State Economist Tom Stinson says recovery on verge of turning up
ST. PAUL -- Minnesota's economy is at more of a crawl than a run but it's in at least slightly better shape than it was in three months ago.
The day state officials announced that state government's budget gap had decreased from $1.2 billion to $994 million they also indicated that the long-slumping economy likely has hit bottom and is now in the midst of a slow but sustainable recovery.
State Economist Tom Stinson Tuesday pointed to a Department of Employment and Economic Development report indicating that the state's adjusted unemployment rate dropped a 10th of a percentage point to 7.3 percent as employers added 15,600 jobs in January.
"We now think the economy is on the verge of turning up," he said. "The real issue is what's going to happen and how fast is the recovery going to proceed."
Under the expected scenario, wages will return to pre-recession levels in late 2011 with employment following in 2013.
While indicators are good now, Stinson indicated that several factors still could push Minnesota back into a recession. Those include a still stagnant commercial real estate market, anything that prevents capital markets from improving and the mismatching of skills offered by those seeking employment versus available jobs.
Another factor at play, Stinson said, is whether there is enough momentum to sustain employment growth once workers hired to help conduct the U.S. Census finish their work later this year.
"We think there is," he said.
Stinson credited federal stimulus funds with helping revive the battered economy. Without that spending, "we'd probably still be in a position where we were losing jobs big time," he said.
Programs such as Cash for Clunkers, Stinson said, appear to have sparked some lasting momentum for auto sales. It remains to be seen if similar momentum will result from cash for appliances, he said.
Stinson said dairy prices and agriculture as a whole should improve during the next year as long as the weather doesn't impede crop production.
Mining will pick up as long as the state and U.S. economies improve as expected, he said. Forestry and wood, however, will continue to struggle as housing construction lags, he added.
Economist Jim Skurla, director of the Bureau of Business Research at the University of Minnesota-Duluth, echoed many of Stinson's thoughts. He said a strengthening Asian economy will drive increased demand for mining and that agriculture "should be fine" as well. Forestry won't see major improvements, Skurla agreed, until the housing industry bounces back.
Overall, Skurla said the economic recovery will be slow because businesses appear to be approaching hiring more cautiously than they have during previous recessions.
He agreed that the state is heading on the right economic track and that employment will slowly improve.
"That number is not going to drop very fast," Skurla said.
Andrew Tellijohn reports for Forum Communications Co.