Missoula’s Health Care Sector Necessary Services and Growing Economic Asset By Dr. Larry Swanson

1. Missoula’s Health Care Sector Necessary Services and Growing Economic Asset By Dr. Larry Swanson O’Connor Center for the Rocky Mountain West The University of Montana Missoula Business Forum Hilton Garden Inn October, 2009

9. Seasonally Adjusted Unemployment since 2000: Montana vs. U.S. Labor force and unemployment data for the U.S. and individual states is compiled and reported monthly by the U.S. Bureau of Labor Statistics (BLS). Data are reported in “raw” form or unadjusted for any seasonality in employment. They also are adjusted to reflect seasonality in these numbers. The seasonally adjusted unemployment rate nationally rose to 9.7% in August nationwide, up from 9.4% in July, 9.5% in June, and 9.4% in May. U.S. unemployment has been rising steadily since March of 2007, coming off of its most recent bottom at 4.4%. National unemployment rose to as high as 6.3% in 2003 during the last recession, but now well-exceeds that level. Seasonally adjusted unemployment in Montana had almost always been higher than nationally prior to June of 2001. In every year since, unemployment in Montana has been lower than nationally. Seasonally adjusted unemployment in Montana had fallen consistently for most of the period to a low of 3.1% in the spring of 2007. The more recent rise in unemployment in Montana is following the national trend, but at significantly lower levels. Unemployment in August was 6.6%, more than 3 percentage points lower than nationally. July unemployment in Montana was slightly higher at 6.7%, the highest level in many years.

10. Seasonally Unadjusted Unemployment since 2000: Montana vs. U.S. This chart shows monthly unemployment rates for both the U.S. and Montana “unadjusted for seasonality”. The seasonality in unemployment is reflected in the annual increases and decreases in monthly unemployment rates. In August unemployment nationally rose to 9.6%, down only slightly from 9.7% in July which is the high. Unemployment had previously bottomed at 4.8% in April of 2008 before beginning its rise. In Montana seasonally unadjusted unemployment in August was 6.0%, down from 6.1% in July and from 6.4% in June. The recent high in Montana was 7.0% unemployment in February. Unemployment in Montana steadily rose with rising unemployment nationally, but has consistently remained 2 to 3 percentage points lower than nationally, with the August spread 3.6 percentage points. January or February is the time of highest unemployment in Montana and it ordinarily begins to fall in March with this fall continuing into September. However, during this economic slowdown, unemployment is remaining higher than usual for this time of year.

11. Flathead County Unemployment Rate Over Time The U.S. Bureau of Labor Statistics compiles monthly unemployment rates for all U.S. counties and these are unadjusted for seasonality. If you look at the pattern of unemployment in Flathead County throughout the ‘90s, you can see than it is very seasonal, rising to yearly highs often times as high as 10% and yearly lows of 5%. In more recent years, the area labor market tightened and unemployment sunk to historic lows of 2.5% as recently as 2007. However, more recently, the area economy slowed, largely tied to a slowdown in housing and construction. Unemployment rose as high as 12.6% in March, 2009, up from 7.2% in November, and up from a low of 3.7% last Summer. However, the most recent estimate for August places unemployment at 8.7%. So, area unemployment is down considerably and the economy is getting back on its feet.

12. Ravalli County Unemployment Rate Over Time The U.S. Bureau of Labor Statistics compiles monthly unemployment rates for all U.S. counties and these are unadjusted for seasonality. The unemployment rate in Ravalli County rose to 9.8% in February, 2009, up from less than 9.5% in January and up from a yearly low of 4.3% the previous Summer. The February unemployment rate was last exceeded in Ravalli County in 1998 when unemployment reached 9.8%. Unemployment in the county rose to as high as 13% in both 1991 and 1992, so Ravalli County has experienced high levels of unemployment in only the recent past. January and February are months when seasonal unemployment are ordinarily highest. The recent released estimate in August for unemployment in Ravalli is 7.7%. This is down from 7.9% in July and 8.1% in June.

13. Missoula County Unemployment Rate Over Time The U.S. Bureau of Labor Statistics compiles monthly unemployment rates for all U.S. counties and these are unadjusted for seasonality. The unemployment rate in Missoula rose to 6.9% in February, 2009. This is the highest level of unemployment in Missoula since 1993 when unemployment rose to 7.5%. The highest rate more recently had been in 2002 when unemployment hit 5.2%. County unemployment reached as high as 10.2% in 1991. So the area economy is not totally unfamiliar with high levels of unemployment. The unemployment rate for August is 5.7%, down considerably from the February high. Unemployment should fall a bit more in September before beginning to rise again going into the Winter months.

