Wednesday, August 16, 2006

Minnesota jobs on fire? 

I've seen several pieces about the new job-growth figures for Minnesota, and Governor Pawlenty is quite pleased about them. Deep in an MPR article, however, there are some disquieting concerns:

More than half the jobs added in Minnesota last month were in the government sector. State labor market analyst Oriane Casale says about half the government jobs added were in education, both higher ed and K-12.

Casale says many schools and colleges didn't lay off as many people as they usually do in the summer. That helped boost the latest job numbers.

"And so what we anticipate is that in the fall, we're also not going to see the increase in hiring that we normally see," said Casale. "And so this is impacting the numbers in that it looks like this is a good summer, when what it could actually mean is that the fall will be a less than good fall."

Casale says other areas of strong job growth last month included professional and business services, including IT and temp jobs, and the hospitality industry, particularly restaurants. The state lost jobs in the construction and factory sectors.

Casale says residential construction is slowing, and some factories are doing their annual shutdown to replace or maintain equipment. She also notes that Minnesota's job growth lagged behind the national average until recently.

"The national job growth started picking up a lot sooner than the state job growth. Now we're picking up, and the nation is slowing down," said Casale. "So what you're seeing is we're beginning to surpass the nation in terms of job growth where, just six months ago, we were quite a bit below them."

I don't know Ms. Casale, but I am a heavy user of data from her office. And if she says that maybe things aren't as rosy as these numbers appear, I am going to take notice. So I have plotted the US versus Minnesota 12-month growth rates since January 2002.
Actually, the Pawlenty version of the story that "we're on fire" is supported by the data, but Casale's version has some truth too. Since Casale has focused us on the private/public employment distinction, I have plotted job growth for private sector jobs only. If one beleives that government activity crowds out private activity, government jobs would crowd out private sector jobs. And as you can see, the private sector in Minnesota, after having a sub-par 2005, has done quite a bit better than the national average for the last three quarters. I suppose I could throw a little cold water on Pawlenty and suggest that the private-sector slowdown in 2005 was due to his battle with the Legislature and uncertainty over tax policy. I don't know that's true -- it's merely conjecture -- but it would seem plausible. How does one add workers when one doesn't know the tax rate one will face going forward?

But despite a weak residential and commercial real estate market -- you will hear more from me on this going forward, it's a big topic for the fall -- there is little doubt that the Minnesota economy has done quite well even in the private sector in 2006. Casale's not wrong in her analysis, but she is focused on one-month changes; the previous three months were very strong for private employment here. I say this on this blog at least once a month -- don't focus on the one month changes!!!

She's right certainly about one thing. There has been a sharp increase in the number of state workers, both in the education portion and elsewhere. If Governor Pawlenty wants to run as a fiscal conservative, he should have some explanation for the expansion of state government payrolls.