3D Economics

Home
Blogs

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

Posts about Business trends

Richard Longworth gives my list a Chicago beatdown

Posted by: Adam Belz Updated: December 28, 2012 - 3:21 PM

Tweet
share

email
Email share

your name

your email

recipients email

+ add a comment add a comment

I posted my list of 2012's top 10 economic stories in the Upper Midwest earlier today.

Richard Longworth, a former foreign correspondent at the Chicago Tribune who now writes and speaks for the Chicago Council on Global Affairs, disagreed with a lot of it.

Mostly he accuses my list of parochialism and draws different lines to define the Upper Midwest. The region spans from the western border of Minnesota to just east of Pittsburgh, he said. But the region I pay attention to includes the Dakotas and excludes Indiana, Ohio and Pennsylvania. I'm sure he's probably right.

He's a smart guy and has a lot of good points. He said I could post his email:

Some thoughts on your list:

1. The North Dakota oil story belongs, but only as a part of the bigger energy and energy independence story, which includes the Keystone XL pipeline and (sorry, but other parts of the Midwest aren't totally irrelevant) the shale oil boom in other Midwestern states.

2. The labor battles? For sure. Great story.

3. Immigration is a terrific continuing story but the real story is the fact that the Midwest needs as many immigrants as it can get, at all educational and social levels, and the presidential election could go a long way toward solving this problem, by persuading the GOP that they're going to stay in the game only if they support some comprehensive sort of immigration law reform. All other aspects of immigration, including the educational part (admittedly, no small deal) depend on progress toward overall reform. So the election is the big story here.

4. That farm price story is good, but iffy. Maybe prices have peaked, maybe they haven't. The real story comes when the bubble bursts. So I'd say this might be a great 2013 story. The 2012 story is that prices kept going up.

5. Hooray for that Minneapolis Fed chief, but what about Charlie Evans, the Chicago Fed chief, who has been campaigning steadily and publicly for more simulus of some sort for at least two years now and seems to have won? Charlie's point is that the Fed has two goals -- monetary stability and full employment -- and had stressed the former at the cost of the latter. Time to get unemployment down, he said. He played a major role in that recent Fed announcement that rates won't go up again until unemployment hits 6.5 %.

6. The housing market? That's a bigger story nationally than in the Midwest.

7. I'm sure that news about Minnesota's biggest compaies really hit the headlines in Minnesota and would have had a major impact down here if we'd ever heard about them. This is too parochial. If you're going to make Minnesota companies #7, then major companies in, say, Iowa, Wisconsin and South Dakota have to be #8, #9 and #10. End of list.

8. Again, the skills gap and possible resurgence of manufacturing is a terrific story, perhaps the best of the year. But it's a national story and, more truly, a story affecting the broader Midwest, where manufacturing and heavy industry are more important and their fate, hence, has more impact. This embraces southern Wisconsin and eastern Iowa but not much of the rest of your Upper Midwest.

9. Again, the drought and the Mississippi are huge stories and should be lumped together. The drought sent the region's crop prices and land prices through the roof. The Mississippi crisis could cut the upper Midwest off from many of its markets. This could be a one-year phenomenon but, if it's not, if it's truly the harbinger of global warming, it means 2012 was a big watershed (sorry) year for the Midwest.

10. Forest products is a good story, partially in itself and partially as a a sign that Midwestern newspapers, which have been trying to figure out what their obligations and readership are in this new media market, may have found an answer.

11. Taconite. Too parochial. Like that Minneapolis Fed chief.

12. Bad holiday shopping? A one-day story. it may mean something, or may not.

15. Chicago housing market? Again, too parochial. What's going on in Chicago is interesting but the housing maket is a pretty small part of it (see below.).

