Minneapolis-St. Paul’s Near Term Economic Health is Fragile
John Clinkard
Over the past five months, Minneapolis-St. Paul has exhibited a steady loss of economic altitude. Since June 2007, employment growth in the Twin Cities has slowed from +1.6% year over year — its highest rate since early 2006 — to a glacial rate of +0.1% in the latest month.
From an industry perspective, by far the major contributor to this slowdown in employment growth was a 2.8% decline in manufacturing employment (due in part to layoffs at Boston Scientific and Minnesota Diversified). In addition, employment in information services (-4.0% year over year) has declined by an estimated 1,600 jobs, while the construction sector (-4.2%) has also continued to shed jobs since late in 2006.
Job Gains in Two Sectors
Despite layoffs among real estate workers, the financial services sector as a whole has added 1,400 jobs over the past year. Also, job growth in educational and health services has pulled back from its peak (+6.6% year over year) in early 2006, but still continued to display solid growth (+3.0 year over year) entering 2008.
Looking forward, it is highly unlikely that Minneapolis will be able to sidestep a serious country-wide downturn. However, the most recent Federal Reserve Regional Business Outlook Poll anticipates that the local economy will continue to exhibit positive, albeit slower, economic growth in 2008 compared to 2007.
Residential Construction will be Weak, but some Big Projects in Commercial
This view is supported by the latest Manpower Employment Outlook Survey which reports that employers in the Twin Cities expect to hire at a moderate pace early in 2008. While the prospect for overall growth in the Minneapolis-St. Paul area remains positive, the outlook for construction spending (and particularly the residential component) is very weak. Declining house prices, combined with a restrictive lending environment, are likely to cause the industry to remain in the doldrums into the second half of the year.
Commercial building will exhibit moderate growth through the first half of 2008. Major projects currently underway include the Ivy Tower restoration project and the Children’s Hospital expansion. However, moderating growth of office-based employment is likely to dampen construction activity in the second half of the year and through 2009.
