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 Economics

Wage stagnation in Minnesota in one chart

Posted by: Adam Belz Updated: September 5, 2014 - 12:29 PM

Hate to pull the old "one chart" trick on everybody, but in this case, it sticks. 

Industries that pay what many people would consider middle income wages ($45,000 to $70,000 per year) have shed more than 30,000 jobs in the past five years in Minnesota, while industries that pay less than $45,000 per year have gained more than 30,000 jobs over the same period.

Interestingly, the state has added more than 10,000 jobs in industries that pay more than $70,000 per year.

This is a nice local addendum to the latest Survey of Consumer Finances from the Federal Reserve, which shows that real wages are either sinking or stagnant for most Americans.

The report is a dreary chronicle of something that more and more Americans are feeling. Quality jobs with good wages are becoming more scarce, and the poor are falling further behind.

"Families at the bottom of the income distribution saw continued substantial declines in average real incomes between 2010 and 2013, continuing the trend observed between the 2007 and 2010 surveys," the Fed report says.

Families in the middle to upper middle part of the national income distribution (between the 40th and 90th percentile) saw no gains in real income from 2010 to 2013, meaning they have not recovered their losses from the recession.

"Only families at the very top of the income distribution saw widespread income gains between 2010 and 2013," the report said, and even for them, real income is below 2007 levels.

In Minnesota, as the above chart shows, part of the problem is that middle-income jobs are evaporating. If you strip out all the middle-income health care jobs at hospitals, clinics and doctor's offices, industries that pay an average wage of $45,000 to $70,000 per year lost almost 50,000 jobs over the past five years.

That is an astonishing decline, driven mostly by losses in manufacturing and construction, but also transportation and warehousing and a category called information, which includes publishing, news organizations and telecommunications.

The big gainers among low-wage industries were health care, as we showed in a story earlier this week

A note on the Minnesota data: It comes from the Quarterly Census of Employment and Wages, which is the gold standard of detailed, reliable job and wage data in the state. The Minnesota Department of Employment and Economic Development has done a wonderful job of making it available for download and I highly recommend it.

Wages in the data are listed by week, so in order to get annual wages I multiplied by 52. That's not a perfect way to do it, but I think it's mostly fair, and if anything, overstates annual wages for certain industries.

Also, I acknowledge there are several other ways to slice up the income levels. This is just one way.

Here's the spreadsheet I put together:

 

Americans are getting MORE pessimistic about the economy

Posted by: Adam Belz Updated: September 2, 2014 - 12:02 PM

Americans have been getting steadily more pessimistic about the economy over the past five years.

It can get tiresome to keep talking about how bad the economy is, how it’s changed permanently, and not for the better. But even as there are signs of economic expansion, pessimism is the prevailing wind of the day, and a survey released last week by the Heldrich Center for Workforce Development at Rutgers University drives home just how deep the gloom runs.

The researchers at Rutgers, who’ve been surveying Americans since the late 1990s, talked to a cross-section of 1,153 people between July 24 and Aug. 3, and the results show that Americans are very discouraged about the economy.

The whole report is worth skimming, but here are a few nuggets:

1. A growing supermajority of Americans believes the recession permanently altered the economy.

71 percent of respondents said this summer that the Great Recession left us with permanent economic change. The share of people who say that has been growing steadily and now they represent a national consensus.

2. People believe the changes to the economy and labor market are negative -- and pretty much across the board.

Three in five Americans think college affordability will never return to the way it was before the recession, 53 percent believe job security is a thing of the past, and 40 percent believe the level of good jobs at good pay will not return to pre-recession levels.

3. People are growing more pessimistic, not less, about opportunities for the next generation of Americans.

In the latest survey, only 16 percent said job, career and employment opportunities will be better for the next generation than for their generation. That’s the worst reading since they started doing the survey in the 1990s, when up to 56 percent of respondents believed opportunities would be better for the next generation.

Opening Belz, Aug. 26

Posted by: Adam Belz Updated: August 26, 2014 - 10:56 AM

The nation should follow Tennessee, make community college free – Scientific American
Warren Buffett is helping Burger King with its tax inversion deal – WSJ
Toilet paper maker Kimberly-Clark goes tubeless – Milwaukee Journal Sentinel
Environmental study required for frac sand shipper in Winona – Winona Daily News
Is Colorado town “up for whatever”? Bud Lite hopes so – Denver Post
Grain shipments are backed up in the rail system and the NYT is on it – NY Times
A graphic showing the most expensive film props of all time – ShortList
A driverless car test run on the streets of Washington – Washington Post
Federal labor board rules against Jimmy John’s in fired workers case – StarTribune
Emerald ash borer marches across Iowa, confirmed in Story County – KCRG

The positive externalities of child care and market failure

Posted by: Adam Belz Updated: August 25, 2014 - 12:18 PM

We published an article yesterday about problems in the daycare market – especially in rural areas and especially for infant care. It’s become a problem for businesses and for the rural economy, because parents can’t find good enough daycare for their kids, and so either miss work or have to quit their jobs altogether.

