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Minneapolis is better than Detroit, Fargo is booming — and other things I learned from the most recent GDP estimates

Though this round of government data prompts more questions than answers when it comes to understanding what’s really going on with Minnesota’s economy.

Fargo stands out with jumps in income over the past three years.
REUTERS/Allen Fredrickson

We’re almost three-quarters of the way through 2014, but we just now have the first estimates of gross domestic product (GDP) for US metro areas in 2013.  To be precise, the federal government compiles data on Metropolitan Statistical Areas (MSAs), which they define as “an area containing a large population nucleus and adjacent communities that have a high degree of integration with that nucleus.” There are eight MSAs totally or partially in Minnesota: Mankato, Rochester, St. Cloud, Fargo, Grand Forks, LaCrosse, Duluth and Minneapolis-St. Paul.

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The new report contains data from 2001 to 2013, and here’s what I found interesting:

1. Minneapolis-St. Paul passed Detroit in GDP.  Since 2008, Minneapolis-St. Paul moved up from the 14th largest MSA by GDP to 13th, changing places with Detroit. That might not seem like much, but consider that right behind Minneapolis-St. Paul is Phoenix, San Diego, San Jose and Denver. All trailed Minneapolis-St. Paul in 2008 and were still behind in 2013. And all of those areas experienced more rapid population growth than MSP, which means that productivity (output per person) grew faster in the Minneapolis-St.Paul MSA than in the others.

2. Minnesota’s MSAs did well since 2001. GDP per capita rose in every Minnesota MSA between 2001 and 2013.  In particular, every metro area met or surpassed its 2007 level of income per person. This can’t be said of every American metro. For example, Naples, Florida saw it’s GDP per capita fall from $46,933 in 2001 to $39,235 in 2013 (in constant dollars), as did Colorado Springs ($41,086 to $39,377) and Atlanta ($57,832 to $52,178).

Per capita GDP — Regional MSAs

3. Fargo is booming. The metro areas that straddle the borders showed strong growth. Fargo, and to a lesser extent Grand Forks, stands out with jumps in income over the past three years. Duluth also recovered nicely from the recession while the LaCrosse area barely registered the downturn in terms of income. What’s going on in Fargo? Lots, according to a recent piece in Minnesota Business. The Bakken oil boom has certainly helped, but Fargo also benefited from strong growth in information technology (through the presence of Microsoft) and health care. The big question looming is whether this will translate into continued progress or whether incomes will stabilize at this new, higher level.

Per capita GDP — Border MSAs

4. St. Cloud, Mankato, and Rochester aren’t. I’m a St. Cloud resident so the chart below bothered me. St. Cloud’s income per capita peaked in 2004 and steadily declined until 2010 when it started growing again. Mankato gained ground until 2006 but paralleled St. Cloud after that. Rochester’s performance is especially perplexing: after rising from 2001 to 2004, per capita GDP stagnated at an annual average growth rate of -0.17 percent from 2004 to 2013.

Per capita GDP — Minnesota MSAs

What’s so different about the border MSAs versus those completely within Minnesota? An obvious answer is the oil boom for Fargo and Grand Forks, but the underlying data show that natural resources and mining sector slowed growth in Fargo’s (i.e. GDP would have grown faster than it did) while it greatly boosted growth in Grand Forks (over 60 percent of growth came in natural resources.)

At the same time, natural resource industries contributed to 33 percent of St. Cloud’s growth and over 100 percent to Mankato. (How’s that possible? Other sectors such as information technology, transportation, and trade all shrank.)  So, it isn’t the case that the farther into Minnesota you get the smaller the impact of the oil rush.

I’m always happy when new data show up. And this round provokes more questions than answers, but that just means we need to gather other kinds of information to understand what’s really going on with Minnesota’s economy.  And that’s where the real fun begins.