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Is Trump right that Minnesota’s having its best economic year ever?

Let’s look at the numbers.

Downtown Minneapolis
MinnPost photo by Peter Callaghan
Adjusted for inflation, Minnesota’s GDP is higher than it’s ever been.

Minnesota and its representatives are not an infrequent subject of President Donald Trump’s tweets.

On Tuesday, the president tweeted a vitriolic statement about Minnesota Rep. Ilhan Omar along with a prediction: that he’d win the state in 2020, in part, because “Minnesota is having its best economic year ever.”

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It’s well-documented that not everything the president says is true. Is Minnesota’s economy really having its best year ever? Let’s look at the numbers. 

(We should note that lots of the data that gives us an idea of how the economy is doing lags behind a bit, so it’s hard to speak definitively about this year. But here’s what we know).

Gross domestic product

Gross domestic product, more commonly known as GDP, is a basic measure of the size of an economy. It looks at the value of goods and services produced and is often used to show how fast an economy is growing or shrinking.

Adjusted for inflation, Minnesota’s GDP is higher than it’s ever been.

But that’s the case nearly every year. Per-capita GDP, which accounts for changes in population, usually grows as labor, capital and materials are used more efficiently over time.

Per-capita GDP for Minnesota, 1997-2018
Note: Figures shown in 2012 dollars.
Source: U.S. Bureau of Economic Analysis, compiled by Minnesota Compass.

In the last two decades Minnesota’s per-capita GDP has only decreased during two recessions, a smaller one in the early 2000s and then the big one that started in 2008.

Unemployment

Minnesota’s unemployment rate — the proportion of workers actively looking for jobs — is low right now: a seasonally-adjusted 3.4 percent in June. On average in 2018, unemployment was the lowest it’s been since 1999.

Minnesota average annual unemployment rate, 1976 to 2019
Source: Federal Reserve Bank of St. Louis

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This is good and bad for the economy.

Low unemployment like this should mean employers want to hire workers.

But such low unemployment can constrict the economy: I firms can’t hire as many workers as they’d like to, they can’t produce to their full potential.

Wages

When unemployment is low, economists expect wages to rise as firms compete to attract scarce workers.

But wages in Minnesota (and across the U.S.) have been slow to recover from the 2008 recession. That raises the question of whether firms are as interested in hiring workers as the unemployment rate would suggest.

Neel Kashkari, the president and CEO of the Federal Reserve Bank of Minneapolis, discussed the possibility that the labor shortage isn’t as bad as it seemed in an interview with the Minneapolis/St. Paul Business Journal earlier this year.

“I don’t see a widespread labor shortage, I see businesses not wanting to raise wages across all sectors,” he said. “I’ll believe there is a labor shortage when I see wages increase and companies still have trouble finding workers. Until then it’s just talk.”

Minnesota average annual wage and salary, 1969-2017
Wages adjusted to 2018 dollars using the Consumer Price Index.
Source: Federal Reserve economic data, compiled by Minnesota Department of Employment and Economic Development

The modest wage gains that workers have seen aren’t even across industries. Workers in high-paying jobs, like those in financial activities and business, are seeing sizable gains, while those in low-paying jobs, like leisure and hospitality, are seeing more stagnant wages.

Average weekly wages by Minnesota industry, 2000-2017
Wages adjusted to 2018 dollars using the Consumer Price Index.
Source: Quarterly Census of Employment and Wages, Minnesota Department of Employment and Economic Development

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Poverty

Poverty among Minnesotans is low right now relative to years past, with 9.5 percent below the poverty level. That’s lower than it has been in some time, but it’s not as low as it was in 1999, when 7.9 percent of Minnesotans were living below the poverty line.

Percent in poverty in Minnesota, 2006 to 2019
Source: Census, compiled by Minnesota Compass

This is an area where the statewide average masks disparities in racial and ethnic groups. White Minnesotans have a much lower rate of poverty than Minnesotans of color: four times lower in the case of black and Native American Minnesotans.

Poverty rate by race/ethnicity for Minnesota, 2006-2017
Source: Census, compiled by Minnesota Compass.