One thing I didn’t get into in the piece was the idea that the child care market is an example of classic market failure – that is, a failure of the market to efficiently allocate resources.

There are many types of market failure – caused by monopolies, or negative externalities (for instance, when the costs of a company’s pollution aren’t born by the business or its customers).

But market failure can also happen when the benefits of a good or service spill over to society in general, and the people providing the service aren’t able to charge the customer for those spillover benefits. This is the case with child care, said Rob Grunewald, an economist at the Federal Reserve Bank of Minneapolis.

Child care serves an early childhood education function, and early education prepares kids for school, which sets them on a tax-paying, law-abiding path that is good for the economy and society. But that value is long-term and spills over to all of society — not just to the child and her parents.

The “social marginal benefit” exceeds the “private marginal benefit.” So there's a stalemate. Parents can't pay much more, providers can't charge much more, and yet providers aren't making much money. This is likely because of the spillover benefits.

“Economics tells us that when spillover benefits are present, the market tends to produce too little,” Grunewald said.

Essentially, child care is like education. It provides massive value that doesn’t show up in the price, which helps explain why there aren’t more options for rural parents. Supply isn’t keeping up with demand, because of market failure.

Minnesota lost 4,200 jobs in July, state says

Posted by: Adam Belz Updated: August 14, 2014 - 3:22 PM

Minnesota lost 4,200 jobs in July and June’s job gains were revised downward by 3,600, disappointing news in a year so far of tepid job growth for the state.

The unemployment rate remained at 4.5 percent, according to figures released Thursday by the Minnesota Department of Employment and Economic Development. The U.S. unemployment rate in July was 6.2 percent.

State economists cautioned that the job figures may be misleading. Adjusting the numbers seasonally using normal patterns of weather and the timing of school years is complicated, and has been more difficult in recent years thanks to the long, severe winters, said Steve Hine, the state labor market economist.

“By digging into the numbers a bit more deeply than just these top-level seasonally-adjusted numbers, I have to conclude that our job growth and our employment strength is considerably greater than these particular numbers would reveal,” Hine said. “Not only July’s numbers, but the numbers we have seen over the past few months.”

Still, over the first seven months of the year, Minnesota’s job market has been stuck in neutral.

After adding 41,900 positions from August to December of 2013, the state has now added a net of only 2,900 jobs since January. Some 133,000 Minnesotans are officially unemployed, and thousands more are working part-time jobs when they would rather work full-time.

The biggest job losses in July were in private education, which shed 4,800 jobs.

“We really did have a significant cutback in July in private ed that has not been typical,” Hine said.
Information, which includes publishing and broadcasting, lost 1,000 jobs. Construction lost 700 jobs. 

The losses were partially offset by gains in manufacturing, retail, transportation and warehousing, hotels and restaurants, and administrative support and temporary jobs.

One bright spot has been heavy construction, which added 500 jobs in July and has added nearly 4,000 positions in the past 12 months.

Meanwhile, Minnesota’s workforce continues to shrink, a sign the unemployment rate will continue to fall.

Labor force participation -- the share of the working-age population that is either working or looking for work -- fell to 70.1 percent. The indicator threatens to fall below 70 percent for the first time since October 1980.
Most of the decline is due to baby boomers retiring, Hine said.

While a smaller pool of workers might help job-seekers in the near term, it is a worrying sign for the long-term health of the state economy, since a robust workforce is key to business expansion.

Laura Kalambokidis, the state economist, said she’d feel better if job growth had been stronger so far in 2014, but other indicators -- like job vacancies, the average worker’s workweek, and the number of people filing for unemployment -- have been positive. 

Initial claims for unemployment insurance fell by 14 percent in July compared to a year earlier, to about 10,700.

“It would be more concerning if we were seeing more people laid off,” Kalambokidis said. “Sluggish job growth is not as worrisome as people losing their jobs.”

The debate over the reliability of the monthly job numbers is an old one, and takes on more significance in
an election year.

“They’re volatile, they get revised,” Kalambokidis said.

The state-specific monthly job numbers from the U.S. Bureau of Labor Statistics released Thursday are based on surveys that economists like Hine and Kalambokidis have argued should be interpreted with caution.

Another source of jobs numbers, the Quarterly Census of Employment and Wages, is based on unemployment insurance records, which account for all workers. Those figures are more reliable, but they are released on a six-month lag to give analysts time to collect and carefully adjust the data.

The esoteric debate over job numbers had its time in the sun in 2011, when Wisconsin Gov. Scott Walker argued the quarterly census numbers were more accurate and was lambasted for releasing them early. The fact that he did so a few weeks before his recall election opened him to extra criticism.

This post was updated at 3:22 p.m. on Thursday.

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