The Changing Billings Area Economy By Dr. Larry Swanson

1. The Changing Billings Area Economy By Dr. Larry Swanson O’Connor Center for the Rocky Mountain West The University of Montana Billings is a city of over 90,000 people, located in a county of more than 133,000 people, that serves as a center of business, trade, health and education for over 300,000 people. It is an emerging “new city” in the fast-growing Rocky Mountain West. This growth poses both challenges and opportunities for Billings and its surrounding communities. What is the path toward greater prosperity? What are Billings’ “key economic assets” and strength? How can Billings best position itself .. its businesses, workforce, governments, families .. for future prosperity?

2. Regional Trade and Service Areas of Montana’s Largest Cities

3. Regional Trade and Service Areas of Montana’s Largest Cities

6. Yellowstone’s Population: 1990 versus 2000 by Single Ages The chart shows total population by singles ages for the two years and, in doing so, shows where population gains or losses occurred during the ‘90s. Growth is focused among adults between their late 30s and mid-50s – classic “baby boomers” or persons born between 1946 and 1964. Growth also is focused among older youth – persons in their teens and early 20s. There are actually fewer persons in their late 20s and early 30s.

7. Lewis & Clark Population in 1990 versus 2000 by Single Age The chart shows the county’s total population by single age ten years apart. Population growth is concentrated among persons at ages between their early 40s and early 60s (“baby boomers”), as well as among younger adults and children in their teens and early 20s.

8. The Missoula Co. Pop. in 1990 versus 2000 by Single Ages The chart shows population change in Missoula County by single age for 1990 versus 2000. Population growth is concentrated among adults at ages between their early 40s and early 60s, as well as among older children. Growth among persons in the early 20s primarily reflects University of Montana enrollment growth.

9. The Ravalli Co. Population in 1990 versus 2000 by Single Age The chart shows population change in fast-growing Ravalli County over the last decade by single ages. Population growth is clearly focused among adults at ages between their early 40s and early 60s (“baby boomers”). Growth also is high among older children.

10. The Flathead Population in 1990 versus 2000 by Single Ages The chart below shows where population growth in the Flathead has been the greatest over the last decade. Population growth is focused among adults at ages between their early or mid-40’s to mid-60s. Among the younger population, growth is focused among the high-school age population, or persons between 12 and 18.

11. Changing Age and Income Features of the Billings Area Economy Recent shits in migration in the West reflect a number of trends, including the aging of the U.S. population – older adults in their 40s, 50s, and 60s – make up a disproportionate share of migrants. They’re also more prone to have income sources outside of what they earn from work (non-labor income such as investment income or transfer payments rather than simply labor income). The median age of Yellowstone County residents has risen from 29 in 1980 to 37 in 2000, which is slightly below the statewide median age of 38 but higher than the nationwide median age of 35. Total labor earnings from all employment has fallen from 72% of all personal income to about 66% over the 20 year period. By the end of the current decade, non-labor sources of income could grow to around 40% of the county’s total personal income.

12. Trends in Income Growth by Major Source Growth in area income feeds area economic activity and business and job expansion. The chart below shows annual income gains, in inflation-adjusted dollars, over the last 25 years. Area income is growing rapidly in recent years, after setbacks in the late ‘80s. The chart at the right shows growth trends for the three major income sources and the chart at the bottom right shows labor income growth by private and public (govt.) sources.

13. Employment Shifts in Yellowstone Co. Employment change in Yellowstone Co. over the last 20 years reflects the pattern of employment change in the larger region. Employment growth is heavily concentrated in services and retail trade. Employment growth in the 11 other major sectors has small in comparison. These trends are continuing. As a result of these shifts, services now account for about 35% of all employment – both full and part-time – in the Billings area, up from less than 25% twenty years earlier. Employment shares by manufacturing, local government including public education, transportation and public utilities, wholesale trade, state government including MSU-B, federal government and military, and mining have all declined.