16. The Midwest's water tech sector. I would have put this in the top 10, but would have broadened it way beyond Minneapolis, which is a pretty puny player so far. Milwaukee is the true center, with its Water Council, the new Freshwater School at the U of Wisconsin at Milwaukee, etc. Chicago is getting in the game, with its BlueTech alliance and with Rahm Emanuel's ambition to make Chicago the water capital of the world. That new alliance between Indiana, Illinois and Wisconsin is focusing on water solutions as a common industry. The year 2012 was the year hat the Midwest woke up to the fact that, in a drying world, it's sitting on the biggest single resource of fresh water on the planet. Big story.

Other stories:

In Chicago, it's only partly housing. Mostly, it's the arrival of the post-Daley era, with the realization that the sainted Richie left us with a pretty dire financial situation. Emanuel is focusing on regional economic development, IT investment, more cooperation with universities, etc. These are the goals. What's happening is the birth of a real IT sector (most of Obama's tech whizzes, who won the election for him, came out of this sector), and the signs that Chicago is finally developing a venture capital core.

In a year of continued gloom, some Midwestern cities are doing surprisingly well, and have been getting attention. Des Moines and Omaha in partiular. Unemployment is down, investment is up, IT is booming.

Finally, we all like a good crime story and the Midwest came up with its own home-grown Bernie Madoff. Russ Wassendorf and the Peregrine scandal had everything, including lots of money, a high-living protagonist, an attempted suicide, a Las Vegas wedding and a truly tragic impact on a Midwestern small town. If good yarns count, this one belongs on your list.

The 10 biggest economics stories of 2012 in the Upper Midwest

Posted by: Adam Belz Updated: December 28, 2012 - 10:24 AM

Tweet
share

email
Email share

your name

your email

recipients email

+ add a comment add a comment

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.

Honorable mentions:

-- Magnetation has been a success story amid a bit of brightness in the U.S. iron ore industry. The innovative Grand Rapids, Minn., taconite processing company opened its first plant in Keewatin in early 2009 and has grown quickly, attracting investment from Cargill. The firm transforms the Iron Range’s plentiful waste ore into a higher concentrate with the help of magnets. By year’s end, Magnetation had 218 employees, a second plant in nearby Coleraine, a joint venture with Steel Dynamics near Chisholm, and plans for a new plant in Indiana.

-- The poor holiday shopping season, fiscal cliff negotiations and uncertain economic outlook for 2013. Who knows what it all means?

-- The lean finely textured beef controversy, which lost a lot of meatpacking workers their jobs and is leading to lawsuits against ABC for using the term “pink slime,” with all its dreadful public relations consequences.

-- The debate over whether to build the Keystone XL pipeline, which would run close to the Bakken basin in North Dakota and hinges to a large extent on Nebraska.

-- Chicago’s housing market continues to suffer, with prices falling again in October.

-- The growing prominence of Minnesota’s water technology sector, including companies like Ecolab, Pentair, SJE Rhombus.

Bonus:

Elon Musk had a big 2012. If electric cars ever succeed in the U.S. market and if humans ever establish a presence on Mars, Musk will have to be mentioned in the history books, and the economic implications would be far-reaching.

Minnesota small businesses can tap into state loan program

Posted by: Adam Belz Updated: December 24, 2012 - 3:31 PM

Tweet
share

email
Email share

your name

your email

recipients email

+ add a comment add a comment

Small businesses who can’t get a loan could find lenders through a little state program that needs to start moving money in 2013.

The program is only just picking up steam.

Some $15.4 million in Treasury funds came to Minnesota to help encourage small business lending thanks to the Small Business Jobs Act of 2010. The programs offer loans and loan guarantees to businesses with fewer than 500 employees, preferably much smaller, minority-owned and in economically distressed parts of the state.

Federal guidance says the state should distribute $9 million in loans and loan guarantees by October 2013. So far, a little more than $1 million has been used.

“Activity is increasing, and we expect to meet that goal,” said Blake Chaffee, spokesman for the Minnesota Department of Employment and Economic Development.

The point is to stimulate private lending with public dollars. DEED reports that in 2012, $1 million in publicly funded loans and guarantees for 31 businesses have helped leverage $15.9 million of private money. According to state estimates, 233 jobs were created and 472 retained.

