Northwest Planning Region: A Region in Recovery

By Nate Dorr
June 2011

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Northwestern Minnesota is inching back from the effects of the Great Recession.

Northwestern Minnesota employment trends were similar to the state and country during the recession of 2008-2009. Many goods-producing sectors shrank significantly as manufacturers, retailers, and construction businesses cut staff to survive.

For some operations that wasn’t enough. Closings in Little Falls, Detroit Lakes, Bemidji, and Brainerd had ripple effects throughout the regional economy.[1] Layoffs in the metro and other areas also negatively impacted the tourism and recreation industry in northern Minnesota’s lake country.[2] People quit buying new automobiles and recreational vehicles, and they built fewer homes. 

Construction jobs in the region felt the pinch over the last few years. Decreases in building permits and new building starts, along with increased foreclosures, contributed to the downturn in construction here. Northwestern Minnesota counties in the lakes areas were hit especially hard. In fact, counties with a greater percentage of water had greater construction employment losses.[3]

The lakes region attracts vacationers from across the country, particularly vacation homeowners from Minnesota and North Dakota metro areas. As a result, the economy in the lakes region has both lower-wage hospitality and food service occupations and higher-paying construction and finance jobs. Uncertainty about the economy and restricted lending by mortgage companies reduced the growth of vacation home building in the region. Communities along the Red River and in farm country, however, largely avoided significant losses in construction employment because the farm economy continued to provide opportunities for growth.

Construction waned during the last few years across the state. From 2006 to 2009 total covered employment for Minnesota slid 3.9 percent, while construction jobs in Minnesota fell a dramatic 25.1 percent.[4] Still, construction employment in the northwestern region held up better than the state as a whole. Regional losses between 2006 and 2009 were 15.7 percent, well below the state losses during that period. Self-employment in Minnesota’s construction sector also dipped 3.4 percent from 2005 to 2008.  In comparison, northwestern Minnesota lost 3.2 percent in self-employment. The information in Table 1 provides employment trends and projection comparisons between the region and Minnesota. 

Interestingly, employment projection data for the region and state counter recent trends. For example, although the state had greater percentage losses in construction, it is also expected to grow jobs faster than the region. This makes sense when we think in terms of recovery. The state and metro areas, with greater construction losses, will show faster job growth in the future because of a lower starting point. We can assume the worst of the construction employment losses is over, and now we begin a slow climb back up.

The recession put job growth on ice during the cold months of January to March 2009 in northwestern Minnesota. Unemployment rates reached a harsh 10.7 percent in the region at that time. Clearwater County maxed out at 21.4 percent during February 2009, while the city of Brainerd peaked at 20.8 percent in March 2009, followed by Bemidji at 16.8 percent in February 2009.[5]

While many construction workers were off for the season during those months, layoffs in manufacturing and retail softened the demand for new construction into the summer. Reduced demand for new construction and home remodels led to a trickle-down effect of job losses in the building material and garden supply store segment, which dropped 7.9 percent (239 jobs) from 2006 to 2009.[6]

Construction Jobs Rebounding?

Unemployment insurance (UI) claims show the region is recovering. During February 2011, total UI claims dropped 18.3 percent from one year ago to 20,485.[7] This follows a similar decrease from 2009 to 2010.

Manufacturing continues to hold the largest number of claims at 5,317 despite a 25.6 percent decline over the year. Wholesale trade and transportation and warehousing follow with 2,379 and 1,740 claims, respectively. In fact, all industry claims are down over the year except for mining and professional and technical services. UI claims for construction improved from the second-highest industry — just behind manufacturing — to ninth place.

As shown in Table 1, employment in construction is expected to grow 15.3 percent in Minnesota between 2009 and 2019, compared with 8.7 percent growth projected for overall employment in the state. Residential and specialty trade construction segments are expected to grow the most. Heavy and civil engineering construction, on the other hand, should decrease over the 10-year period. This subsector showed solid growth between 2006 and 2009, while other construction segments lost employment. Projected losses in heavy and civil engineering construction may be from shrinking government budgets rather than decreased demand.

Current demand for workers in the region remains fairly low. Job Vacancy Survey data show higher vacancy rates in retail trade (2 percent), transportation and warehousing (2.9 percent), professional and technical services (2.1 percent), and health care and social assistance (2.5 percent). Low job vacancy rates are found in construction (0.1 percent) and manufacturing (1 percent).

New American Community Survey information may shed some light on another threat to construction employment. Households with mortgages and monthly housing costs over 35 percent of income could signal potential foreclosures or short sale situations in the future. An increase in foreclosures and short sales would put more housing units on the market, thereby reducing the demand for construction jobs.

Comparing multiple data sources by county, a clear and positive relationship exists between the percentage of land base to water for households spending more than 35 percent of household income on housing expenses. Counties with less water to land tend to have both lower housing costs and more demand for construction.

To summarize these multiple data sources, the worst is over. Although job vacancies and current demand remain weak, projections and unemployment measures continue to show improvement. Employment will return slowly. Consumer confidence will factor into the speed of recovery in the region. The construction industry is showing signs of a turnaround. That’s good news for the regional economy, since this industry represents 10,011 covered jobs and another 7,374 self-employed workers.[8]

[1]Minnesota Department of Employment and Economic Development (DEED), Dislocated Worker Program, Plant Closings and Mass Layoffs Events.
[2]DEED, Economic Trends, September 2009, “Northwest Planning Region: Water and Wilderness,” Nate Dorr.
[3]DEED, Quarterly Census of Employment and Wages (QCEW), 2006-2009, all ownerships, and 1990 U.S. census data.
[4]DEED, QCEW, 2006-2009, all ownerships.
[5]DEED, Local Area Unemployment Statistics.
[6]DEED, QCEW, all ownerships.
[7]DEED, unemployment insurance claims, February 2011.
[8]DEED QCEW, 2009, all ownerships, and U.S. census non-employers statistics, 2008.

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