Minn. economy promising, but recovery will be slowby Annie Baxter, Minnesota Public Radio
St. Paul, Minn. — The state's job market is definitely recovering, Minnesota budget officials say, but recovery will continue at a crawl.
That assessment came as part of the surprising state budget surplus projection of $876 million in the coming fiscal year. The budget forecast, provided twice a year by the Minnesota Management & Budget Office, is one of the most exhaustive reviews of the state's economic strengths and challenges.
Economic recovery is underway, but it's clocking in more slowly than state officials projected last February. Back then, they stood by the prediction of the forecasting firm IHS Global Insight, which said all the jobs lost in the recession nationally would return by 2013. Now, with gross domestic product growing slower than expected, they think that won't happen until 2014.
In February, Global Insight estimated a 20 percent chance of a second recession. Now, nervous about the European debt situation, the firm says those odds are up to 40 percent.
"This probably sounds a lot like the same old gloom and doom you've heard before," said Tom Stinson, state economist, with a laugh in his voice.
Why laugh at this quip? Because he was wearing a smile.
"Actually, there's some good news in there," Stinson said.
The good news Stinson's talking about has to do with Minnesota's economic recovery and the advantage it gives the state moving forward. The state's employers have added back more than a third of the jobs lost in the recession. The nation has only regained a fifth of the jobs lost.
In addition, Minnesota's unemployment rate, 6.4 percent in October, was well below the national rate of 9 percent. In the first ten months of 2011, private hourly earnings in Minnesota rose 3.2 percent from the year before, compared to 2 percent growth nationally, and hourly earnings in Minnesota outpaced national growth.
This all makes Stinson guardedly optimistic.
"It's not that we're doing as well as we should. It's not that there isn't a lot left to do," Stinson said. "But we are outperforming the U.S. economy and we're expected to continue to do that."
Scott Anderson, a senior economist at Wells Fargo, doesn't entirely buy state officials' optimism about the durability of Minnesota's economic advantage over the nation.
"I would be even a little more pessimistic than them. I think there's a chance of further downgrades in the economic outlook in the months ahead here," Anderson said.
For one thing, Anderson said state officials are banking on a substantial jump in the job count, as a result of what's basically an accounting change. Officials expect a technical adjustment will add about 14,000 jobs to the state's total employment. That addition would make Minnesota's job growth rate slightly stronger than the nation's.
There's no guarantee things will pan out that way, Anderson said.
"We have seen at least over the past two years a general outperformance for the state of Minnesota, but it's only been a really minor outperformance and that outperformance could get revised away," Anderson said. "And in fact there could be a good chance that you slow down and see the growth rate move back towards the national average."
Some of Anderson's pessimism stems from his concerns about the state's export market. By his estimate, about 20 percent of Minnesota's exports go to the European Union, and about 30 percent go to Asia.
Global economic problems could hurt the state's economic performance, he said.
"And certainly could affect manufacturers' ability to expand payrolls next year," he said.
But economic contraction is not something recruiter Chris Ohlendorf worries about right now. He's a partner with the McKinley Group, an executive search firm in Minneapolis.
"I've never seen all the businesses trending up at the same time. But we have all seven business units trending upward right now."
And Ohlendorf said usually the information technology component of his company's business acts as a leading economic indicator, and he said it shows no sign of flagging.
But experts say a lot could change for the worse if Congress doesn't renew the payroll tax holiday and extended unemployment benefits. According to Stinson, failure to do so could seriously crimp economic growth both in Minnesota and nationally.
- Morning Edition, 12/02/2011, 6:50 a.m.