In Minnesota, Above-Average Economy Hides Familiar Pains

During the recession, the state’s unemployment rate never reached the double-digit peak suffered by the nation as a whole. Since the recovery began, it is among a handful of states whose rate has fallen at a faster clip than most other states. Minnesota’s rate is now 6.6 percent, well below the 9 percent across the country now.

Farmers in the state’s large agricultural sector have benefited from surges in the prices for their corn and soybeans. Among big companies with headquarters in the state, 3M and General Mills have recently reported strong earnings growth, and Target and United Healthcare are hiring.

Dig a little, though, and the foundation looks wobblier. Economists point out that some of the drop in state unemployment merely reflects people giving up on the job search or retiring early, as well as an aging work force with fewer young people hunting for jobs.

“It really seems slow here,” said David Vang, an economist at the Opus College of Business at the University of St. Thomas. “So if we’re rapid, other places must be terrible.”

Many people look to Minnesota as a state whose demographics, varied industries, educated citizenry and public policy could together provide a bit of a shield against hard times. But a closer inspection shows a disconnect between the more encouraging economic data of late and the harsher reality that people so often describe, here and across the country.

According to government data, which show that state unemployment peaked at 8.5 percent in the downturn, employers slashed roughly 154,000 jobs but have added back fewer than 27,000 — or only about 18 percent of those lost. Big local employers including Medtronic, a medical device maker, and Hutchinson Technology, which makes components for disk drives, have announced layoffs in recent weeks. Small to medium-size companies say they are nervous about government policy and are reluctant to hire.

A depressed real estate market remains a drag on the local economy — as it does in many other places. In March, foreclosed homes made up more than 40 percent of sales in the Twin Cities. Construction workers have been idled for years, with little hope of much imminent work. And the state government must resolve a $5 billion budget shortfall that some fear will lead to job cuts.

Over all, the nation continues to face a battery of economic challenges. Last week’s employment data showed a welcome bit of job creation for several months’ running, but other recent reports have been more lackluster. Unemployment insurance claims have been running at a higher level, and the main association of small businesses said it expected hiring to be sluggish.

Minnesota has some ability to outpace the rest of the country, with its tilt toward medical and food manufacturing and agricultural strength.

“In some ways it looks like it’s doing a little bit better,” said Terry J. Fitzgerald, senior economist at the Federal Reserve Bank of Minneapolis. “But not a lot better.”

Still, part of the reason Minnesota’s headline unemployment rate may have shown more rapid improvement is that it has fewer young people competing for jobs. According to Thomas Stinson, the state economist and a professor at the University of Minnesota, the proportion of workers in the 20-to-40 age group has slid from nearly half in the 1980s to about 38 percent now.

The people in the 40-to-60 age group, Mr. Stinson said, “are the people whose 401(k)’s got hit so hard and whose housing values have gotten hit so hard. So part of the reason for the slow recovery is that people are not spending, but are rebuilding their 401(k)’s. And we haven’t seen the release of pent-up demand that we would have normally seen” after a recession.

The state also faces many of the same trends that hamper job growth elsewhere. To the extent they are hiring, companies like 3M and General Mills are adding more people abroad than domestically. Connie Pautz, a spokeswoman for Hutchinson Technologies, which will cut about 600 people — or nearly half its Minnesota staff — over the next 12 months, said the company had automated much of its operations. “So we don’t need as many people,” she said.

Article source: http://www.nytimes.com/2011/05/14/business/economy/14unemployed.html?partner=rss&emc=rss