The Minnesota economy should gain momentum in 2015, with falling unemployment, a quicker pace of job growth and modest increases in wages.
The unemployment rate should fall to 3.3 percent (right now it is 3.7 percent) and personal income should grow faster than last year, economists at the Federal Reserve Bank of Minneapolis predicted Tuesday in their annual outlook based on surveys of businesses and statistical models.
“The Minneapolis Fed’s forecasting models are projecting solid employment growth and a decrease in the unemployment rate for Minnesota,” said Rob Grunewald, an economist for the Minneapolis Fed. “In individual sectors of the economy, manufacturers expect growth and home building is expected to be flat.”
Business leaders profess near record levels of optimism in the Upper Midwest, and are at an all-time high in out-state Minnesota. They expect to do more hiring in 2015 than in 2014, and most bosses expect to offer workers 2 or 3 percent wage and salary increases.
The Minneapolis Fed's region, the Ninth District, includes the Upper Peninsula of Michigan, northern Wisconsin, Minnesota, the Dakotas and Montana.
A few areas of weakness remain in the economy, notably sluggish wage growth and continued weakness in new home construction.
Before they are willing to declare economic victory, economists are watching for faster wage growth.
“That still has yet to happen,” Grunewald said.
Also, housing construction is expected to be flat in 2015, thanks to slow household formation among young people and the continued need for a correction from the heady days of housing development in the mid-2000s, said Toby Madden, an economist at the Minneapolis Fed.