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Recovery: A New Minneapolis Takes Shape

February 28, 2012 By Lee Egerstrom, Economic Development Fellow

A former North Dakota farmer and state commissioner of agriculture (1974-1981) thinks the city of Minneapolis has a bright future.

“It sure does look like an (economic) recovery is underway,” said Myron Just, who is a resident these days in downtown St. Paul. But a new Minneapolis is taking shape, not just restoring what was in place prior to the housing and financial collapses that began in 2006 and 2007 and continued on into 2009, he said.

For Just and other long-time observers of rural America, what is happening now in select urban communities is familiar to the recovery that came 25 years ago to a deflated rural and agricultural economy.

Data gathered by Minneapolis Community Planning and Economic Development researchers support Just’s observations. In its fourth quarter Minneapolis Trends report prepared for city officials last week, the researchers found city economic indicators continuing to build on what had been a strong third quarter.

The labor force in the city increased in the fourth quarter, the number of residents employed continued to grow for the past two quarters, residential and non-residential building conversions and remodels both increased in the past quarter, the rental vacancy rate and the central business district office vacancy rate both fell, and the city’s unemployment rate fell from 7 percent, in the third quarter, to 5.5 percent to close out the year and in line with the seven-country metro area’s 5.3 percent.

In general, the economic indicators show a rapidly improving core city, said Cecilia Bolognesi, principal planner for the CPED department. “I think we are especially pleased to see the construction activity,” she said. “A lot of that is downtown.”

Among development indicators, permits were issued to 22 commercial and residential projects in the past quarter that will cost $1 million or more, for a total cost of $106.6 million. The number of new and converted units permitted in 2011 increased to 985 from 878 in 2010.

New construction can be spotty from quarter to quarter in the city. But throughout the Twin Cities metro area, Bolognesi and colleagues found construction increased 21 percent from the third quarter and was up 7 percent from the fourth quarter of 2010. The increase was attributed to single-family home construction in Hennepin, Ramsey and Anoka counties.

That’s the overview of a city and urban area on the mend. That’s also why we turned to Just for a view from the countryside. After leaving family farm operations in the hands of a son, Just moved to the Twin Cities where he served six years, until 2004, as executive director of the Minnesota Agri-Growth Council umbrella group for the food and agriculture industries.

Rural America changed greatly during and after the 1982-1987 farm financial crisis. A mostly strong agriculture has been rebuilt from that period. Some rural communities have seen prosperous local economies rebuilt around rural industrialization. Other communities never recovered and continue to wither and die.

America’s urban centers may be facing similar challenges coming out of the Great Recession (2008-2009), Just said. Manufacturing in St. Paul has just taken a hit with the closing of the Ford assembly plant. But the Twin Cities, he said, are capable of building a new, sustainable economy based on business and technology strengths.

“I guess I worry most that we will hurt education and reduce the research capabilities we need to keep adjusting,” he said. “We have a diverse and highly-skilled economy.”

The Minneapolis Trends report shows an adjustment is underway.

Except for unemployment rates, most employment data assembled by the CPED department are from lagging indicators. They compare second quarter employment with the previous and prior year’s quarters. That data found jobs growing in Minneapolis at a faster pace than in the metro area and statewide.

CPED gathers employment data from the Minnesota Department of Employment and Economic Development (DEED). What becomes evident from the data is that Minneapolis is steadily becoming more “white collar” and less “blue collar” in its mix of jobs.

Manufacturing in the city had 2.7 percent fewer jobs in the second quarter, and transportation and warehousing posted a 3.5 percent loss in jobs. The retail trade in the city had 1.7 percent fewer positions while arts, entertainment and recreation, which involve a smaller base of employees, had a large 6.0 percent loss in jobs. Public administration had a 1.3 percent job loss in second quarter comparisons, and that could fall farther with budget cutbacks from federal, state and local governments.

On the upside, substantial job gains were realized by real estate and rental and leasing companies (9.8 percent), management of companies and enterprises (4.8 percent), administrative and waste services (4.4 percent), finance and insurance (4.3 percent). The professional and technical services sector and utilities both posted 3.3 percent increases in jobs.

Bolognesi said some of the changes reflect national industry trends. There is more online shopping and that impacts the retail trade, and less warehousing with greater use of just-in-time logistics. But job growth in some Minneapolis industry sectors that support other businesses suggests a broader statewide and regional recovery is underway.

The current signs of recovery didn’t happen overnight. They’ve been about 10 years in the making, said rural expert Just. He sees it out his high-rise window when he looks at light rail construction in downtown St. Paul, and when he looks at the sophisticated products and services produced by scientists and skilled workers at Minnesota companies.

Infrastructure investments are moving the metro area forward, Just said. While that advantage could still be lost, he warned, it is a strength that many rural communities didn’t have in the 1980s.

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