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Tom Stinson, State Economist


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Tom Stinson, State Economist, Presentation for the Minnesota Agri-Growth Council Annual Meeting 2009.

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Tom Stinson, State Economist

  1. 1. The Short and Mid-Range Economic Outlook Thomas F. Stinson University of Minnesota November, 2009
  2. 2. Real GDP Is Growing Again
  3. 3. We Have Been in a Great Recession
  4. 4. The Recession is (Almost Certainly) Over <ul><li>The recession’s end usually is set at when real GDP begins to grow again </li></ul><ul><li>The stimulus package, slower declines in inventories and modest growth in consumer spending will produce a positive Q3 </li></ul><ul><li>But, improvements in the labor market are unlikely before summer </li></ul>
  5. 5. The U.S. Economy Is Expected to Lose More than 7 Million Jobs
  6. 6. Job Losses in Minnesota Have Tracked the U.S. Average Since the Recession Began
  7. 7. Real GDP Will Not Reach Pre-Recession Levels Until 2011
  8. 8. This Recession Was More Severe Than Those in 1990-91 and 2001
  9. 9. Minnesota Employment Is Projected to Recover Slowly
  10. 10. Why a Slower than Usual Recovery <ul><li>Interest rates will increase, not decrease </li></ul><ul><li>Excess production capacity limits need for new business equipment </li></ul><ul><li>Export demands unlikely to surge in short term </li></ul><ul><li>Lost wealth and retirement concerns will slow pent-up demand </li></ul>
  11. 11. The Age Distribution Is Different Than in the 1980s
  12. 12. Spending on Food and Food Away from Home Will Increase in 2010
  13. 13. Oil Prices Now Expected to Trend Toward $85 Per Barrel in 2012
  14. 14. Interest Rates Will Go Up, But Not Until 2011 and 2012
  15. 15. The Dollar Is Expected to Continue to Decline through 2012
  16. 16. The Housing Slump Has Been More Severe in Minnesota
  17. 17. What to Watch During the Next Six Months <ul><li>Consumer spending </li></ul><ul><li>Savings rate </li></ul><ul><li>Payroll employment (smaller declines) </li></ul><ul><li>Credit markets / interest rates </li></ul><ul><li>Capacity utilization </li></ul>
  18. 18. The Great Recession Has Raised the Level of Social Angst <ul><li>But </li></ul><ul><li>Four Mega-Forces Will Shape the Outlook for Longer Term Growth </li></ul><ul><li>Globalization </li></ul><ul><li>Technology </li></ul><ul><li>Energy prices </li></ul><ul><li>Demography </li></ul>
  19. 19. Minnesota Saw a 30 Percent Jump in Workers Turning Age 62 in 2008 2005 ACS
  20. 20. From 2010 to 2020, Minnesota Will See Large Increases Age 50s and 60s Source: Minnesota State Demographic Center, rev 2007 Numbers are rounded
  21. 21. Competition For The Future Workforce Will Increase Census Bureau US Proj, Mn State Demographer revised 2007
  22. 22. Labor Force Growth Is About To Slow Sharply
  23. 23. For Many Occupations, Replacements Will Outnumber New Job Growth Projected Openings In Minnesota Occupations 2006-16 DEED projections. Percent of 2006 level
  24. 24. Migration Will Be Increasingly Important for Labor Force Growth State Demographer projection revised 2007
  25. 26. Workforce Development Will Be Crucial To Minnesota’s Economic Future <ul><li>Number of workers </li></ul><ul><li>Quality of workers </li></ul>
  26. 27. Economic Fact of Life #1 <ul><li>Standard of Living depends on output per resident </li></ul><ul><li>Output = Output per Hour * Hours Worked </li></ul>
  27. 28. Productivity Is Not Just Producing at a Lower Cost Increasing the Value of Products Produced Also Increases Productivity
  28. 29. Economic Fact of Life #2 <ul><li>Productivity depends on </li></ul><ul><ul><li>The private capital stock </li></ul></ul><ul><ul><li>The stock of human capital </li></ul></ul><ul><ul><ul><li>Education </li></ul></ul></ul><ul><ul><ul><li>Health status </li></ul></ul></ul><ul><ul><li>The stock of infrastructure </li></ul></ul><ul><ul><li>Advancements in technology </li></ul></ul>
  29. 30. The New 3 R’s for Economic Success <ul><li>Retention </li></ul><ul><li>Recruitment </li></ul><ul><li>Retraining </li></ul>
  30. 31. Academic Research Is a Key Factor in State Economic Growth <ul><li>“ the lags between R&D and economic outcomes are quite long (at least years, and more likely decades) </li></ul><ul><li>“ The state … may do well for a while by drawing upon its existing stock of knowledge capital </li></ul><ul><li>“ How the state of Minnesota will fare in the future … will crucially depend on its recent and future investment in R&D </li></ul><ul><li>* Long Gone Lake Wobegone , Pardey, Dehmer and Beddow, 2007 </li></ul>
  31. 32. R&D Spending Slowed in the Early 90s We Are No Longer Above Average Rank 1972 Rank 2004 Total Academic R&D 19 26 Academic R&D per capita 20 40 Academic R&D per dollar of GSP 20 43
  32. 33. Health Care Spending Jumps After 55 U.S. Health Care Spending By Age, 2004 Source: Agency for HealthCare Research and Quality, Medical Expenditure Panel Survey, data for per capita spending by age group in the Midwest. Excludes spending for long-term care institutions.
  33. 34. From 2010 to 2020, Minnesota Will See Large Increases Age 50s and 60s Source: Minnesota State Demographic Center, rev 2007 Numbers are rounded
  34. 35. Education Is The Key To Productivity Minnesota High School Graduation Ratio 2004-05 through 2005-06 graduates. Based on 10 th grade enrollment three years earlier.