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
An All too Slow but Steady Recovery
May 2011
Jack M. Geller, Ph.D.
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The recent news that the Minnesota unemployment rate dropped again in March to a rate of 6.6% certainly was welcome news to government officials and economic developers alike. In fact, a belief that Minnesota is finally climbing out of the grasp of the "Great Recession" now seems to be common; and why not? Minnesota has now experienced three straight months of employment growth; we'e added over 7,000 new jobs year-to-date; and at 6.6% Minnesota now has the 11th lowest unemployment rate in the nation. And yet ... in spite of all this good news, many do not necessarily feel like the recovery has truly taken hold and that good times are ahead.

So is this economic good news really something to celebrate, or is it all just statistical mumbo-jumbo? Well, like everything ... it depends on how you look at it. On a positive note, a 6.6% unemployment rate is good news; and the fact that it has steadily declined over the past year is even better. With a national unemployment rate of 8.8% and with the state of Nevada now occupying the top spot at 13.6%, Minnesota's rate of 6.6% cannot be viewed as anything but positive. Minnesota's manufacturing sector, which had taken a particularly hard hit, has shown a great resilience with a net gain of close to 8,000 jobs in the past year. And the traditional growth sectors of health care and education continue to add jobs, although not as rapidly as we have seen in the past.

At the same time, most of Minnesota's contiguous neighbors actually have a lower unemployment rate, with North Dakota leading the nation with a current 3.7% unemployment rate. And with South Dakota at 4.8% and Iowa at 6.1%, that leaves Wisconsin as the only contiguous state behind us at 7.4%. But is the unemployment rate really a good measure economic recovery? I would suggest that at best, the unemployment rate is a very crude measure. 

One shortcoming is that the unemployment rate does not differentiate between temporary employment and permanent, full-time employment. And a recent study by the National Employment Law Project reports that more than 20% of the job growth in this recovery is comprised of temporary employment. The rate also does not differentiate between low-medium wage jobs and what I would call a "first-earner income;" you know ... the type that you can raise a family on. So clearly, the types of jobs being created can have a big impact on how we view this recovery.

But in addition, there are a number of other forces that are creating headwinds for the Minnesota economy that lead me to believe that while we are certainly not going back into recession, the recovery will be steady, but slow. Allow me to cite just a few:

  • First, we have to recognize that the Minnesota workforce is continually expanding. In fact, a certain amount of job growth is required just to keep the unemployment rate from rising further. So as we congratulate the current crop of high school and college students graduating this month (including my daughter) we have to realize the growth in the size of workforce actually works against the lowering of the overall unemployment rate as more jobs need to be created just to stay even.
  • Second, we have tended to discount the importance of the residential construction industry and the financial services industry in their contributions to job and economic growth over the past 15-20 years. In fact a recent report by the Federal Reserve Bank of St. Louis documents the reduction of their contributions to both jobs and GDP growth, which will further slow down the prospects of a speedy economic recovery. And while we are now seeing the typical seasonal increase in construction employment in Minnesota, it will likely be a fraction of the job growth we have experienced in years past. That's not good.
  • And finally as I noted in a previous column, we must remember that the overall employment picture of our region is comprised of jobs in the private, public and nonprofit sector. And with the presence of multiple public institutions of higher education, a MnDOT regional headquarters and a large regional security hospital in St. Peter, the region is disproportionally dependent upon public sector jobs. As a result it is likely that the current mood at the State Capitol will create some additional headwinds for the region as reductions in the public workforce take hold.

So overall, while there are no real signs to suggest that the steady improvement in our economy will slow, these headwinds noted above may keep the recovery from speeding up as well.  In other words, be prepared for an all too slow, but steady recovery.

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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