The EDA Center | at the University of Minnesota  
Commentaries on Greater Minnesota

Periodically we will present commentaries on topics of interest to community and economic developers across rural Minnesota. Below is a list of all commentaries with the most recent listed first.

 

Commentaries
A Turning Point?
October 2010
Jack M. Geller, Ph.D.
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As we look back it just may turn out that July marked a real turning point for the Minnesota economy. As we all know, for the past few years the Minnesota economy and its job outlook has been in retrenchment, or at best going sideways. But beginning in mid-2009 some signs of recovery began to emerge, with job growth one month and retrenchment the next. Temporary workers were showing up on payrolls and the signs of a recovery taking hold were there.

Then came the month of July when the Department of Employment and Economic Development reported that Minnesota had a net gain of 9,800 jobs. Pretty impressive in itself, until you realize that during the same month we also lost 9,100 government jobs. Many of these government jobs were temporary census workers, but clearly not the majority. So for a net gain of 9,800 jobs to occur, this actually meant that the private sector created almost 19,000 jobs in July. Now that's a pretty good month! In fact, Minnesota has now gained almost 30,000 jobs in the past 12 months; a pace not matched in almost 4 years.

If you currently examine our economy within the national context, you'd have to come to the conclusion that while the recovery is slower than we would like, it's really not doing too bad. We've now recovered more than 25 percent of the jobs lost in the recession and our unemployment rate of 6.8 percent is almost 3 percentage points lower than the national rate of 9.6 percent. And while a 6.8% unemployment rate is still high, let's remember that several other states are still stuck in double-digits. And of course, it wasn't that long ago when a 4-5% unemployment rate was viewed by many as "full employment."

Of course, you'd never know that the economic recovery is on track if you listen to our politicians and public officials. With a substantial budget deficit at the state level, it's easy to blame the economy for this situation. But the reality is that the Minnesota economy and the Minnesota state budget are two entirely different things. The economy of course is a reflection of the production, sale and distribution of goods and services continuously circulating throughout a global marketplace. As much as government tries, it really cannot make an impact on the economy as quickly or as comprehensively as politicians would have you believe.

The state budget on the other hand is a political instrument, reflecting the culmination of dozens and dozens of political decisions and compromises; some good - some bad. But unlike the economy, a small group of political leaders can make a huge impact on the state budget. Choices to raise taxes, lower taxes, use one-time funds to temporarily resolve recurring problems, or shift expenses into the next budget cycle are all political decisions. So the next time your local legislator or public official wants to blame the economy for our budget woes don't let them off so easy.

In the end no one knows for certain what the remainder of 2010 will bring, but my guess is that the economy and the job outlook will continue to incrementally improve until we reach a full recovery. But when we are fully recovered, don't expect everything to look like it did prior to the recession. The reality is that some of our business sectors will never fully recover and the overall employment composition in Minnesota will have changed. This may be especially true within some regional areas across the state. And looking a bit further out, demographic shifts, educational attainment and other socio-economic characteristics of the workforce, along with the integrity of our regional and state infrastructure will all influence the future economic and employment outlook for Minnesota.

Many economists and pundits are now calling this emerging economic configuration the "New Normal." I think they are on to something.

Geller is professor & head of the Arts, Humanities & Social Sciences at the University of Minnesota, Crookston. He also serves as the director of the federally-funded EDA Center at UMC. He can be reached at gelle045@umn.edu

This document was prepared by the University of Minnesota, Crookston under award number 06-66-05709 from the Economic Development Administration, U.S. Department of Commerce. The statements, findings, conclusions, and recommendations are those of the author(s) and do not necessarily reflect the views of the Economic Development Administration or the U.S. Department of Commerce.

The University of Minnesota is an equal opportunity educator and employer.

 
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