region size population
and market areas.   The lower chart shows the
distribution and growth of service sector labor
earnings for the states regional center
counties, counties closely-linked to these urban
areas, and the rest of the state. Service sector
activity has been steadily expanding in the
regional centers, doubling in size between 1980
and the mid-1990s and continuing to grow.
Services activity in counties closely-linked to
these regional centers grew beyond activity in
the rest of the state in 1989. This gap has
steadily widened since then. Together, the seven
regional centers and their closely-linked
counties accounted for 95 percent of all service
sector growth in Montana during the last
decade.   To the degree that economic expansion
in Montana continues to be focused in services
and other trade sectors, such growth will
continue to concentrate more and more of the
states overall economy in and around these
regional centers.

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Economic Well-being in Montana   While recent
trends in population, income, and employment
growth in Montana are placing increasing emphasis
on Montanas cities and city regions as engines
of economic growth, these cities also are where
the states greatest economic prosperity resides.
The chart at the right shows per capita income
in Montana by area type regional centers,
closely-linked counties, and rest of the state.
  While per capita income statewide lags behind
most states across the country, per capita income
levels among Montanas regional centers are very
competitive with regional centers of similar
population size throughout the western United
States. However, similar comparisons for
counties nearby these regional centers and the
more isolated rural areas of the state show that
per capita income in most of these areas lags
behind levels for comparable areas in the
West.   Other measures of economic well-being,
such as median household and family income and
area poverty rates also indicate that income
levels are considerably lower in Montanas
outlying and rural areas. This suggests that
many of the more positive aspects of economic
restructuring and change are tending to focus in
the states regional centers, translating into
per capita income gains. On the other hand, many
of the more negative aspects of restructuring and
change, such as under-employment and wage
decline, are tending to focus in outlying and
rural areas. The gap between income levels in
isolated areas and regional centers is widening,
reflecting important advantages of more populated
places and market areas in the changing economy.
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Lessons to Learn from Emerging Economic
Patterns   Look Forward Promising strategies
for economic improvement must reflect where the
economy is going, not where it has
been.   Customize Strategies Needs and
opportunities vary widely from place to place.
Goals and strategies must likewise vary.   Cities
Matter Recognizing that most growth is focusing
in and around city regions, more attention
needs to be focused on the needs of cities as the
settings if not the engines of economic
growth, diversification, and advancement. In
Montana, we need to assist cities, not deny that
we have any.   Urban-Rural Relations Matter
Pursuing economic development town-by-town or
county-by-county is difficult. Influencing local
economies sub-region by sub-region with healthy
urban-rural partnerships has potential.   Become
Learning Communities Successful businesses
are adaptive businesses. Successful communities
are adaptive communities. Adaptive communities
must be learning communities, keeping abreast
of change.   Think about Regional Positioning
Local economies cant be remade by local leaders.
What they can do is find ways of better
positioning themselves businesses, schools,
work forces, governments, families for future
change. Anticipate future change and position
yourself for it.   Human-Resource Based Economy
The economy is less and less natural resource
based, and more and more human resource based.
Do we know how to invest in human resource
development? Well-designed, well-funded,
adaptive systems for education and work force
development are essential for economic
prosperity.   Environment as a Key Economic
Asset In the new economy, a quality
environment is a key economic asset. Protecting
and enhancing environmental qualities is not the
enemy of economic development. It is essential
for economic prosperity.
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Total Tax Revenues in Montana In actual dollars
or dollars unadjusted for inflation, state and
local tax revenues from all sources have steadily
risen over time, as shown in the top chart. This
rise is much less pronounced when these dollar
amounts are adjusted for inflation, as shown in
the lower chart. Source 1998 2000
Biennial Report, Montana Dept. of Revenue
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Montana Tax Revenues as a Share of Income
Actual tax collections as a share of total
personal income reflect the size of the states
tax burden in relation to the size of Montanas
economy.
Tax revenues as a share of income Have steadily
fallen from as high as 10.24 in 1985 to a low of
7.78 in 2002. State revenues are not growing as
fast as are incomes.
Source 2000-2002 Biennial Report, MT Department
of Revenue
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