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MN2020 - Minnesota’s Job Roller Coaster Trending Upward
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Minnesota’s Job Roller Coaster Trending Upward

February 24, 2014 By Jeff Van Wychen, Fellow and Director of Tax Policy & Analysis

The Great Recession created massive job losses throughout the United States, including Minnesota and Wisconsin. However, unlike many other states, Minnesota has recovered all of the jobs lost during the recession and then some, a milestone that Wisconsin and many other states have yet to achieve. In short, there is no indication that Minnesota’s policy of reinvesting in public assets through a modest tax increase has done any harm to the rate of job creation in the state. Nor is there any indication that Wisconsin’s more austere budget policies have done anything to enhance job growth.

The graph below tracks the percent change in employment for Minnesota, Wisconsin, and the entire U.S. since August 2003—the month of the national employment trough associated with the preceding recession—based on Current Employment Statistics from the U.S. Bureau of Labor Statistics. During the early years of this period, the economy was in recovery and employment was increasing. From August 2003 to January 2008, Minnesota had a net employment gain 114,000 jobs. However, this 4.3 percent increase in jobs lagged behind the national growth rate of 6.3 percent and was barely enough to keep pace with state population growth (3.8 percent).

While the net employment gain in Minnesota failed to keep pace with the national average during the recovery of the last decade, Minnesota’s employment loss during the Great Recession fortunately also lagged behind. From January 2008 to the job nadir of February 2010, Minnesota lost nearly 150,000 jobs, a decline of 5.4 percent. While this employment loss was a traumatic blow, it nonetheless lagged behind the national job decline of 6.3 percent. However, during the entire period from August 2003 to February 2010, Minnesota underperformed the national average, with a net job decline of 1.3 percent, compared to a national net job loss of 0.4 percent.

Since 2010 Minnesota’s rate of job growth has surpassed the national average, albeit only modestly (6.5 percent for Minnesota versus 5.9 percent nationally). Unlike the entire nation, Minnesota has recovered all of the jobs lost during the Great Recession and has surpassed the pre-recession job peak, while the national economy is still several months away from this milestone, assuming that post-recession job growth trends continue. However, it should be noted that one of the reasons why Minnesota was able to replace the jobs lost during the Great Recession more quickly than the rest of the nation is that Minnesota’s percentage job loss during the recession was significantly less than the national average.

Wisconsin’s trend of job creation and job loss mirrored that of Minnesota from 2003 through most of the Great Recession. However, approximately half way through 2009, job trends in the two states diverged. For the rest of 2009, the Wisconsin job loss rate surpassed Minnesota’s rate and as the recovery gained steam in 2010 the Minnesota job growth rate surpassed Wisconsin’s. From the job trough of February 2010 to December 2013, the rate of job growth in Wisconsin (4.7 percent) lagged significantly that of Minnesota (6.5 percent) and the national average (5.9 percent).

State and national trends of job growth and job loss defy simple explanation and do not neatly coincide with periods of conservative or progressive control of state government in either Minnesota or Wisconsin. However, trends in employment since August 2003 contradict conservative talking points and leave apologists for right wing fiscal policy with some explaining to do. For example:

  • During the period from 2003 to 2010 (and especially during the period from 2003 to 2007), job creation in Minnesota lagged behind the national average, even though fiscal conservatives had succeeded in significantly reducing real per capita government revenues and expenditures. (From 2003 to 2010, Minnesota had the 6th highest rate of decline in real per capita state and local government general revenue and expenditures.*) A 2010 Minnesota 2020 report documented Minnesota’s deterioration relative to other states not only in job creation over this period, but also in terms of income, education, and infrastructure measures. There is no indication that the austere budget policies pursued during this decade by anti-tax policymakers produced any of the promised prosperity.
  • Since February 2010, Minnesota’s rate of job growth has surpassed the national average, while Wisconsin’s rate is well below. For every three net new jobs created in Wisconsin over this period, four were created in Minnesota. This occurred despite the fact that conservative Wisconsin Governor Scott Walker (who took office in January 2011) pursued policies more austere than anything seen in Minnesota. Over the same time, income growth in Wisconsin also lagged behind Minnesota. If anti-tax fiscal policies were the key to economic prosperity, Wisconsin should be doing better than Minnesota. In fact, we see the opposite.

There will undoubtedly be competing interpretations of job trends in Minnesota and Wisconsin over the last decade, as opposing fiscal philosophies attempt to fit the available facts into their worldview. However, this task is much easier for progressives than it is for conservatives. So far, the Minnesota policy of modest tax increases combined with increased public investment in education, infrastructure, work force development, and other public assets has coincided with relatively strong economic performance relative to the anti-tax policies pursued in Wisconsin.

 

*This conclusion is based on annual general revenue and expenditure data compiled by the U.S. Census bureau, adjusted for inflation and population growth.
 

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