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

Update: Less dependence on manufacturing has been good for Minnesota

Posted by: Adam Belz under Business trends, Economics Updated: October 22, 2013 - 10:52 AM

Everyone agrees that manufacturing jobs are an important part of the economy, but in Minnesota, we should be glad they aren't a bigger part of the economy than they are.

Gov. Mark Dayton has declared "Minnesota Manufacturers Week," an annual event designed to educate the public about the role manufacturing plays in the state’s economy.

“For decades, manufacturing has been a crucial sector of Minnesota’s economy, providing good jobs and living wages for middle class families,” Dayton said in a press release. “I want to thank our state’s manufacturers, and the 300,000 Minnesotans who work hard every day to build the high-quality, innovative and reliable products our global economy demands.”

But one of the reasons Minnesota has weathered the downturn and recovery so much better than its eastern neighbors (see state unemployment rates below) is precisely because manufacturing is not as "crucial" here as it is in Wisconsin, Michigan and Ohio.

This data I gathered from the Bureau of Labor Statistics is going to be a bit hard to read, but check it out anyway. The key information is there:

As you can see, Minnesota and Wisconsin have pretty much identical employment, but a larger share of Wisconsin's workforce has been and continues to be working in manufacturing. Places like Milwaukee, Racine, Sheboygan and Appleton are famous for their historic manufacturing prowess, and almost one in five Wisconsin jobs was in manufacturing in 2003.

Over the past decade, that hasn't been an economic advantage. Both Minnesota and Wisconsin lost about 12 percent of their manufacturing jobs over the past 10 years, but because Wisconsin had more people working in manufacturing to begin with, it lost almost 18,000 more jobs. That's a significant difference, and you can see that it has helped Minnesota nearly catch up with Wisconsin in total employment.

It's worth mentioning here that Minnesota's GDP has been and continues to be greater than Wisconsin's, even though slightly fewer people have jobs here. And in manufacturing, Minnesota's annual output grew by 30 percent from 2003 to 2012, even though employment fell 12 percent.

So not only does Minnesota depend less on manufacturing for employment, but factories in the state are increasing output faster than other states. This is not surprising considering the high value of many of Minnesota's manufactured goods, such as medical devices.

I've included data for Michigan, Ohio and Illinois, states with bigger economies where manufacturing took an even bigger hit. Employment overall is negative in those states over the past decade (which it would not be in Ohio or Illinois absent the manufacturing declines).

But Wisconsin and Minnesota are the key comparison. Manufacturing jobs are at best stagnant across the Midwest today, thanks to automation and the constant pull of offshoring, and the fact that Minnesota's economy is less dependent on the blue-collar work of making things has turned out to be a benefit to the state.

Note: I updated this piece with GDP data at the suggestion of @tobycmadden

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