14. Sector Labor Earnings Trends in Yellowstone Co. The increasing importance of service sector employment in Yellowstone County can be seen by comparing labor earnings growth by sector. Services employment earnings growth is accounting for the lion’s share of labor income growth as a whole. This general pattern of sector labor income growth should continue.

15. Fundamental Trends in the Direction of the Billings Area Economy – Professional Services The largest sub-sectors of Billing’s large and growing services sector are health care services, business services (services businesses largely provide to other businesses including accounting, computer assistance, advertising, etc.), and engineering and management services. These professional service areas will continue to grow. Growth also is occurring in the area’s F.I.R.E. sector, particularly real estate, insurance, and brokers, and in wholesale trade. Growth in these areas is focused in urban areas and growing cities in the region.

16. Fundamental Trends in the Direction of the Billings Area Economy – Construction, Travel The shift in area net migration has spurred construction activity and reversed the downward slide in construction industry labor earnings. Sub-sectors of the economy most sensitive to travel activity also have seen increases, particularly service stations (these are combined with auto dealers in the data) and air transportation. While Billings sees a lot of traffic, both commercial and tourism related, Billings itself is not seeing large increases in labor earnings by those employed in hotels, motels, and other lodging facilities. Amusement and recreation services are steadily growing, however.

17. Fundamental Trends in the Direction of the Billings Area Economy – Manufacturing Manufacturing in many areas of the United States is being placed under increasing pressure by international competition as trade around the world expands. Labor earnings by those employed in some aspect of manufacturing in Yellowstone County fell through much of the 1980s and early 1990s, but is now generally on the rise. Gains in manufacturing are hard-earned and hard to maintain because of growing competition, which places a premium on less labor-intensive manufacturing activities in the U.S.

18. Longstanding Industries in the Billings Area Economy For many decades, the area’s economy has followed growth and decline or boom and bust in sectors of the economy such as oil and gas and other mining, railroads, and agriculture. These industries remain prominent fixtures in the area’s economy, but growth in other sectors of the economy are reducing the area’s dependence on these longstanding industries.

19. Yellowstone County’s Struggling Agricultural Sector Farming and ranching in Yellowstone County are following a familiar path to that found in many other areas of the region with large and important agricultural sectors. In inflation-adjusted dollars, ag producers have been steadily whittling away at production costs year-after-year. But these gains are largely off-set by steady drops in annual cash marketing receipts. In fact, in most years production expenses exceed cash receipts from marketings. Other income sources, such as government payments, help to off-set these losses. However, ag producers operate with a thin margin of profitability or loss. Over $100 million a year is received and spent by area farmers and ranchers, even when net income is small or non-existent.

20. Rapidly Growing and Declining Sub-Sectors of the Billings Area Economy The area economy is undergoing constant change and restructuring, with growth focused in services, construction, and finance, insurance and real estate. Several sub-sectors tied to natural resource industries have rebounded or continued to expand. Labor earnings by health care professionals and workers grew by over $100 million during the ‘90s, followed by business services, up by over $66 million. These were followed by special trade and heavy construction contractors and engineering and management services. These top five sub-sectors alone accounted for 43% of all labor income gains by the county. These same sectors are rapidly growing in many quality cities in the Rockies.

21. Rapidly Growing and Declining Sub-Sectors In Missoula County The Missoula economy is undergoing constant restructuring and change with growth focused in many service, trade, financial, and construction sub-sectors and decline concentrated in traditional industries like lumber and wood products manufacturing, other manufacturing, and agriculture. Many of these fast-growing sub-sectors can only grow and thrive in largely urban-based economies.

22. Rapidly Growing and Declining Sub-Sectors In Lewis & Clark County The Helena area economy is undergoing significant restructuring and change with growth focused in many service, trade, financial and construction sub-sectors and decline concentrated in traditional industries including metal mining, agriculture and wood products, as well as in home furniture stores and food manufacturing.

