Minnesota economy chugs on, but slowdown on the horizon
ST. PAUL -- Minnesota’s economy is chugging along, but economists warn that could be about to change.
"We're currently living in the longest recovery ever in the U.S. and we know that a recession is likely to come," said Jay Kiedrowski, a former Minnesota commissioner of finance and senior fellow at the University of Minnesota.
That is the same thing State Economist Laura Kalambokidis warned Thursday, Dec. 6, as state finance officials projected a $1.5 billion state budget surplus.
While the economy next year looks to continue strong, she said, economists now expect a weaker economy beginning in 2020 compared to what they predicted back in February. “You can see a slowdown in economic growth.”
The slowdown comes after 112 months of consecutive national economic growth. That is the second-longest growth on record.
In that time, Commissioner Myron Frans of Minnesota Management and Budget said, the economy has been in steady recovery due to Minnesota businesses and workers.
Part of the reason for a slowdown is the expected lack of workers to fill jobs, due in part to baby boomers retiring and too few workers stepping in to replace them. Also, as they retire they will require more government services.
Also, Kalambokidis said that the impact of recent federal tax cuts will weaken.
The economic future is tough to predict, economists say, especially now.
The country’s trade policy is uncertain with the Trump administration and China trade tariff questions up in the air. That adds to stock market volatility, which just in recent days has forced wild swings.
Minnesota farmers and manufacturers do not know how federal trade policies will affect them, Kalambokidis said. For manufacturers, she added, that may mean they will reduce their purchases, further slowing the economy.
China already has found new sources for soybeans, particularly Brazil, which leaves them wondering how to sell some of their recently harvested crops.
State House Speaker-designate Melissa Hortman, D-Brooklyn Park, said besides soybean farmers, pork producers face an uncertain future.
Kalambokidis said any Minnesota business that relies on exports could face issues.
While Kalambokidis said international trade policy “has been in flux,” there also is talk about a trade war that could raise prices of all Chinese goods and reduce the amount of American goods China would buy.
The tightening economy likely will be felt across Minnesota, both in the Twin Cities and greater Minnesota, the state economist said. There are a large number of unfilled job openings in most of the state.
Economists also wonder about the impact of increasing interest rates, which would boost the cost of loans. The Federal Reserve Board is toying with that action.
Even with the questions, the state report released Thursday predicted a 1.3 percent job increase this year and 1.7 percent next year, before it slows slightly.
State House Speaker Kurt Daudt, R-Crown, who will become minority leader in a month, said he thinks people “are happy with the economy. We basically are at full employment. … Anyone who wants a job can get one.”
Daudt has crisscrossed the state much of this year helping GOP candidates. He said state officials need to make sure they do not hurt the economy by raising taxes.
Democratic Governor-elect Tim Walz said the state can help the economy in ways such as providing aid to child care providers, with shortages around the state.
Politicians in both parties say transportation improvement can help the economy, although they disagree on how to fund it.
In Minnesota, construction, leisure, hospitality and manufacturing were the fields that saw the greatest levels of job growth between October 2017 and October 2018. Information, mining and logging and federal government jobs in Minnesota shrunk the most.
The report showed for the first time since the state started reporting, both the Minneapolis-St. Paul region and greater Minnesota posted a ratio of less than one unemployed person to every job opening. In Greater Minnesota, that rate was 0.7, in the Twin Cities, it was 0.5.
And the number of Minnesotans filing for unemployment in September fell 2.4 percent compared to a year prior.