EMPLOYMENT BY INDUSTRY
(Does not include self-employed or agricultural employment)
Industry Employment
(in thousands)
May(P)
2008
Apr.
2008
Net
Change
Percent
Change
Total Non-Agricultural
451.1
450.6
0.5
0.1%
Natural Resources &
Mining
8.7
8.7
0.0
0.0%
Construction
33.0
32.7
0.3
0.9%
Manufacturing
20.7
20.6
0.1
0.5%
Trade, Transportation, &
Utilities
93.8
93.8
0.0
0.0%
Information
7.6
7.6
0.0
0.0%
Financial Activities
21.7
21.7
0.0
0.0%
Professional &
Business Services
42.5
42.3
0.2
0.5%
Education & Health
Services
60.1
60.0
0.1
0.2%
Leisure & Hospitality
60.1
59.8
0.3
0.5%
Other Services
17.3
17.5
-0.2
-1.1%
Total Government
85.6
85.9
-0.3
-0.3%
(P) denotes preliminary figures
Montana's seasonally-adjusted non-agricultural
payroll employment increased by 500 jobs (0.1%)
from April to May 2008. Leisure & Hospitality and
Construction showed the largest gains with 300
additional jobs each. Meanwhile, Total Government
experienced the largest decrease, with a loss of 300
(-0.3%) jobs over the month.
esearch
VV>i> esearcn P
UNEMPLOYMENT RATE
Seasonally Adjusted
2000 2001 2002 2003 2004 2005 2006 2007 2008
Montana's seasonally-adjusted unemployment rate
increased to 4.2% in May 2008 from 3.8% in April. The
U.S. also increased to 5.5% from 5.0 over the month.
NON-FARM EMPLOYMENT
In Thousands
Montana Department ot Labor and Industry
-i r 1 r
2000 2001 2002 2003 2004 2005 2006 2007 2008
Research and Analysis Bureau
"Montana's Workforce Information Center"
Phone: (406) 444-2430 or (800) 541-3904
P.O. Box 1728 Helena, MT 59624-1 728
www.ourfactsyourfuture.org
Economy
at a 6lanc&»
®
Measuring the Cost of Living in Montana
by Aaron McNay, Economist
If you have traveled, you may have noticed that
the cost of living can be different from one place
to the next. At the same time, anyone living in a
rapidly growing area can tell you that the cost of
living can change over time. Information on the
cost of living in a region can be very important.
Does that new job pay enough? Is my pay raise
enough to cover rising food prices? Some type of
cost of living information is required to answer
both of these questions. Unfortunately measur-
ing the cost of living in Montana, and how it has
changed, is not as easy as it sounds. This article
provides information on some of the resources
available to measure cost of living differences.
Price and Comparative Indexes
The cost of living can be measured in two ways:
over time or by location. Changes to the cost
of living over time, referred to as inflation, are
measured using a price index. The price indexes
examined in this article are the Consumer Price
Index and the Wyoming Cost of Living Index. To
compare prices by location, a comparative index,
such as the American Chamber of Commerce
Researchers Associations Cost of Living Index, is
needed.
The Consumer Price Index
Price indexes are used to measure the inflation of
prices in an economy. The most common index is
the Consumer Price Index (CPI), which is gen-
erated by the Bureau of Labor Statistics (BLS).
The CPI is the standard method of measuring
inflation because it measures the end prices that
consumers pay.
What exactly is the CPI? The BLS describes the
CPI as "a measure of the average change over time
in the prices paid by urban consumers for a mar-
ket basket of consumer goods and services." 1 Put
simply, the CPI measures how prices change over
time. Each month, the BLS collects price data on
80,000 goods from urban areas across the coun-
May 2008
try. These goods are chosen to represent every-
day items purchased by urban consumers. Once
the current price data is collected, it is compared
to the prices of the same goods in the reference
period. When complete, the index compares prices
and measures inflation over time (see Figure One).
Many people refer to the CPI as a cost of living
index. While a cost of living index and the CPI
both measure price changes over time, a cost of
living index would also measure changes in con-
sumer consumption. This is necessary because the
goods that are consumed today may not be the
same ones that will be consumed five years from
now. A true cost of living index would adjust for
these consumption changes. The CPI only partial-
ly adjusts for consumption shifts by allowing for
the substitution of goods within large spending
categories. There is no substitution of goods be-
tween categories. This inability to substitute some
goods causes the CPI to overestimate the cost of
maintaining a particular standard of living.
Another weakness of the CPI is that it fails to
measure the consumption of public goods (public
transportation, law enforcement, education, etc.)
that affect everyone's standard of living. By not in-
cluding public goods, the CPI is unable to provide
a true measure of the changes in the cost of living
from one period to the next. The use of urban
prices, the inability to substitute goods, and the
lack of price data for public goods are all factors
that prevent the CPI from truly measuring cost of
living changes in rural areas like Montana.
The BLS is aware of the aforementioned limita-
tions and attempts to minimize them whenever
possible. For example, the introduction of a geo-
metric mean formula in 1999 allows for the index
to adjust for some substitution of goods within
each category 2 Continual improvements in sta-
tistical techniques, as well as the large sample size,
make the CPI a very reliable source of urban data
and a strong measure of inflation.
