THE GOOD NEWS:
Montana’s economy is projected to continue expanding for the foreseeable future.
THE BAD NEWS:
Montana's labor supply is expected to grow much more slowly.
The Montana Department of Labor & Industry projects that only 4,500 workers will be added to the state's economy each year over the next decade – roughly half of the number of workers needed to fuel the 2015 job growth of roughly 9,200 jobs—resulting in unemployment rates at very low levels around 2%.
The expected labor market tightness is due primarily to demographics. Nearly 6.5% of Montana’s labor force is already over 65 years of age, the second highest share in the nation. An additional 96,000 workers are between the ages of 55 and 64 and close to retirement. While many Montanans continue to work past the typical retirement age, there is still expected to be at least 120,000 retirements among the baby-boomer population within the next ten years. The economy has always relied on an ever increasing supply of labor to fuel economic growth, but the labor force is expected to be restricted in the future. Assuming Montana’s job growth continues, Montana could see unemployment rates under 2% by 2025.
Because of these tight labor markets, the Montana Department of Labor & Industry’s employment forecasts expect a slowing of job growth in the upcoming years. The chart below shows the projected labor force, employment, and resulting unemployment rates for the next ten years. Employment is expected to grow by 1.1% over the next ten years, adding roughly 7,300 jobs per year for the next two years, then slowing as labor markets tighten further. The expected job growth is expected to be slower than the 2.1% employment growth in 2015, and even slower than the 1.7% growth from the last ten years including the 2007 recession. Even with slower job growth, unemployment rates are expected to hit 1.9% at the end of the projected timeframe in 2025.
Labor Force, Employment, and Unemployment Rate
Source: Labor Day Report 2016, Montana Department of Labor & Industry, Labor Force and Employment Forecasts
In this low-unemployment scenario, workers who are flexible and able to meet the skill needs of employers will have significant opportunities to improve their wages and hold consistent employment. Tight labor markets caused by worker shortages can provide economic benefits for workers because jobs are easy to find and wages increase rapidly. However, economic growth will be constrained if businesses cannot find the right workers, or enough workers, to produce their goods. Employers will need to expend more effort to locate and retain their skilled employees, including increasing pay and benefits. Businesses unable to increase pay rates will need to find creative ways to recruit and retain workers, or identify processes to automate and reduce worker needs.