Minnesota’s job market will keep improving in 2014, but growth will slow and fall below historic averages, economists at the Federal Reserve Bank of Minneapolis predicted Monday.
Business leaders in the region are as optimistic as they have been since before the Great Recession, according to the Minneapolis Fed’s business outlook poll. Still, job growth will likely tick downward slightly to 1.2 percent in 2014. At that rate, the state would add about 35,000 jobs, slightly fewer than in 2013.
The unemployment rate in Minnesota should keep falling to about 4.3 percent, the Fed projects, which is well below the national average of 7 percent. The decline won’t be as dramatic as 2013, when the rate fell nearly a full percentage point.
“We’ve gotten back to more of a normal pattern of growth,” said Toby Madden, regional economist at the Minneapolis Fed.
Despite the expectation of slower job growth, Madden sees the projections as largely positive.
“Personal income is expected to grow faster, and the unemployment rate is expected to fall, and housing starts are expected to continue next year,” Madden said.
The Minneapolis Fed’s region covers Montana, North Dakota, South Dakota, Minnesota, the northern half of Wisconsin and the Upper Peninsula of Michigan. Job growth is expected to fall in 2014 below national and historic averages in all states within the region except North Dakota, where the problem is not a lack of jobs.
“The lack of skilled labor may constrain growth, as almost all of the business respondents reported challenges finding workers in North Dakota,” Madden said.
The regional Fed’s annual economic outlook has tended to overestimate job growth in recent years, but it almost precisely called the decline in Minnesota’s unemployment rate in 2013.
Personal income — which includes wages, benefits and dividends — is projected to rise at a rate of 5 percent. That’s slower than 2011 but faster than 2012.
The Fed’s economists use a statistical model to project job growth, unemployment and personal income growth in each state, but also survey 321 businesses and 485 district manufacturers to gauge their outlook, sales projections, and hiring and investment plans.
Manufacturers and construction companies told the Fed that they expect moderate growth in sales and hiring in 2014. Overall, 75 percent of business leaders surveyed by the Fed in the region were optimistic about the economy in their community, a clear improvement over a year ago, when only about 55 percent were optimistic.
In Minnesota, businesses outside the metro area have a cheerier outlook than those in the Twin Cities. About 80 percent of outstate businesses were optimistic, while 68 percent of businesses in the Twin Cities were optimistic.