The Federal Reserve Bank of Minneapolis on Monday released its mid-year outlook for the regional economy, stating that it expects the moderate pace of economic and job growth experienced during the last couple of years to continue during the next 12 to 18 months.
Toby Madden, a regional economist at the Minneapolis Fed, said that the national economy has been sluggish due to a variety of factors, including soaring oil prices and the effects of natural disasters. But the Upper Midwest has benefited from a strong presence of natural resources-based industries, among other things.
The Minneapolis Fed oversees banks in the Ninth Federal Reserve District, which includes Minnesota, North Dakota, South Dakota, Montana, and portions of northern Wisconsin and Michigan. Based on its statistical models, the Fed projected that employment growth in the region is expected to pick up the pace by the end of 2012, although unemployment rates will likely remain above historical levels.
One positive sign: Several states in the region have maintained unemployment levels that are well below the national average, including Minnesota, which had a jobless rate of 6.6 percent in May, compared to the national average of 9.1 percent.
In Minnesota, the Fed predicts job growth of about 0.5 percent in 2011 and 1.7 percent in 2012. The state's unemployment rate, meanwhile, is expected to be 6.6 percent this year and decrease to 6.2 percent in 2012.
The Upper Midwest has recently experienced the most significant employment gains in the following industries: natural resources and mining, manufacturing, professional and business services, and education and health services. But the construction industry continues to see a decline in jobs.
The Fed also predicts that personal income in Minnesota will rise by 7.1 percent this year, up from the historical average of 6.5 percent.
About 150 businesses from throughout the region were surveyed in late May, "and surprisingly, they were pretty optimistic," Madden said. Most businesses expect an uptick in sales, hiring, productivity, and profits over the next year-but higher input costs will likely cause them to raise prices. Many found that credit conditions have remained unchanged during the past few months, while some indicated that conditions have improved.
Thirty percent of respondents said they expect to hire full-time workers over the next 12 months, while 7 percent expect to reduce their number of full-time jobs.
Although the Minneapolis Fed forecasts a "moderate" recovery for the region, some other local economists reportedly found the outlook to be a bit rosy.
"This Fed forecast is in danger of requiring a downward revision," Scott Anderson, director and senior economist at Wells Fargo in Minneapolis, told the Star Tribune. "Just this morning there was an atrocious national consumer spending report for May. There's been no growth in real consumer spending for two consecutive months, and real disposable personal income has not grown for [four] months."
Minnesota's state economist Tom Stinson, meanwhile, told the Minneapolis newspaper that the Fed's outlook anticipates good job growth in June-and whether that growth actually occurred will be revealed in upcoming employment reports.