What are the forces moving the Minnesota economy? Adam Belz tries to identify the trends and show the connections between Minnesota and the larger U.S. and global economies. You can connect with him on Twitter: @adambelz
Here are the Top 10 economics stories of 2012 in the Upper Midwest, loosely defined as the region from Michigan to the Dakotas, plus northern Illinois and all of Iowa. Please weigh in with a comment.
1. The North Dakota oil boom is attracting capital and population, shifting job markets, rerouting railroads, helping create frac sand riches and controversy in Wisconsin, and changing the U.S. energy picture. It’s clearly the most dynamic and far-reaching story in the region.
2. Labor lost big legislative battles in Michigan and Wisconsin, and employers are locking out workers all over the place. Wisconsin Gov. Scott Walker won his 2012 recall election easily after he championed a law that ended collective bargaining rights for most public employees. Then in December, Michigan Gov. Rick Snyder signed a right-to-work law in the home state of the United Auto Workers, which Monica Davey of the New York Times called “a moment startling in its symbolism.” In Minnesota, symphony players, sugar workers and NHL players have all been locked out by their employers.
3. Demographics. For instance, in Minnesota, as the population ages and baby boomers cycle into retirement, the state’s workforce is shrinking. And the young people that will make up a disproportionate share of the future workforce will be black and Latino, populations that in 2009 and 2010 were graduating from high school at rates of only 51 percent and 52 percent. High school graduation is a minimum standard for adult success that barely even passes muster in the Minnesota of the next 50 years. By 2018, 70 percent of jobs in Minnesota will require some postsecondary education. (h/t Anna Nelson)
4. Midwest farmland prices may have finally peaked. Dan Piller at the Des Moines Register reports that overseas farmers will ramp up production in response to high commodity prices, and the result will be a gradual decline in prices and therefore land values, which in Iowa hit a record average $8,296 per acre in 2012. “It won’t be a crash, like we saw in the 1980s, but a slow decline,” said Mike Duffy, an economist at Iowa State University.
5. Minneapolis Federal Reserve President Narayana Kocherlakota, generally thought of as an inflation hawk, became one of the most vocal proponents of keeping interest rates low indefinitely. He wanted explicit goalposts for interest rates and inflation to govern Fed monetary policy. He said publicly several times that the Federal Open Market Committee should keep interest rates low until either unemployment drops below 5.5 percent or the inflation outlook rises above 2 percent. Neither has happened yet, and the Fed announced in December it would use a similar national standard – 6.5 percent unemployment and 2 percent inflation.
6. The housing market appears to be improving. National home prices rose 4.3 percent from October 2011 to October 2012, and in Minnesota they rose 9.2 percent over the same period. Housing oracle/blogger Bill McBride said “house prices probably bottomed earlier this year.”
7. Minnesota's largest companies face a leadership challenge. Best Buy’s turmoil and founder Richard Schulze’s attempt to take over the company headline the list. But 3M, Carlson, Supervalu, Medtronic and Nash Finch also have recently-appointed leaders. (h/t Bill Blazar)
8.Two important debates in American manufacturing: 1) Whether there is a skills gap, and 2) Whether companies are bringing jobs back to America. I tend to think the skills gap is less pronounced and more complicated than some manufacturers would like the public to think. At very least, average wage trends don’t point to a gap. On the question of jobs returning to the U.S., rising Chinese wages could help move work to other countries, but I tend to agree with Alan Tonelson, who argues the work isn’t coming back to the U.S.
9. The drought may not have devastated the farm economy, thanks to crop insurance and resilient seed varieties, but it did squeeze one of the nation’s key shipping lanes: the Mississippi River. Low water below St. Louis brought barge traffic to a halt this summer and is still a problem. It’s something to watch in 2013.
10. The fight for survival in the region’s forest products industry. Reports of innovation at Sappi have been overshadowed by closures in Sartell, Duluth and Brainerd. Both we at the Star Tribune and John Schmid at the Milwaukee Journal-Sentinel wrote lengthy articles on the forest industries.