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

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.”


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


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

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.

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Comments (12)

  1. Submitted by Edward Blaise on 07/25/2019 - 02:08 pm.

    Hmm, Maybe favorable economic news is attributable to Ilhan Omar being in congress?

    As a compromise, Omar can take credit for the economy and Trump can take credit for the sun coming up.

    Or maybe both are responsible for neither…

  2. Submitted by Elsa Mack on 07/25/2019 - 02:33 pm.

    It does seem as though Minnesota is doing very well economically—as it has been for years, compared to its neighbors—and I’m happy to see it… however, I’d tend to give more credit to state-level government and less to federal. I also have trouble understanding how Trump can pound the white grievance drum about rural Minnesota, paint Minneapolis as a hotbed of terrorists and criminals, and still brag about how great we’re doing. But I have long given up on logic in Trump’s arguments.

  3. Submitted by Jim Smola on 07/25/2019 - 02:45 pm.

    Interesting to note that the trend lines in the graphs above started to increase or decrease prior to Trump being elected!

  4. Submitted by richard owens on 07/25/2019 - 02:55 pm.

    Trump measures everything in money.

    Child health and security.
    Maternal health and infant mortality.
    Social mobility.
    Housing costs.
    Food costs.
    Transportation costs.
    Household formation.
    General happiness.

    All of those are affected by GDP, but are not determined by it.

    These factors, if they are favorable, are more indicative of a good “economy” than GDP.

    (in MN, they are not all favorable, and vary widely by region and social status.)

    • Submitted by Joe Bontems on 07/29/2019 - 01:47 pm.

      What an insightful reflection! If money alone made a society successful, why are a significant number of Americans so angry and divided ?

  5. Submitted by Paul Brandon on 07/25/2019 - 03:19 pm.

    The unemployment index is skewed by people dropping out of the work force.
    A better measure is the employment index: the proportion of people of employment age who are actually employed.

  6. Submitted by John Evans on 07/25/2019 - 05:44 pm.

    Yeah, those numbers are pretty good, except for a couple of things:

    Trump and the Republicans in Congress have chosen to run crazy, shoot-the-moon deficits that are unprecedented, and unthinkable for any Democratic administration.

    In 2018, the first full year of Trump’s budget policy, the deficit was well over $5,800 per taxpayer, for a single year. This is the most massive fiscal stimulus in our history, and it was implemented at a time when the recession was long over.

    With this much deficit spending, it’s almost impossible not to achieve impressive-looking growth. The fact that we haven’t seen even greater growth, including hefty, widespread wage increases, is that the administration refuses to put the borrowed money to work in the real economy by fixing bridges and roads, building out better water and sewer systems, creating a 21st century rail network and a robust energy grid for the future.

    Instead, they have chosen to throw hundreds of billions at the Defense Department, for no particular reason. But their main priority was to relieve the tax burdens of our oppressed wealthy class.

    For 2020, the last budget year for this administration, the plan is to run the deficit up to $7,200 per year, per taxpayer. Gee, maybe we’ll get another dollar an hour out of it.

  7. Submitted by Joel Stegner on 07/25/2019 - 09:51 pm.

    The article has a blind spot. Agriculture. Low prices mean that farmers are not making a lot of money and that is not likely to improve anytime soon. This is also impacting incomes of small town business owners. They are not unemployed, but may not be making a living wage. They are also unlikely to get government support. Prosperity in the metro and large cities brings up the averages. We need to remember if the economy is leaving behind hard working workers, the economy is simply not good enough

    • Submitted by Ray Schoch on 07/26/2019 - 10:20 am.

      I certainly agree with the last part of your comment. Merchants in rural towns are unlikely to be getting any sort of government support, and not all the farmers in their area are being subsidized by the latest Trump bribe, made necessary by his foolish contention that “trade wars are easy to win.” Many farmers, however, are getting substantial additional subsidies from the federal government specifically as a result of the negative consequences of Trump’s trade war, and in particular, many very large, agri-business-type farming operations are doing OK with the influx of federal dollars. Most of those workers, however, don’t own the land, they’re being paid hourly wages like most city workers. It’s the executives and stockholders – just as in “regular” industry – who reap most of the benefits. Not surprisingly, they don’t have a problem with Trump’s trade policies…

  8. Submitted by Kathleen Castrovinci on 07/27/2019 - 09:01 pm.

    Minnesota is doing far better because Mark Dayton had the courage to raise Income Taxes on people like himself after 10 years of deficits and Fiscal Mismanagement from Jessie Ventura and Tim Pawlenty. It took a number of years to get out of that bad stretch. Also protecting Union rights to collective bargaining helped.

    Unlike in neighboring Wisconsin during the same time frame, cuts to Education was not necessary. Raising the State Minimum Wage attracted more workers. Investing in Infrastructure brought in more jobs, as Minnesota needs it. Farmers are hurting because of the Trump Trade tariffs because markets are closed to them. We cherish our higher quality of life because we are willing to pay for it.

  9. Submitted by Tom Miller on 08/03/2019 - 12:49 am.

    What a poorly written article. Misspellings aside, how can you call yourself a journalist when you take such a biased and one-sided viewpoint? You try to flip every positive stat on its head.

    What is the point of the poverty paragraph? It’s the lowest it has ever been except for one year 20 years ago. the poverty rate of plack people went from 38% pre-Trump to 28%, the lowest it has been over the duration of your chart.

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