A Look at the Treasure State's Economic Issues

The Backyard Economy: Montana

A Look at the Treasure State's Economic Issues

By CHRISTINE BYUN
ABC NEWS Business Unit

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Bolstered by its natural resources and a tight labor market, Montana is predicted to stave off any slowdown.

"Are we feeling effects from a national recession? Yes, but we'll be OK because of strong employment and income growth, and also because commodity and ag prices are remaining strong," predicted Paul Polzin, an economist with the University of Montana. "The state consistently outperforms the nation in growth."

Montana, aptly nicknamed the Treasure State, is sustained by its wealth of natural resources and commodities, and the recent strength of its export industries. The state boasts an unemployment rate lower than the national average.

Agriculture is one of the state's largest industries, in particular, livestock and wheat crops. Wheat is exported primarily overseas while cattle are sold to other states where feedlots and meat-packaging plants are clustered.

Though wheat prices have risen, Ron de Yong, the director of the state's Department of Agriculture, said local farmers will not benefit as much as expected due to the higher costs they are paying, largely higher oil prices. Farmers have begun to diversify their crops and have started to explore raising biofuel crops, which would attract more investors and companies to the area.

"Having two options for the industry will be beneficial," de Yong said.

Rising oil prices have encouraged companies to increase crude oil production and tap new sources. The state already has seen an increase in the number of wells for both natural gas and oil in the past five years. In addition, the Bakken shale formation, a large oil reserve that spans Montana, North Dakota and Canada, is being studied and developed with new technology.

Fallout from the mortgage crisis will not make a huge dent in Montana's housing industry, but some wear-and-tear has been noticeable in lower home prices and a slight increase in foreclosures during the first quarter of 2008. Polzin said Montana's "house price bubble is now bursting, but the decelerating is not as fast as the national average."

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