Much like the rest of the nation, Minnesota’s economic signals are everywhere.
The scorching housing market in the Twin Cities is starting to cool down, but prices in the area continue to rise and hit another record high last month.
Minnesota saw mostly flat job growth in June after posting strong gains in previous months. At the same time, the state’s 1.8% unemployment rate is not only the lowest in the country, but also the lowest on record in the United States.
“When you consider that we had the lowest unemployment rate on record among any state last month, it’s hard to say there are signs of a recession in the labor market,” said Oriane Casale, Manager of the Office of Labor Market Information at the Minnesota Department of Employment and Economic Development (DEED).
Consumer spending is still on the rise, although there are indications of a pullback. Minnesota-based retailers Target and Best Buy have warned in recent weeks that sales and profits will be lower than expected as consumers shift shopping.
If this image corresponds to a recession, most economists agree that it would be very strange.
“What we’re seeing over the last quarter or two is a lot of mixed signals,” said Sean O’Neil, director of economic development and research at the Minnesota Chamber of Commerce. “We are in a period of flux.”
It will be months before the official arbiters of a recession in the United States – a panel of academics – decide whether we are officially in a recession. But new data released Thursday showed the United States met the empirical description of a recession, which is two straight quarters of declining economic growth.
Minnesota and the United States both saw declines in gross domestic product in the first quarter of this year — 2% statewide and 1.6% nationally. In the second quarter, early estimates on Thursday showed US GDP fell another 0.9%, fueling more speculation and questions about whether the country is now in recession.
Minnesota’s GDP numbers for the second quarter will not be released until late September.
Many economists and officials, including Federal Reserve Chairman Jerome Powell, have said they don’t think the economy is in a recession just yet, as other indicators, such as the labor market, remain quite strong. .
Laura Kalambokidis, Minnesota’s state economist, said most recessions are characterized by large job losses, which neither the United States nor Minnesota has experienced.
“The fact that unemployment is so low is incompatible with the idea of a recession,” she said.
But the risk of the United States falling into recession has increased over the year, especially as the Federal Reserve raised interest rates, including another threefold increase this week, in an effort to calm high inflation.
If a recession materializes, Kalambokidis said Minnesota is well positioned to weather that storm given its low unemployment rate and record number of job openings.
“The state is well positioned to transition to slower economic growth because employers are in a good position to absorb any workers who enter the labor market to seek work or who risk losing their jobs as the economy is slowing,” she said.
She added that state finances are also strong with full fiscal reserves and a projected surplus.
Kyle O’Keefe, Twin Cities district president for recruiting firm Robert Half, said he hasn’t seen a drop in hiring demand yet, with local employers still eager to hire.
“It continues to be a pretty robust environment,” he said. “There’s such pent-up demand that I don’t see any slowdown.”
Recent surveys by his company, however, showed an increase in the number of workers fearful of losing their jobs, he added.
O’Neil of the Minnesota Chamber of Commerce said he also hasn’t discerned a change in the tone of companies when it comes to staffing.
“Companies I’ve visited are still trying to hire,” he said. “They still have vacancies. They keep saying their biggest challenge is trying to find workers.”
The steady job growth in the state last month appears to have been driven primarily by labor shortages, O’Neil said. “These tight labor markets are slowing the job recovery,” he said, adding that Minnesota was lagging the nation’s job recovery.
The “r” word – recession – did not appear during a DEED roundtable with business leaders Thursday held at the Twin Ignition startup garage in northeast Minneapolis. The topic of conversation was how to support the economic and business growth of the state.
DEED Commissioner Steve Grove said the state’s labor shortage is holding back growth. “If we don’t have enough workers to produce the goods and services that Minnesota has, we won’t be able to grow our economy,” he said.
Also of concern is the state’s high black unemployment rate, which rose last month to 7.4% and is more than double the state’s white unemployment rate. “Disparities are currently one of our economic Achilles heels,” Grove said.
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