14. Population Growth in Missoula County, 1970 – 2008 The population of Missoula County has grown steadily in recent years, rising from less than 80,000 residents in 1990 to over 96,000 in 2000 – a gain of more than 17,000 and increase of nearly 22% - and continuing to grow to an estimated 107,000 people in July of 2008, the most recent estimate. The two charts show growth in Missoula County. Growth is also shown in nearby Ravalli County for purposes of comparison. The lower chart shows population growth by both counties on an annual basis. Growth from one period to the next has been somewhat uneven. There was little growth in the mid and late ‘80s. Growth accelerated in the early ‘90s, then slowed before reaccelerating more recently. Growth in the future can be expected to be somewhat uneven as well, making projections for the future general ones at best.

15. Personal Income Levels Over Time in Missoula and Ravalli Counties The upper chart shows total personal income for each county since 1969. The lower chart shows percentage changes in income for 5-year periods over this period. The personal income base of Missoula County rose from $850 million in the early ‘70s to $1.5 billion in the early ‘80s. Growth stagnated in the ‘80s. However, since then, the county has seen virtually uninterrupted growth, with total income reaching $3.2 billion in 2006. Personal income in Ravalli County rose from $430 million in the late ‘80s to over $1 billion in 2006.

16. Employment Levels in Missoula and Ravalli Counties Over Time The upper chart shows total employment, including all full- and part-time jobs in Missoula and Ravalli Counties, since 1969 through 2006. Employment has steadily grown in Missoula County over time, rising from 25,000 in 1970 to 40,500 by decades end. Employment dipped temporarily in the early ‘80s, but has steadily grown since the mid-80s. The lower chart shows growth in employment in the two counties for 5-year periods over time.

17. Major Sectors of the Missoula Economy – Labor Earnings by Sector, 2001-07 There are 24 major sectors of the economy, using the NAICS industry codes. Levels of labor earnings for each of these in Missoula County in recent years are shown in the chart. Health care is the single largest sector of the area economy with labor earnings exceeding $400 million a year, up from $343 million in 2001.

18. Major Sectors of the Missoula Economy – Employment by Sector, 2001-07 There are 24 major sectors of the economy, using the NAICS industry codes. Total employment levels for each of these in Missoula County in recent years are shown in the chart. Health care employed nearly 10,000 workers, both full and part-time, in 2007. This is second only to the Retail trade sector which had 10,700 jobs.

19. Employment Growth in Missoula Co. by Major Sector, 2001 – 07 The chart shows employment growth in Missoula County between 2001 and 2007 by major sector of the economy. The health care sector added 687 jobs over this period, ranking it 9th among all sectors of the economy. Retail trade added the most jobs at 1,348. The Real estate sector was 2nd in jobs growth at 1,329.

20. Economic Growth in Missoula Co. by Major Sector, 2001 – 07 The chart shows labor income growth in Missoula County between 2001 and 2007 by major sector of the economy. Health care experienced more growth than any other sector, increasing by $65 million a year over this period, measured in inflation-adjusted 2005 dollars. Growth in Professional and technical services – accountants, lawyers, engineers, computer technicians, etc. – was 2nd highest in growth at $48 million. Growth in State Government – primarily by the University of Montana – was 4th highest, up by $38 million.

21. Sector Shares of the Missoula Economy The upper chart shows how much area employment is accounted for by each major sector of the economy. The bottom one shows how much each sector accounts for area labor earnings. Health care accounts for over 12% of all jobs in Missoula County – 2nd only to Retail trade – and for over 15% of all labor earnings – highest among all major sectors of the economy.

22. Framework for Community & Regional Development • Sub-state, City- and Region-based Strategies Successful, economic development initiatives must reflect underlying and emerging area strengths and weaknesses that vary from place to place. • Key Foundations for Future Economic Success • Quality Infrastructure: streets, water, sewer, schools, parks, neighborhoods, office buildings and complexes, • business centers, communications, transportation, educational facilities, cultural amenities, etc. Develop a • “vision” for what you want and put it into place. • Quality Workforces: adaptive well-stratified workforces, with access to good training and education tailored to particular needs and opportunities of area employers. Area education and economic development providers must work in tandem in devising area workforce training programs. • Devise “Side-by-Side” Strategies for Business Development and Workforce Development using Clusters Don’t try to decipher business assistance and workforce needs of hundreds of employers all as one. Stratify current and potential employers in the area into “clusters” and customize strategies for each cluster. • Chart and Assess Your Progress using “Peers” • Establish an “Area Economic Development Roundtable” Area economic success requires a combination of strategies for business assistance, education, workforce development, infrastructure, and city planning. Key leadership across this array of programming must regularly meet in order that this type of multi-faceted approach can be developed, inter-coordinated, pursued and continually assessed. • - Larry Swanson, O’Connor Center for the Rocky Mountain West, U. of MT

