Employment in Montana rises, but significant labor force challenges persist

When it comes to employment and labor markets, Montana is both a leader and a laggard, according to a variety of measures found on the Minneapolis Fed’s Regional Economic Indicators dashboard.

For example, among Ninth District states, Montana has seen a strong employment rebound during the recovery, along with South Dakota (chart 1). Although the state is not quite back to pre-pandemic levels, its rising employment is likely because the state saw stronger job growth leading into the pandemic than other district states.

The state has also seen its unemployment go from the Ninth District’s highest pre-pandemic rate to the second lowest. At 3.1 percent, it is one of the lowest jobless rates nationwide and lags only South Dakota among district states.

In contrast to those strong employment trends, labor force participation in Montana remains substantially lower than in other states in the District. While this has historically been the case in Montana, the state’s rate is still a full percentage point below pre-pandemic levels, as many Montanans have stopped looking for work (chart 2). This phenomenon of lower labor force participation is also common among states nationwide, but Montana’s labor force participation rate remains nearly 5 percentage points below Wisconsin, which has the second lowest labor force participation rate out of Ninth District states.

Given the comparatively low labor force participation rate, how has employment managed to rise at all in Montana? The answer likely lies in population growth. While 2021 data on population growth are not available, the long-term trend through 2020 suggests that the state has likely seen stronger population growth than other district states.

Over the past 10 years, Montana’s population has grown nearly 10 percent, resulting in a new seat in the U.S. House of Representatives. In 2020, the state’s annual population grew by 1 percent, compared to 0.3 percent for Minnesota. The state has reportedly seen an influx of remote workers and others looking to relocate from more expensive regions or toward more amenity-rich areas like western Montana. In fact, Montana experienced a higher rate of inbound moves in 2020 than most other Ninth District states, according to U-Haul’s annual migration study.

With more people living in Montana, employment levels can rise despite a decline in labor force participation within that population.

Montana’s employment growth could be even stronger given robust job openings, which have accelerated faster than the population and labor force. The resulting labor tightness has been exacerbated by a rising rate of voluntary quits among existing workers in recent months. While the quit rate in Montana has often been higher than the rest of the region, quits increased over 30 percent in September, leading the state to have one of the highest rates of people leaving their jobs in the nation.

Prior to 2020, job openings and hires were often closely aligned in Montana. Rising quits, falling unemployment, and lower labor force participation have led to a persistent gap between job openings and hires in the state (chart 3). As the gap between job openings and hires widens, employers are having more difficulty filling jobs, and interested workers are having less difficulty finding work.

Despite Montana’s promising growth in employment, the mismatch between labor supply and demand means the state could be seeing an even better recovery. However, the state’s rising population also puts it in a stronger position to sustain recent employment growth compared to other Ninth District states.

For more data on economic indicators across the Ninth District—updated monthly—visit our Regional Economic Indicators dashboard.