State economists say slow recovery will continueby Annie Baxter, Minnesota Public Radio
St. Paul, Minn. — State officials were in a decidedly more cheerful mood Tuesday than at their past press conferences.
State economist Tom Stinson recalled the grim tone of the economic forecast last February.
"Things were really very uncertain at that time. We were in the Great Recession, and there was really no certainty as to when it was going to end, or when it was going to turn up," he said.
But now, Stinson notes, the nation's gross Domestic product is ambling in the right direction, and thousands of new jobs will soon sprout up because of hiring for the 2010 Census.
"We think that within the next couple of months we'll see both growth nationally and in Minnesota in the employment area," Stinson said
Minnesota's January employment report provided a taste of that growth. The state's employers hired a net 15,600 workers in January, and the unemployment rate notched its seventh consecutive monthly drop ticking down a hair to 7.3 percent.
Stinson cautiously cheered that news, but in what is, perhaps, the best sign that his own mood has lightened, he laughed when asked what sort of dark clouds may yet loom on the horizon.
"All economists can see dark clouds. We can see dark clouds everywhere. I can list you a whole list," he said.
One of the clouds may loom over the big jump in January employment. Although it was the biggest in nearly five years, state officials say some of the gains may be artificially created by the seasonal adjustment process.
And that's not all. While Stinson believes there is enough momentum in the economy to maintain a recovery, he and other economists worry that factors like weak consumer spending and continued tightness in credit markets could hamper economic revival.
Even if those headwinds recede somewhat, Stinson is forecasting anemic job growth for several years. He expects that Minnesota's employment will not return to its pre-recession level until 2013.
Narayana Kocherlakota, the president of the Federal Reserve Bank of Minneapolis, agrees that unemployment will remain elevated for some time. At a separate event, he said both GDP and unemployment will not rebound as quickly as he hopes.
"Unemployment has fallen somewhat, but the forecasts remain uniformly troubling," Kocherlakota said. "It's notoriously slow to recover as a variable, and has been especially slow to decline after the last two, milder recessions."
St. Paul resident Dale Petrie is bracing himself for long-term unemployment.
"I'm looking at a situation that I was hoping would be a temporary change," Petrie said. "But the longer it goes, the more it feels like well this could require some really permanent life change."
Petrie lost his job as an accountant in February 2009, when the company he worked for shut down. He says his wife's part-time job and his own jobless benefits are keeping the family afloat.
The couple has slashed many items from their budget to rein in costs, but they're still taking on a lot of debt and are exhausting their lines of credit. Petrie worries that protracted unemployment could force him to make even bigger changes, like taking a low-wage job outside his field.
"I would like to be one of the lucky ones who doesn't have to do that," Petrie said.
Petrie says he is feeling somewhat encouraged by the proliferation of job ads he's seeing. According to the Conference Board, Minnesota's online job ads grew by 2900 between January and February.
"Instead of seeing four jobs in a week that I could apply for, there might be 40," he said. "That's a real sign that I can look at and say, OK things are getting better. But what does that number have to be? Does it have to be 80? Does it have to 100? Does it have to be 200 a week before I actually find one that will be the exact right fit and for them to say, 'OK, you are the person for this job.'"
State officials seem confident that for workers like Petrie and the state as a whole, the worst has past. State economist Tom Stinson credits the federal stimulus package with keeping employment from falling into a much deeper trough.
"We'd probably still be in a situation where we were losing jobs big time-- this recession would've extended for another year at least," Stinson said.
Stinson's view differs from that of Gov. Tim Pawlenty, who has been critical of federal stimulus projects. When asked whether the two ever sit down over coffee to talk about the stimulus package's effect on Minnesota, Stinson made this quip:
"Well, I don't drink coffee," Stinson said.
But Stinson went on to say that he and the governor chatted before the forecast announcement.
- Morning Edition, 03/03/2010, 6:20 a.m.