Who's winning and losing in Minnesota's 2016 economy?

 By  Today at 10:19 a.m.
 

ST. PAUL - The story of Minnesota's economy in recent years has been similar to the national story: steady but slow growth. The state hasn't suffered a recession - but it hasn't boomed, either.

But that steady growth hasn't been spread evenly over Minnesota's 5.4 million people. For every group or economic sector that's had good times lately, there's another that's struggled.

"Minnesota continues to be a success story. We have a diverse economy that continues to grow, but more slowly," said Minnesota Management and Budget Commissioner Myron Frans, in announcing that the state is expecting a $1.4 billion budget surplus for the next 30 months. "What this forecast does not do, however, is show the disparities that still exist throughout our state."

For example, while health care and the Twin Cities suburbs have generally done pretty well, many farmers and communities of color haven't.

"The economy overall is improving, but not for the farmer," said Gary Wertish, a Renville County farmer and leader with the Minnesota Farmers Union.

Plenty of other regions, demographic groups or economic sectors have similar good news-bad news stories about Minnesota's economy.

In unveiling the new forecast Friday, state officials said the state is on a steady course but significant uncertainties loom. What President-elect Donald Trump and the Republican Congress does on health care, trade policy, tax plans and infrastructure investment could have a ripple effect in Minnesota.

Here's a look at some of the groups that are winning and losing in Minnesota's 2016 economy, as it now stands:

Health care

Almost one-fifth of America's economy is spent on health care, and all that money means good times for health care providers.

The state's October jobs report showed that more than 11,000 additional Minnesotans are working in health care and education compared with a year ago - an increase experts said was driven by the education side of the picture.

Minnesota's large medical-device industry is doing particularly well, said Bill Blazar, the Minnesota Chamber's senior vice president for public affairs and business development.

Not doing as well? The state's nonprofit health insurers, who face a market in turmoil because of changing technology, an aging population and the effects of new regulations.

Agriculture

Agriculture sometimes zigs when the broader economy zags. So when much of the country was hurting at the peak of the Great Recession, many farmers were doing great because of high crop prices.

But those crop prices started to fall a few years ago, and now it's a different story in farm country.

"When this turns around, no one knows," said Wertish, whose own crop of corn, soybeans and navy beans failed to cover expenses this year despite high yields.

Though fewer than 1 percent of Minnesotans work in agriculture, their struggles have what Brad Finstad, CEO of the Center forl Rural Policy and Development, called a "big trickle-down effect." Struggling farmers are less likely to buy a new tractor and may cut back on a range of other expenses, too - which means hard times for people who sell to farmers as well as the farmers themselves.

Employees

Employment remains high in many parts of the state - with mixed effects.

On the plus side, this means that it's about as easy as it will ever be for a worker to find a job. Additionally, the worker shortage means salaries are rising at their fastest rate in years as companies compete to attract the best employees.

But some employees aren't feeling the good times yet. Elaina Hane, a Woodbury nurse, acknowledged that the health care field is doing well - but feels that the benefits aren't reaching workers.

"If health care is doing so well, the bedside people aren't seeing that," she said.

Employers

Some employers are also feeling a strain as they try to expand but can't find suitable workers.

"It is very hard to find good people. The market is certainly tight," said Phil Jungwirth, president and chief financial officer of Morrissey Hospitality Cos., which manages the St. Paul Hotel, the St. Paul Grill, Pazzaluna and other properties across the Twin Cities and the state. The group employs about 1,300 people.

Blazar said more companies in a range of industries are telling the Chamber they're having trouble filling vacancies. It's a situation exacerbated by demographics as more and more baby boomers retire.

"When somebody does have an opportunity to grow and they go to the labor market, they're not only competing against other firms that are growing, they're also competing against other firms that are trying to replace the retirees," Blazar said.

Construction

The past year was a good one for Minnesota-area construction companies - but business still hasn't recovered to pre-recession levels.

