State’s economy makes solid gains

by Joni Astrup

Associate Editor

With the Great Recession in the rearview mirror, Minnesota’s economy continues to make solid gains.

Laura Kalambokidis
Laura Kalambokidis

State Economist Laura Kalambokidis said in many ways Minnesota’s economy is outperforming other states and national averages, particularly when it comes to the pace at which Minnesota recovered from the recession.

Kalambokidis spoke April 16 at the Elk River Area Chamber of Commerce’s quarterly membership luncheon, held at Rockwoods in Otsego.

She touched on a number of economic measures, including unemployment.

Minnesota’s unemployment rate stands at 4.8 percent, compared to 6.7 percent nationally. However, Kalambokidis noted that the unemployment rate can be affected by the number of people participating in the workforce. Labor force participation has been declining over time, she said, and there are economic and demographic reasons for that.

“For instance, when the economy is really bad, people stop looking for work,” she said. Some people go back to school. In some two-earner households, one person decides to stay home.

Others leave the workforce as they retire.

On the jobs front, Kalambokidis said almost all major industries in Minnesota are adding jobs, with construction and health care services showing some of the most robust growth.

Regarding income, Minnesota’s per capita income of $47,856 exceeds the national level of $44,543. The gap is larger than it normally is, she said.

Overall, Kalambokidis said leading labor market indicators remain positive. Initial claims for unemployment insurance are down, average hours worked are up, job vacancies are up and the number of unemployed people keeps trending down.

Jobs exceed pre-recession levels and modest gains are projected, she said.

In fact, Minnesota reached the pre-recession peak of employment last summer, while the nation as a whole still hasn’t quite reached it, she said. That doesn’t tell the whole story, though.

“It’s important to note that even while we have numerically recovered the jobs lost in the recession, that doesn’t mean that we are all as well off as we would have been had the recession not occurred,” she noted. Although there are more jobs in Minnesota now than before the recession, the state’s population has also increased, she said. Additionally, some full-time jobs were replaced by part-time ones and some people are working at lower wages than they expected.

However, job growth as well as stronger household formation rates are helping housing recover, she said.

A household is formed when people who had been living together form separate households. That can happen when young people move out of their parents’ homes or when people who shared housing during the recession to save money now separate, she said.

Household formation is climbing back from 2009, when it bottomed out. Household formation drives demand for homes, she said.

Total housing permits — the number of units permitted to be built — are also increasing after hitting low points in 2008, 2009, 2010 and 2011.

Kalambokidis also noted that the age distribution in the United States has changed. From 1990 to 2010, the number of people under age 34 dropped and the number over age 50 increased.

As baby boomers age out of the work force, Kalambokidis said Minnesota’s labor force growth is projected to continue to slow. As that happens, for Minnesota’s economy to keep performing at the level it has been with high per capita incomes and so forth, labor productivity will be key. Or, as she explains it, “We’re going to have to increase the amount of stuff that each worker produces.”

Leadership choices will affect future economic performance, she said, citing several factors:

•Worker health, education at all levels, research and innovation and infrastructure all affect worker productivity.

•Minnesota can’t afford to leave any workers behind. That means the education system and workforce training must serve all groups well.

•Minnesota can’t leave entrepreneurs behind.

•Reducing policy uncertainty is pro-business. The fiscal cliff, the debt ceiling and other federal issues were a drag on the economy in 2013, she said. “A lot of that is gone now,” she said.

•Public and nonprofit sector effectiveness matters as well.