23. What are “Clusters”? Clusters are simply geographic concentrations of interrelated companies and institutions of sufficient scale to generate externalities. Clusters are firms and institutions that are located in somewhat close proximity and that have common interests and needs. Once clusters and potential clusters of an area are better understood, strategies can be devised for each that may involve customized workforce development programs, special programs in business finance and capital investment, programs in research and development, and a range of business development initiatives targeted and customized for each cluster. By knowing your clusters, you can better know how to grow your economy. Stuart Rosenfeld, Regional Technology Strategies

26. Major “Segments” of the Missoula Economy Using NAICS sectors, the Missoula economy is further examined by combining these in some cases into more meaningful “segments”. Professional and technical services are joined with Finance and insurance, Administrative and waste services, Management services, Information services, and other business services. Retail and Wholesale trade are joined. Hotels and other lodging are joined with restaurants and arts and entertainment services. Construction is joined with Real Estate. And Manufacturing is joined with Utilities and Transportation services to create the “Primary Industries” segment.

27. Candidates for “Key Economic Clusters” in Missoula Professional, Technical & Business Services Lawyers, Engineers, Accountants, Architects, Computer programmers & techs, Insurance providers, Financial services, Management & Administrative services, Membership organizations Health Care Services Hospitals & Clinics, Health care providers, Support services, Care providers Adult Education Services The University of Montana, UM College of Technology, Missoula Adult Education, Other Education providers Wholesaling, Retailing & Services Trade Focused in three differentiated centers or sub-areas: Downtown, Southgate Mall & Mid-town, Reserve St. Assorted Manufacturing Longstanding manufacturing industries in many areas of the U.S. have been declining. However, smaller more niche-oriented manufacturing and technology-based manufacturing are growing in some areas.

28. Determining an area’s clusters requires more than data analysis. Albert Einstein said, “Not everything that can be counted counts, and not everything that counts can be counted.” Conservation Cluster U.S. Forest Service, University of Montana, Rocky Mountain Elk F., Clark Fork Coalition, Five Valleys Land Trust, Boone & Crockett Club, Other Non-profit Conservation-related organizations, Forest product companies, etc. Arts & Culture Cluster Children’s Theater, Missoula Art Museum, Missoula Symphony, UM Museum of Art, Private Galleries, Ft. Missoula Museum, International Wildlife Film Festival, Choral Festival, Bookstores, Etc. Recreation & Tourism Cluster Missoula isn’t a “resort” area or destination, per se, for many tourists, but because of its amenities, it can be a growing center for entertainment and outdoor recreation for both residents and travelers.

29. Missoula’s Emerging Health Care Cluster Major Hospitals St. Patrick Hospital & Health Sciences Center and Community Medical Center Affiliates – Big Sky Surgery Center, Providence Surgery Center, Montana Neuroscience Institute, International Heart Institute, Montana Cancer Center, Advanced Imaging, Broadway Imaging, Women’s Health Center, etc. Major Providers of Health Care Related Technical Services Missoula Radiology, Missoula Anesthesiology, etc. Ambulatory Health Care Services Western Montana Clinic, Missoula Bone & Joint, Northern Rockies Orthopedics, Rocky Mountain Optical Center, and the many other doctor and dentist offices throughout the community Nursing Homes and Residential Care Facilities Facilities providing nursing care throughout Missoula that will greatly increase as the population ages Social Assistance Programs assisting in Community Health

30. Growth in Health Care Labor Earnings in Missoula County Over Time Measured in 2005 inflation-adjusted dollars Missoula’s health care sector generated only $50 million in annual labor earnings in 1970. These had grown to $92 million in 1980 and to $160 million in 1990. Growth accelerated in the late ‘90s and by 2000 had reached $292 million. More recently in 2007 these labor earnings totaled $364 million. The health care sector has three sub-sectors that include hospitals and nursing home and residential care facilities, ambulatory health care or care by doctors and other health professionals outside of hospitals and nursing homes, and also health care that is provided through various types of “social assistance”.

31. Distribution of Health Care Labor Earnings across Montana, 2007 The upper chart shows the distribution by county of health care labor earnings in Montana in 2007. The health care sector in Billings and Yellowstone Co. is the largest of any in the state with area labor earnings totaling $616 million in 2007 with these in 2005 inflation-adjusted dollars. Missoula County’s health care sector is 2nd largest in the state with labor earnings of more than $400 million. Cascade is 3rd at $295 million, followed by Flathead at $239 million. The health care sectors in Lewis and Clark, Gallatin, and Silver Bow Counties are considerably smaller in size. The lower chart shows how Billings, Missoula, and Great Falls compare in terms of their economic dependencies on health care, as measured by health care labor earnings per $20 million in area personal income. Missoula has the highest economic dependency on health care in the state.