“Optimism is back,” says Toby Madden, regional economist at the Minneapolis Fed, describing the results of multiple year-end surveys of business and manufacturers across the six-state Upper Midwest Fed Ninth District.
“After two years of overall pessimism, businesses expect increased sales, employment and profits,” Madden said of Thursday’s release of the Minneapolis Fed’s 2011 Regional Economic Outlook. “In addition to the survey results, our statistical model predicts increases in income and employment.”
Sixty-three percent of business leaders reported that they were optimistic about the economy in their local communities, up from 42 percent who were positive in 2009. That measure of sentiment can be an important indicator of businesses’ willingness to hire and invest.
A separate set of questions asked business leaders how confident they are on everything from their own firms to the nation as a whole in terms of “performance over the next 12 months.”
Not surprisingly, they are most confident about their own firms’ prospects. The further away from their own firms, the more pessimistic they become.
While that result is not necessarily surprising in itself — after all, the closer to home, the more first-hand knowledge leaders have about conditions and the greater control they feel they can exert — the range of optimism to pessimism is noteworthy.
Seventy percent of businesses report confidence in their companies’ performance 12 months out, but less than 20 percent shared that confidence for the nation as a whole. Fully one-third of respondents were pessimistic about the nation’s performance in the coming year.
This is the first time the Fed has asked this series of questions, so there is no comparison with results from earlier periods.
Madden is “relatively optimistic” about Minnesota’s economic outlook for next year.
The Fed forecast projects the state will add 50,000 jobs and will see “pretty decent gains in personal income” while the unemployment rate, currently at 7.1 percent, will likely not improve because previously discouraged job seekers likely will re-enter the workforce.
He describes the outlook for housing starts as “somewhat sour.” Minnesota is up in 2010 over last year (10,000 housing starts this year) but they remain well below the 40,000 pre-recession level and continue to weigh down the construction industry.
The agriculture sector is queued up to have another strong year across the Ninth Region, with prices up in many commodities and drought-free conditions across the region the first time in several years, Madden adds.
The Ninth District includes Minnesota, Montana, North and South Dakota, northwestern Wisconsin and the Upper Peninsula of Michigan.
The 2011 Regional Economic Outlook was compiled from the Fed’s statistical forecasting models, an annual poll of 408 business leaders, a survey of 478 manufacturers conducted jointly with the Minnesota Department of Employment and Economic Development, and a poll of 730 chamber of commerce members across the region.
For a video of the Fed Outlook, go here.