Minnesota is showing all the signs of a recession and its slumping employment picture is getting worse, but that that shouldn’t prompt policy makers and their economic advisers to start weighing ways to prime the pump just yet.
Some of Minnesota’s job-creating tools now are missing the mark. What the state might do later may be clearer when the full dimension of the “soft” or “recessionary” economy is understood.
The state’s seasonally adjusted unemployment rate jumped half a point in December, to 4.9 percent, or almost in line with the national December unemployment rate of 5 percent. More troubling is that six of 11 major industrial sectors had job losses during the
past year, with Minnesota losing 2,300 nonfarm jobs in December to close the year on a low note.
Raw data drawn from the U.S. Bureau of Labor Statistics since 1990 show Minnesota has been steadily working its way to “average” status when comparing employment data against other states.
We’ve arrived, and that is little comfort as the nation appears to have slipped into recession. Minnesota state economist Tom Stinson told reporters the state is in recession. The Star Tribune quoted him as saying, “I don’t see how you can label it anything else.”
Although employment data aren’t the only valid measuring tool, Minnesota’s economy and unemployment rate generally outperformed the nation’s when the state did more to invest in its future. Minnesota is now “disinvesting’ — providing less support for education and infrastructure than in the past when the state’s economy was on stronger footing.
Quick fixes can help provide some employment gains. They may even be needed after the full effect of the current national and state economy is understood. An official declaration of recession isn’t likely before April.
Longer term, however, reinvesting in Minnesota–such as support for education–is a better way to restore the employment comfort margin that Minnesota formerly enjoyed over other states.
The Governor’s bonding recommendations announced on Monday target bridge repairs, partly acknowledging the cost of past deferred maintenance. It is not a Keynesian attempt to jump-start employment and the economy. Construction actually had a 1,500 job gain in December despite a 14 percent decline in 2007 residential construction.
Manufacturing, the leisure and hospitality industry, and public education were among employment sectors that took hits in December and in the past year. At first reading, that data give indications that trying to subsidize manufacturing jobs through tax break schemes doesn’t work, and that short-changing education clearly leads to job losses.