Only lenders who’ve been OK’d by DEED can make the loans, each of which must also get final approval from DEED. The lenders are generally foundations and neighborhood development corporations.

The largest of the programs is the Emerging Entrepreneurs Fund, which can lend up to $150,000 to a small business, provided private lenders match public dollars. The program loaned $615,000 in 2012, which helped create $10.8 million in private loans.

“The goal is 10 to 1,” Chaffee said.

If DEED can get $10 of private investment for every $1 it commits to a small business, that would be $154 million of investment in Minnesota small businesses.

“It is a demand thing, so we’re going to work our way to the 80 percent by 2013,” Chaffee said.

Banks have said for months that loan demand is weak. Lending by traditional institutions like banks has slowed since the recession as loan officers tighten credit standards and consumers try to chip away at their debt. Depoosits at U.S. banks now outnumber loans by $2 trillion, which is a problem for institutions that make the bulk of their profit by lending and chargning interest.

The state's entrepreneurs fund is designed specifically for minority- or women-owned businesses and businesses in economically distressed areas. Another way to use the federal money is called the Capital Access Program, which tries to encourage lenders to work with companies that might not meet their credit standards. It uses a special loss reserve to bolster these questionable loans.

Companies like Northshore Manufacturing Inc. in Two Harbors, the French Hen Café in St. Paul and Raices Residential Cleaning in Brooklyn Park each received federal dollars to help leverage larger private loans. The largest state commitment was for a $224,000 loan guarantee for STAFF Manufacturing in Lester Prairie, which DEED says helped attract $2.2 million in private loans.

“One of the biggest challenges faced by promising small businesses is gaining access to capital in the early stages of their development,” said DEED Commissioner Katie Clark Sieben. “This program provides Minnesota businesses with funding that will enable them to expand and create jobs.”

A full list of the programs' recipients and their lenders is here.

Opening Belz, Dec. 20

Posted by: Adam Belz Updated: December 20, 2012 - 12:02 PM

Tweet
share

email
Email share

your name

your email

recipients email

+ add a comment add a comment

Why the New York Stock Exchange doesn’t matter – Felix Salmon
Newport Beach yacht owners don’t want to pay for the harbor – LA Times
GDP grew at 3.1%, better than expected – WSJ
Hot Twin Cities apartment market shows signs of cooling – Finance & Commerce
Best Buy digital chief leaves for Symantec – StarTribune
Workplace deaths rise in North Dakota oil patch – Fargo Forum
Global business drives General Mills growth – StarTribune
Study says fracking creates 20k Wisconsin jobs – Milwaukee Journal-Sentinel

Minnesota adds 10,800 jobs in Nov.

Posted by: Adam Belz Updated: December 20, 2012 - 12:36 PM

Tweet
share

email
Email share

your name

your email

recipients email

+ add a comment add a comment

The biggest holiday hiring spike in a decade headlined a Minnesota job report full of good cheer, as the state added 10,800 jobs in November.

Stores, delivery companies and similar businesses drove the gains, according to figures released Thursday by the Minnesota Department of Employment and Economic Development.

“We’ve seen strong retail sales this holiday season so far,” said Steve Hine, a labor market economist for the state. “November’s job gains on an unadjusted basis was the strongest we’ve seen in about ten years.”

Also pointing to the strength of consumer spending were hiring gains in leisure and hospitality, a category that’s suffered most of the year. Restaurants, hotels and arts and recreation businesses hired 3,200 people in November. The gains were bolstered by upward revisions to the October job numbers showing that instead of losing 8,100 jobs the state lost only 4,800.

Minnesota has now gained 55,200 jobs in the past year, a growth rate of 2.1 percent, compared with job growth nationally of 1.4 percent during that period.

The state has more than 2.7 million jobs and has clawed back just over 100,000 of the 156,300 jobs it lost in the recession, according to the monthly report. (State economists believe the numbers are better than the monthly reports indicate.)

The unemployment rate ticked down to 5.7 percent in November, compared to a 7.9 percent U.S. jobless rate.