McElroy: Recession bottoming out
While the recession probably won't rebound until next year, there signs that it's bottoming out, says state Employment and Economic Development Commissioner Dan McElroy.
"We're starting to see some signs of it turning around," he said Wednesday in an interview. "It's not uniformly across the state, but our new claims for unemployment are starting to slow down, the total number of people on unemployment is actually going down a little each week."
McElroy, Department of Employment and Economic Development and a host of others with federal economic stimulus dollars to dole out to businesses held an "Advancing Economic Prosperity" road show Wednesday at the American Indian Resource Center on the Bemidji State campus.
"There are some statewide reports of new housing starts," McElroy said.
Nationally, the Index of Leading Economic Indicators has been up three months in a row, he said. "Last month it was up fairly sharply."
A revision in the gross domestic product, or the growth of goods and services in the United States, that declined by a slow 1 percent is big news, he said. "That is a big deal, The thing that will get us out of this is when that GDP number starts to get positive."
State Economist Tom Stinson continues to believe that there will be slow growth in the GDP in the fourth quarter and fairly good growth in 2010.
"I don't expect to see a lot of job growth until next year," McElroy said.
He bristles when the media likens the current recession to the Great Depression, saying it is more like the recession of 1982-83, only longer, he told the 50 participants.
"That was a V-shaped recession -- we got into it quickly and out of it quickly," he said. "This one looks like it's going to be a bathtub recession -- we got into it over time, we're going to be in a plateau for a while, and out of it rather slowly."
The current recession is the 11th in the nation since first calculated in 1929, the start of the Great Depression, he said.
The Great Depression saw a decline in GDP of 25 percent, while the current recession is 5-6 percent, he said. The unemployment rate during the Great Depression was 25 percent, and it isn't expected to be more than 10 to 10.5 percent now, and in Minnesota less than that.
"During the Great Depression, 40 percent of our banks failed without the guarantees of the FDIC or the Federal Reserve," he said. "We're up to 56 bank takeovers or rescues this year compared to about 25 last year -- not a dollar of savers' money has been lost during that time."
Americans' savings rate has gone from zero in the second quarter of 2008 to 6.6 percent during the same quarter this year, McElroy said. "That's a two-edged sword as it helps bank liquidity and in the long-term retirement savings .. . The fact that Americans are saving more is an interesting fact and helps liquidity, but doesn't help consumer confidence or spending."
So far, jobs have in lost in Minnesota in all but one of the nine major sectors of the economy that DEED watches, he said. Minnesota since the start of the recession has lost about 4 percent of jobs, or 120,000 jobs from 2.74 million to 2.45 million.
But there has been an increase in the number of people in self-employment positions.
Health care and private education is up, but manufacturing and construction are the most severely down.
"We are starting to see other indicators in the economy get better," McElroy said.
The influx of nearly $1 billion in American Recovery and Reinvestment Act funds is also helping Minnesota through the recession, he said. Most of it -- $700 million -- flows through DEED to individuals for unemployment compensation benefits, which the federal law has extended. Another $200 million will go to DEED business assistance programs, including about $100 million in public infrastructure grants for such things as municipal water systems.
"That is stimulus that gets into the economy immediately, that's a very good thing," he said.
While northwest Minnesota suffers from the recession, McElroy called it a diverse economy with the nation's major manufacturer of snowmobiles and windows, and near the top in all-terrain vehicle manufacturing.
Wood products is down, but paper mills are doing pretty well, he said.
"We expect our manufacturers to rebound as the economy rebounds," he said. "Health care is probably the growth industry that we expect in the 21st century. ... Norboard is a real success story, and Potlatch is still running their lumber mill. There is continued interest in wood pellets.
Bemidji "is an exciting area because you have been so good at weaving together systems and collaborating and working together," McElroy said.
He said when it's too stormy to fish, fishermen mend nets, and when loggers can't get out in the woods, they sharpen their saws. "I'm hoping we're using this time to assist workers in dislocated worker programs."
He said "there are a number of saw-sharpening tools available."