Main Street's mood is resilient despite rocky markets

The economic headwinds that have dominated financial news for the first two months of this year haven't stopped Jeff Warner's trucks.

Warner, president of family-owned Warners' Stellian, just opened a ninth Twin Cities-area appliance store, in Shakopee. And he's less worried over talk of an economic slowdown than he is over finding entry-level warehouse workers at $15 an hour, plus benefits and bonus.

"Our business is good and we outperformed our industry in this market last year," said Warner, about sales that rose 13.6 percent to a new record. "People are concerned about the economy, but they are investing in their house. And some of them put it off for awhile. And we're really good at selling."

To be sure, 320-employee Warners' Stellian, which has taken share in recent years from diversified big-box retailers, is outperforming the economy.

Similarly, the roaring IT, health and software sectors have combined with the traditional strong suits of food, finance and health care to continue growing the Twin Cities economy and push the unemployment rate to about 3 percent.

Jeanne Boeh, professor of economics at Augsburg College, noted that Minnesota and its diversified economy grew at an annualized rate of something more than 4 percent through the first half of 2015, better than neighboring states more dependent on agriculture and energy. However, Boeh was concerned last week because the overall Minnesota economy seemed to be slowing lately. And median household income, the wages paid to the middle class, still hadn't rebounded to prerecession levels.

"Because we're a diversified economy, we will keep trudging along at a lukewarm pace and eventually the labor shortages will happen and employers will raise wage rates more in order to get good workers," Boeh said. "I think we are OK."

"Importantly, U.S. industrial production growth accelerated to an 11.7 percent annualized pace in January, the best annualized rate of growth since May 2010," he told clients Friday, projecting the economy will grow 2 percent this quarter. "Manufacturing comprises only 12.1 percent of the U.S. economy, but it often works as a barometer of overall economic activity and employment."

The state outlook will become clearer Friday when state economist Laura Kalambokidis issues her first economic forecast since last fall.

The good news then was that economic recovery would continue into a seventh consecutive year and that Minnesota has added 50,000 jobs since employment topped its pre-recession peak in 2013. A $1.9 billion state budget surplus was projected in the current two-year biennium.

The bad news was that overall economic growth, nationally and locally, appeared slower in the fourth quarter, thanks partly to collapsing energy, farm and other commodity prices.

That has put mining-dependent northeastern Minnesota on the sick list, with thousands of workers off the job. And the farm economy, thanks to lower corn and soybean prices, has gone fallow. Both industries are investing less than normal. And Minnesota companies that made money supplying products and services to North Dakota oil fields also are faring worse.

Bermo's production is balanced by products for the lawn-and-garden industry, consumer goods and other equipment that has offset the order cutback by agriculture and mining equipment makers.

"The often unspoken issue is the low price of steel, partly caused by China imports into the U.S.," he said. "It's like $30 per hundredweight, or about 25 cents a pound. That's like gas at $1.10 per gallon. Cheap. And a good portion of our revenue comes from the steel. So we have to sell our parts cheaper.

"We've got a new automated ordering system that we invented in-house … to help churn out products more quickly. We're trying to differentiate ourselves from the competition. Companies want things fast and cheaper."

Tom Salonek, founder 25 years ago of Intertech of Eden Prairie, said there's been concerning financial news recently. But he's buoyed by the rising fortunes of many local technology and software companies.

"I'm cautiously optimistic," said Salonek. "I don't think we're going into a recession. I think we'll be 2.5 percent growth nationally. It's not going to be a banner year but it's not going to be a down year. We're making investments at Intertech. We built our reserves during the recovery, which seemed to be a little shaky a few years ago. We built up cash reserves … and it makes me sleep better. We're focused on profitable … single-digit revenue growth."

Cotton hailed the Twin Cities' 3.1 percent unemployment rate and what he described as a strong entrepreneurial culture of small and growing companies, on top of a base of solid multinationals.

"I think the Minneapolis-St. Paul economy should keep growing and stave off even a mild recession," Cotton said. "That could change if the global headwinds continue for too long. That would make it more difficult for Minnesota companies."