A billion dollar drop in Minnesota's projected budget deficit was the biggest and best news out of today's updated Minnesota forecasts
Deeper in the report, though, are some fascinating, though not encouraging, nuggets about the Minnesota economy and where it might be headed.
Bottom line: Things are improving but there's nothing to suggest 2011 is a big rebound year. Don't expect the jobless rate to show any significant improvement this year. Construction will continue to take its lumps.
We're still looking at another two and a half years before the state returns to pre-recession employment levels.
We'll know a little more Wednesday when the state releases employment data and the unemployment rate for January. But here are the important takeaways from today's official Minnesota economic forecast.
Unemployment. Likely to hover around 7 percent for much of 2011; It will take until mid mid-2013 before Minnesota regains job numbers hit prior to the recession.
When officials add together the unemployed who are actively seeking work, discouraged workers who've left the workforce and underemployed workers working part time but seeking full time work, they calculate there are nearly one in seven Minnesotans who want a full time job but can't find one.
That's roughly 14 percent -- or double the better known monthly jobless rate.
The "slow pace of job creation continues to make it very difficult to put the
state's unemployed and underutilized workers back to work promptly," the report says, noting that the state Department of Employment and Economic Development estimates that...
...in December a seasonally adjusted 206,000 residents were actively seeking work in the state but unable to find employment. This is down only slightly from 216,000 in early 2010 and remains well above the 136,000 seeking work just prior to the recession over three years ago.
Construction. We've written a lot about the woes of the construction business. It's the sector that used to pull economies out of recession. Not this time.
"Residential home construction remains a drag on Minnesota's economic outlook," the official state economic outlook notes.
The construction industry is forecast to lose an additional 900 jobs between the end of 2010 and early 2012, before slowly beginning to recover in mid-to-late 2012 and 2013. The large excess supply of homes built during the housing boom, the slowdown in household formation due to the recession, and weak demand for building activity in 2011 and early 2012 are principal assumptions behind this outlook.
Worst recession in decades?
For most of this recession and recovery, I argued that for as bad as it's been the past few years, the recession(s) of the early 1980s were worse. I started changing my tune last fall as the national unemployment rate stayed above 9 percent.
With this graph from today's report, I officially concede: This recession is worse. (Click the chart for a larger view).
For comparison purposes, here's what I wrote about the November state economic forecast.
The recovery is now officially longer than the Great Recession. But if you don't have a full-time job, it doesn't feel like it. That estimate of 14 percent of Minnesotans who want a full time job but can't find one is pretty telling.
Take a look at today's report and let me know what jumps out at you.
Any way you look at this, the overall situation remains dicey, at best.
- Increase in capital gains tax collections means that families are being forced to liquidate positions and/or assets to (presumably) remain above water. This is not comforting for the long term.
- The effects of energy costs cannot be understated. The forecast states that the underlying assumption they are going with is sub-$100 bbl oil through mid-2013. If that condition does NOT hold, even a limited recovery could get sidetracked since higher transportation costs for goods would result in higher prices and reduced demand (think tourism for the latter).
- Financial markets want stability and predictability. At this point, the current political situation in Minnesota and Washington, D.C. is neither stable nor predictable. Pols on both sides seem to be more interested in exploiting the situation for perceived political gain rather than actually resolving issues.