"When people look ahead to next year's construction season, they see less opportunity next year than they saw this year," Blazar said.

Harry Melander, president of the Minnesota Building and Construction Trade Council, told a similar story: partial recovery and remaining obstacles. But he said it's been pretty good in the state's bigger cities.

"(Construction) employment is really regionally based," Melander said.

Mining and logging

It's not a good time to make your living hauling ore from the ground or cutting down trees. This economic sector has been in free-fall, losing jobs year over year as mines and plants sit idle.

About three-quarters of ironworkers in northern Minnesota have been affected, said Darrell Godbout of the Iron Workers Local 512 union.

Many apprentices can't keep jobs in the union and journeymen and other workers have had to travel to places like Milwaukee, the South and other areas around the state to find temporary work until business picks up again in the area, Godbout said.

Workers are wondering, "Am I going to have a check to pay for Christmas presents?" Godbout said.

People of color

Minnesota has among the biggest disparities in the nation between white workers and minority workers, and this has continued in recent years.

"Some of the data has shown that people of color are actually losing ground, that we're seeing a larger gap between African-Americans and whites," said Vina Kay, executive director of the nonprofit Voices For Racial Justice.

Adjusting for inflation, black, Hispanic and American Indian families all make less money today than they did in the 1970s.

The picture isn't uniformly bad. Many minorities are highly skilled and high-earning, even if on average people of color are struggling. And some communities of color are doing better than others. Kay noted that Minnesotans of Hmong descent have been doing worse than Asian-Americans generally, while African-Americans here have seen worse outcomes than some immigrant groups of color.

Melander said deliberate efforts to promote diversity have meant more apprenticeships to people of color in recent years.

Craig Helmstetter, senior research manager at the nonprofit Wilder Research, said that recent data showed Minnesota African-Americans doing better economically, but they on average still remain far behind white Minnesotans.

Cities

The state's October jobs report showed Minnesota adding 31,375 jobs since October 2015. Of that, almost 85 percent were in the broader Twin Cities metro area, which includes 14 Minnesota counties and two Wisconsin counties.

Almost all the rest of the new jobs were in the Rochester and St. Cloud metropolitan areas.

"Sometimes people paint this brush that things are going well in the Twin Cities, things are not going well in Greater Minnesota, and that's the end of the analysis," said Helmstetter.

That's an oversimplification. The Twin Cities are doing well - but so are Greater Minnesota's regional centers such as Rochester, St. Cloud and Duluth.

Rural areas

It's not Greater Minnesota as a whole that's suffering right now, but rather what Finstad called the "deep rural" part of the state.

"The further away from regional centers you are, the more challenging some of the issues are," Finstad said. "You see higher median age, lower median incomes."

Part of this reflects the struggles of the agricultural economy. But it also reflects demographic pressures: in many "deep rural" areas, more than a third of the population is retired or on the verge of retirement. This means fewer people working and less money flowing into the community.

Meanwhile, the people in those areas who still want to work sometimes can't find it.

"In short, they need workers in Rochester and Olmstead County, and in (rural) Itasca County they need jobs," Helmstetter said.

The suburbs

Rural areas have their problems and urban centers include both wealth and poverty. But nowhere is doing quite so well as the suburbs around the Twin Cities.

The ring of counties surrounding Hennepin and Ramsey counties have the highest median incomes in the state.

Exporters

The U.S. dollar has had a high value lately, which makes U.S. goods and services more expensive overseas.

"The economy continues to grow, but those that depend on export markets are likely growing at a slower rate," Blazar said.

Precision manufacturing

While exporters may be struggling, Blazar said one particular segment of Minnesota manufacturing is doing well: high-tech precision manufacturing.

So-called "made-to-order" manufacturers that produce small runs of products on demand as opposed to mass quantities continue "to do well, although they're facing competitive pressure," Blazar said.

Rachel E. Stassen-Berger contributed to this report.