Encouraging Numbers, at First Glance
By MOTOKO RICH
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.
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 idle for years, with little hope of 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.
Tube Bending Specialists, a family-owned firm that cuts and bends aluminum and steel tubing in Coon Rapids, a suburb of Minneapolis, illustrates the problem on a smaller scale. George W. Mundis Jr., the chief executive, said the company laid off eight people, or half its staff, in 2008 as annual sales plunged to $570,000 from $1.6 million.
With mechanical saws rumbling on the factory floor next door, Mr. Mundis, 70, and his wife Mary, 67, sat in his office and lamented the $200,000 in retirement savings they had used to avert the company’s bankruptcy. Even though sales have recovered somewhat, the Mundises have been cautious, adding only three people in a year.
If manufacturing companies are hesitant, at least they have added jobs — about 7,840 in Minnesota over the past year. Across the country, manufacturing has steadily added jobs during the recovery — about 250,000. Construction, on the other hand, has lost close to 2,200 in Minnesota, consistent with weakness across the nation.
New home permits issued in the Twin Cities in April were down about a third from a year earlier, according to Keystone Report, a construction data firm. That has left people like Bill Evertz, a 51-year-old former house framer who keeps his white hair mashed under a baseball cap, scrambling for odd jobs. Mr. Evertz lost his job of 15 years in 2007 and then worked for a home remodeling company north of Minneapolis until last fall.
To cut costs, he moved in with his sister. At the gym, he talks with other former construction workers who hope that spring brings fresh hiring. Right now, he said, he is left to “praying for hail or rain storms, because then the insurance companies hire people to fix up houses.”
Public sector workers are struggling as well. Over the past year, Minnesota lost 1,900 government jobs. Steven Lutmer, who spent 20 years as a city building inspector in Ramsey, was let go in January of last year.
Mr. Lutmer, 51, who once earned $62,000 a year and benefits, is collecting $498 a week in unemployment. At a job fair last week, where more than 250 people jammed a windowless hotel ballroom, he approached a recruiter from Toys “R” Us to ask about his application for a part-time job stocking shelves that would pay less than $8 an hour. “I’ll take part time, full time, anything,” shrugged Mr. Lutmer.
The bright spot in Minnesota’s economy has clearly been agriculture. David Frederickson, the state’s commissioner of agriculture, attributed it to the price of corn, which is close to $6.70 a bushel, and the price of soybeans, at about $12.80 a bushel, not far from recent peaks. The hefty prices are generating some increased activity for fertilizer distributors and agricultural equipment makers, he said. But the ripple effect will be limited, he added, because many farmers will use their revenue to pay down debt.
There are signs of hope, however. Steve Hine, an economist for the Minnesota Department of Employment and Economic Development, noted that the ratio of jobseekers to online listings is among the lowest in the nation. And at the University of Minnesota, Paul Timmins, director of career services for the college of liberal arts, said more employers showed up at a spring job fair for graduating seniors this year than last. “Definitely more students are getting jobs,” said Mr. Timmins.
“My sense is it’s a slow and steady march ahead,” he said, adding wryly: “Sorry you had to come all the way to Minnesota just to learn that we are like the rest of the country.”
