Thursday, September 20, 2012

A Little Job Growth Fact Checking

Judging by Mike Dennison’s report on the gubernatorial debate in Helena this week, when it comes to explaining what’s wrong with Montana’s economy and what should be done about it, Rick Hill is “on message.” It’s the usual story: we’re falling behind, we have a bad business climate, our taxes are too high, we over-regulate, we need to develop our natural resources (particularly coal), etc.

Now it’s fine to say all that, if you believe it, but it would be nice not to mangle the facts while you’re at it.

For example: Dennison quotes Hill as saying that “We’re trailing all our neighboring states in creating jobs” which “has been a pattern in Montana for almost three decades.” Hill especially envies Wyoming, which he thinks has a better economy than Montana’s because it “embraced coal development” 40 years ago. Well, look at the chart below. It shows trends in total employment in Montana, Idaho, Wyoming and North and South Dakota over roughly the past two decades (1990 to 2010). Employment each year is measured as a percent of its value in 1990, so all the lines start from the same place, 100 in 1990.*

As you can see, we have not been “trailing all our neighboring states in creating jobs … for almost three decades.” We trailed only one, Idaho, and came in ahead of North and South Dakota and yes, even Wyoming.  Of course none of this means that Montanans shouldn’t be concerned about job growth and economic recovery or that we shouldn’t look at what other states have done to promote their economic health. But in looking for states to emulate, shouldn’t we choose the ones – like Idaho - that are doing relatively well? At a minimum, shouldn’t we know which states those are?

The fact that Idaho did a lot better than Wyoming should make us all – including Hill – think long and hard about an economic development strategy based on more natural resource extraction. Here’s another graph. It shows natural resource employment as a percent of total employment in Idaho and Wyoming over the same 1990 to 2010 period.

As you can see, starting out in 1990, natural resource employment was less important in Idaho than in Wyoming. And over time, the relative importance of natural resources in the Idaho economy fell. The strength of Idaho’s economy came from diversifying, away from natural resources and towards high growth sectors – for example, computer manufacturing -  in the national and world economies. Wyoming, which remained more dependent on natural resource production, did not fare anywhere near so well.

Montanans are proud of their history of living off the land as loggers and ranchers and cowboys and miners, and it’s hard to believe that what worked for us in the past won’t necessarily work for us in the future. But like it or not, the world is changing, and the key to our economic future is to make the public investments – in education, infrastructure, research, and communications – that will allow us to change with it.

*I prepared this chart using data from the US Department of Commerce, Bureau of Economic Analysis, Regional Economic Accounts. If you’d like to make a chart of your own, or check to see if I’ve done mine right, you can find the data here.