23. Rapidly Growing and Declining Sub-Sectors In Flathead County The Flathead economy is undergoing significant restructuring and change with growth focused in many service, trade and construction sub-sectors and decline concentrated in traditional industries including primary metals manufacturing, wood products, railroads and agriculture.

24. Recent Improvements in Economic Well-being in Yellowstone Co. There are several different ways of measuring area “economic well-being.” The most often used is per capita income, which is simply total personal income divided by total population. After about ten years with little or no improvement during the ‘80s, per capita income grew steadily throughout the ‘90s, particularly in more recent years. Per capita income gains in the area in recent years are a dramatic departure from steady and unsettling declines in the previous decade.

25. Other Measures of Economic Well-being Area median incomes for both households and families (there are both “family” and “non-family” households as defined by the Census Bureau) fell between the 1980 and 1990 Censuses in inflation-adjusted dollars. But all of these losses and more were made up with area economic improvements during the last decade. Median family income climbed from $41,367 in 1989 to $46,427 in 1999. The area’s poverty rate, which rose from 9.3% to 12.1% in the ‘80s, fell back to 11.1% more recently. By nearly every measure, the economic well-being of Yellowstone County residents is improving significantly.

26. Major Population Centers or Region “Cores” and Closely-Linked Counties in the West

27. Billings Area Population “Peers” in the West There are 30 regional population centers in the 22 contiguous western states largely west of the Mississippi River with “core” populations between 75,000 and 170,000 and “region-wide” populations between 100,000 and 250,000 (’90 Census). Billings is one of these. The relative performance of area economies can be gauged by making side-by-side comparisons between peer areas.

38. What can communities and regions do to improve their economies? “The primary responsibility for designing and implementing economic development activities must rest with states, regions, and localities. The federal government, by itself, cannot have an enduring impact on economic conditions in the widely different communities and regions throughout the country.” “Effective strategies for area economic improvement will not be based on traditional definitions of urban and rural, but on an understanding of the economic and social structure of a particular region, its links to the surrounding communities, and the particular problems and opportunities that these structures and interrelationships present. Local leaders must use this understanding to craft policy strategies and programs to build the capacities for taking advantage of new economic opportunities.” - Path to Smarter Economic Development, National Academy for Public Administration (NAPA), 1996 What we can do at the community level is gain a much better understanding of the larger patterns of economic change and how this change is “playing itself out” in our community and region. Armed with this understanding, we can attempt to identify ways to “better position” ourselves for future change; finding advantages in some change while attempting to reduce undesirable effects associated with other change. We can become more adaptive communities and, thereby, potentially more successful and vital communities. Taking realistic measures based upon well-grounded expectations is a more effective community development posture than simply letting change happen, whatever it may be, or simply reacting to it after it occurs.

39. Keys Propositions in Billings’ Economic Future Cities as Economic “Engines”Cities in Montana have become the settings if not the engines of economic growth, diversification, and advancement, as is the case in the larger region. They are growing centers of education, health care, entertainment, culture, business and finance. The greatest growth and prosperity will center and expand in cities of quality. Tend to and plan well for this growth. Fast-growing Larger RegionThe larger Rocky Mountain West region – Montana, Idaho, Utah, Wyoming, Colorado – is one of the fastest growing regions in North America. Quality cities in this region with quality businesses and quality workers will likewise grow and prosper. Nearby Highly-valued Amenities Open lands, mountains, forest lands, free-flowing streams, and similar amenities help support a high quality of life for area residents and have become “magnets” to new migrants in the region. These amenities are all defining features of surrounding and nearby landscapes of Billings. They have become key economic assets. Human-Resource Based Economy While natural resource based segments of the area economy remain important, growth is increasingly focused in areas such as health care, financial services, business and professional services, construction and real estate. The economy is more and more “human-resource based”. Well-designed, well-funded, adaptive systems for education and work force development in the city and region are essential for continuing economic advancement. Build new structures and networks for public-private leadership development and interaction. Look forward. Anticipate and position yourself for future change. Become a learning community. Become a more aware, adaptive and successful community. Pursue opportunity.