Figure One: Consumer Price Index Growth Rate (Inflation Rate)
Economy
at a Glance w
®
Wyoming's Cost of Living Index
The CPI is limited to urban price data. This is not
a problem when examining urban areas such as
New York City, or Boston. If the area is rural, such
as Montana, the CPI may not be a good repre-
sentation of real price changes. Thankfully Wyo-
ming's Economic Analysis Division has developed
the Wyoming Cost of Living Index (WCLI),
which is likely to better represent the price levels
in Montana.
Twice a year, price data is collected from 28 cit-
ies all across the state of Wyoming. The data is
weighted to reflect the relative importance of
items such as housing and food within an individ-
ual's budget. The price data is then used to esti-
mate inflation rates and to develop comparative
indexes (see Figure Two). Overall, the process for
estimating the WCLI is very similar to the CPI,
but it only measures rural Wyoming prices.
ACCRA Cost of Living Index
Figure Two: Annual Estimated Inflation
Rates for the U.S. and Wyoming 3
14%
Both the CPI and WCLI are very useful in
examining price inflation over time, but they do
not provide information on comparative price
levels between two areas at a single point of time.
A comparative index should be used to compare
prices between areas. The American Chamber of
Commerce Researchers Associations (ACCRA)
Cost of Living Index, which is developed by the
Council for Community and Economic Research,
is a commonly used comparative index. This index
includes some Montana data, and it can be used to
compare areas all across the country.
The ACCRA index examines price data from
over 300 cities at a single point in time. It col-
lects indexed price information for various goods
typically consumed by people. Once collected, the
prices are weighted based on expenditure patterns.
The completed index reveals how each city ranks
relative to the average cost of living in all the mea-
sured cities. A value above 100 indicates that the
cost of living is above average. Below 100 and the
cost of living is below the average. The ACCRA
index is only available by subscription.
The ACCRA index does have its limitations. First,
the index cannot be compared from one period
to the next. Each quarter, the city price data is
indexed relative to the average of all the cities
measured. Because the measured cities change
from one quarter to the next, the index cannot
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measure price changes over time. Second, the AC-
CRA index only has data on three Montana cities
(Missoula, Bozeman, and Kalispell). With so little
data, it is nearly impossible to get an accurate cost
of living estimate for the entire state. For informa-
tion outside these three areas, a different index
should be used.
Measuring the Cost of Living in Montana
It would be nice if a strong cost of cost of liv-
ing index existed for Montana. Unfortunately, a
perfect index is not available. The ACCRA cost
of living index can be used to compare the prices
from area to another. This index has useful infor-
mation on the cost of living in a few of Montana's
cities. However, making generalizations about the
statewide cost of living based on ACCRAs data
may not be a good idea. Bozeman, Kalispell, and
Missoula are relatively large, young, and fast-
growing cities, and may not be representative of
the entire state.
Both the CPI and the WCLI are used when mea-
suring price changes over time, but each index has
its own limitations, and can act only as a proxy,
or substitute for actual Montana data. The use of
each index as a proxy is not a concern as long as
the proxy data is similar to Montana price data.
The standard proxy for inflation in Montana is the
CPI. The national data and large sample size en-
sure that the CPI data is consistent and accurate.
This consistent data is one reason why the CPI
is the standard method of measuring inflation in
Montana. But, the CPI's lack of rural data means
that the measured area is not very similar to
Montana. This causes the CPI to perform poorly
as a proxy for Montana whenever urban and rural
prices move differently.
May 2008
In contrast, the WCLI does measure rural prices,
although these prices are in rural Wyoming.
When Montana's prices move similarly to Wyo-
ming's prices, the WCLI is a better proxy for
Montana than the CPI.
All of the indexes that were mentioned lack spe-
cific data for Montana. Therefore, none of them
will be a perfect proxy for Montana. The CPI's use
in many federal and state programs has lead to the
CPI becoming the standard method of measuring
cost of living changes. While the CPI may be the
standard index, it is far from being the only one.
At times, alternative indexes, including the WCLI
or ACCRA, can result in better estimates of price
changes in Montana.
Consumer Price Index Frequently Asked Questions, Bureau of Labor
Statistics, http://www.bls.gov/cpi/cpifaq.htm
Consumer Price Index Addendum to Frequently Asked Questions,
Bureau of Labor Statistics, http://www.bls.qoy/cpi/cpiadd.htmU_ 1
inflation Tables Usinq WCLI and CPI-U Index Numbers, Wyoming
Economic Analysis Division
UPDATED
WAGE RATES
MONTANA
Need to know how much a
Sheet Metal Worker earns
in Great Falls? What about
a Child Care Worker in
Missoula?
Our newly updated
Informational Wage Rate publication has the
answers you need for hundreds of occupations
in Montana and seven areas within the state.
You can find the new publication on the web at:
www.ourfactsyourfuture.org/?PAGEID=67&SUBID=177
^Ecqnomj County Unemployment Rates* - May 2008
Montana Average Rate: 3.7%
| | 1.9% to 2.9%
| | 3.0% to 3
Q^ 4.0% to 4.9%
" 5.0% to 5
6.0% and above
MAIL OR E-MAIL? If you would like us to e-mail you a link to this publication on
our website each month, e-mail us at: mediacontacts4rad@mt.gov. Please include
your mailing address as it appears on this publication and your e-mail address.
Not Seasonally Adjusted
2,300 copies of this public document were published at an estimated
cost of $0.87 cents per copy, for a total cost of $2,000.00, which
includes $1,537.00 for printing and $463.00 for distribution.
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