September 2009 Trends
Letter from the Director

By Steve Hine, PhD.

Minnesota’s strong economic performance during the expansion of the 1990s led many to believe that the state was destined for an enduring advantage over the rest of the nation. As we came to the end of that historically long expansion, Minnesota was at or near the top of the nation in such measures as job growth, unemployment rates, labor force participation rates, educational attainment, poverty rates and per capita income.

In the eight years since the onset of the 2001 recession, the state’s performance has been less impressive. While Minnesota certainly didn’t plummet when ranked by the measures above, we stopped gaining on some states and passing others. We even lost ground in some respects, slipping in such areas as unemployment and personal income growth.

It was with this weakened performance that we entered the latest recession that began in December 2007. Like the rest of the country, the state’s declining labor market wasn’t all that alarming through the first eight months of the recession, rising from 4.8 percent to 5.4 percent through September 2008. The U.S. rate during that period climbed from 5 percent to 6.1 percent. Relative to previous recessions, 2008 was looking fairly sanguine.

But things began to change with the near collapse of the financial markets last September. Between last September and this June, Minnesota businesses shed more than 109,000 jobs, and the unemployment rate climbed from 5.4 percent to 8.4 percent. Nationally, more than 5 million jobs were lost and the unemployment rate jumped from 6.1 percent to 9.5 percent, the highest rate in 26 years in the country.

With July’s numbers showing the unemployment rate dropping to 8.1 percent in Minnesota, we are seeing signs that the downward momentum of the past year is slowing. But is the recession finally over? This issue of Trends doesn’t attempt to answer that question, but it does look at how Minnesota has been affected by a recession that, by most standard measures, has been the deepest and longest on record.