Minnesota Outperforms Neighbors in Job Growth

Since the turn of the century, employment growth in Minnesota has kept pace with the rest of the nation and comfortably surpassed the Midwest average. Minnesota’s strong performance relative to the rest of the region has persisted through two recessions, a major financial meltdown, a major tax reduction, and a major tax increase.

The following chart tracks the percent change in seasonally adjusted non-farm employment, based on monthly Current Employment Statistics (CES) from the U.S. Bureau of Labor Statistics (BLS). Total non-farm employment includes all jobs with the exception of farm work, unincorporated self-employment, and employment by the military, intelligence agencies, and private households.

Minnesota employment growth (the red line in the chart) modestly outperformed the rest of the nation (the blue line) during the early months of the 21st century. During the first recession of the century, Minnesota lost jobs at approximately the same rate as the rest of the nation. During the subsequent recovery, Minnesota job growth lagged behind the national average; from December 2002 to December 2007 (when the Great Recession officially began), national employment grew by 6.1 percent, compared to just 4.1 percent in Minnesota.

In the early months of the Great Recession, however, Minnesota lost jobs less rapidly than the rest of the U.S. By the end of 2008, Minnesota’s net employment gain relative to the January 2000 baseline was nearly identical to that of the nation as a whole. Throughout the remainder of the Great Recession and during the subsequent recovery, Minnesota’s rate of employment loss and growth closely mirrored the national average. During the entire period from January 2000 to April 2017, Minnesota’s employment growth (11.1 percent) was a scant 0.4 percent behind the national growth rate (11.5 percent).

The Minnesota (and U.S.) job growth rate during the 21st century compares favorably to the Midwest average.* During periods of recovery, Minnesota gained jobs more rapidly than the regional average—and lost jobs less rapidly during the recessions. During the entire period from January 2000 to April 2017, Minnesota’s rate of employment growth was four and one-half times greater than that of the entire Midwest (2.4 percent). Even if we exclude the rustbelt states of Indiana, Michigan, and Ohio—whose manufacturing economies were hit especially hard during the Great Recession—the remaining states of the Midwest region had a job growth rate half that of Minnesota.

Wisconsin—the state most similar to Minnesota in terms of climate, geography, and demography—had a rate of employment growth (5.3 percent) since January 2000 that was less than half that of Minnesota. While Wisconsin outperformed the Midwest as a whole in terms of 21st century job growth, it underperformed the region if we exclude the three rustbelt states.

One way of measuring the rapidity of the post-Great Recession recovery is to examine the period of time it took to regain all the jobs lost during the Recession. By May 2014, total U.S. non-farm employment had finally been restored to the pre-Recession zenith.† Minnesota, on the other hand, reached this milestone eight months earlier—in September 2013. The entire Midwest region did not regain pre-Recession employment levels until November 2014—six months later than the nation as a whole and over a year later than in Minnesota. Wisconsin took up the rear in restoring lost jobs, not reaching pre-Recession employment levels until April 2015—nearly a year later than the entire U.S. and 19 months behind Minnesota.

Conservatives posit that state tax increases stifle the economy and hurt job growth, while tax cuts have the opposite effect—a view that they continue to espouse despite little evidence to support it and significant indications to the contrary. (Consider the economic doldrums of Kansas—a state that has adhered to a long-term strategy of supply-side tax cuts.) For example, Minnesota’s job growth and loss trends closely tracked the national average throughout the preceding seventeen years, with no apparent bonus resulting from the tax cuts enacted during the early years of the century and no apparent ill effects resulting from the significant tax increase enacted in 2013.

Minnesota’s continued strong job growth since 2000 is likely the result of smart investment made by previous generations in education and infrastructure. These expenditures helped produce a well-trained workforce and a diversified economy that has allowed Minnesota job and income growth to outperform the regional average both in good times and bad. Minnesota policymakers would be well-advised to focus on adequately funding critical public investments and balancing the state budget, rather than harkening to the false allure arising from the economic siren song of tax cuts.

 

*Based on the U.S. Census Bureau definition of Midwest states, which include Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin.

 †Both nationally and among Midwest states generally, the peak in non-farm employment prior to the depths of the Great Recession occurred early in 2008.