Local labor markets have provided lots of news recently, and not much is good: Unemployment is up, new and continuing claims for unemployment are up and announced layoffs seem common.
Earlier this week struggling ADC Telecommunications, a high flier just two years ago, said it was laying off as many as 150 executives including its chief operating officer. Thousands of ADC rank-and-file workers have already hit the street.
On the same day Dain Rauscher in Minneapolis announced pink slips for 15 percent of its employees and said that its 2001 revenues will fall to 1998 levels.
Where is Minnesota’s economy going?
It’s clearly going down from where it was, perhaps further down than any time since the 1982 recession. But it probably will stay in better shape than the average for the nation and certainly better than many other regions.
The models of one forecasters, Economy.com, predict the Twin Cities economy will suffer only 15th worst among the nation’s 20 largest metro areas because of the attacks.
Once again the Minnesota economy is likely to demonstrate that it pays to be well-educated and diversified. In the 1980s there was much talk of “rolling recessions” as various regions of the United States experienced hard times even when national employment and output were relatively strong.
This phenomenon was most pronounced in steel and automobile producing areas as the Ronald Reagan-Paul Volcker-Tip O’Neill strong dollar swung a wrecking ball at the dated infrastructure of U.S. industry.
The Pittsburgh, Youngstown and Detroit metropolitan areas suffered particularly. Tire cities such as Akron also had their turn at high unemployment. Minnesota did not escape recession, but things never were nearly as bad as in Michigan, Ohio or Pennsylvania.
In the early 1990s, Massachusetts, Connecticut and Southern California were in the doldrums as cutbacks in defense procurement took their toll. Once again, Minnesota experienced some slowing but did not take major hits as did several other regions.
Will we dodge the bullet again? Not likely. Here’s why:
- Consumer spending is slackening and jobs are less plentiful.
- Financial service firms have slow business as stock markets stagnate.
- Construction has been booming for so long that it would have been hard to avoid some slowing.
- The 2001 crop is adequate to very good, but prices, especially for wheat and soybeans, remain depressed.
- And there won’t be a lot of extra spending on Main Street.
But we still have an extraordinarily diverse and resilient economy. Those two adjectives are not unrelated.
Our economy is resilient in large part because it is diverse. We have a lot of small and specialty manufacturing. We have medical technology, transportation, food processing, grain trading, information processing and telecommunications, financial services, education and health care.
There are major employers, but no single sector dominates the way steel did in Pittsburgh, tires in Akron, autos in Detroit or defense in Los Angeles. We should be rejoicing in that fact.
Moreover, we have a highly educated work force, which makes for flexibility in adjusting to unanticipated career changes.
Getting laid off from any job can be a blow at any level. But well-educated people can usually shift their skills to those needed in other positions much easier than less-educated people with narrower skills bases.
We also have a pretty good educational system in terms of midcareer retraining. It’s not perfect, but the Minnesota State Colleges and Universities system is better in terms of retooling unemployed workers than similar systems in many other states.
The local economy is slowing as the national economy slows. The next six to 18 months will bring hardships for many households compared to the prosperity of recent years. But Minnesota’s broad-based and flexible economy will continue to perform better than average.
© 2001 Edward Lotterman
Chanarambie Consulting, Inc.