Friday, November 16, 2007

The churn of Minnesota 

I was wondering about something the other day in thinking about the decline of the Minnesota economy. At what rate does the Minnesota economy create jobs?

Now, I realize you probably read that the economy lost jobs last month. But that's not the full story. Lots and lots of people got new jobs in October; lots and lots of other people lost theirs. It takes some time to get the numbers, but for instance in the quarter ending March 31, Minnesota added 140,915 jobs and lost 133,393. What you would get for the usual report is therefore "a gain of 7,522 jobs." The smaller number fails to give you a feel for how much dynamism there is in the Minnesota economy, or that for any other state.

The new Business Dynamics report from the Bureau of Labor Statistics today gives you a feel for that. Look at the last two pages of the report for a snapshot of state gross job gains and gross job losses as a percent of employment, and you can compare Minnesota to the rest of the area. I've selected data from Table 6 therein.

Job gains Job losses

Mar-06 Mar-07 Mar-06 Mar-07
U.S. 6.9 6.6 6.1 6.2
Illinois 5.7 5.5 5.1 5.2
Indiana 6.2 5.8 5.6 5.6
Iowa 6.4 5.8 5.7 5.9
Michigan 6.0 6.1 6.6 6.5
MINNESOTA 6.6 6.1 6.0 5.8
No. Dakota 7.9 7.0 6.5 6.5
Ohio 6.0 5.7 5.8 5.7
Pennsylvania 6.0 5.7 5.4 5.4
So. Dakota 7.1 6.5 5.5 5.9
Wisconsin 6.0 6.0 5.7 5.9

March 2007 is the last quarter for which we have data. One can see that, though Minnesota has gross job gain rates below those in the national economy, so do all the other states in this area. California and New York, in contrast, have gross job gains in excess of 7%; Utah had an 8% job gain rate in March 2007. Governor Pawlenty, on his radio program this morning, noted the job loss but asked for comparisons to these states I've included in the table.

Whenever I present economic analysis about the St. Cloud economy, I show a picture of the counties around St. Cloud. There are dots on the picture. Each dot represents a worker who drives to a job within a five-mile radius of the St. Cloud City Hall. The dots extend along U.S. 10 to the north, along I-94 in both directions (not so much Highways 23 and 15). I then show them a second map. Lots of dots down into the Twin Cities, not so many going out. That map shows where people work who have a house within five miles of the St. Cloud City Hall. (The map isn't precise -- I freehand the location of City Hall by finding where Highway 23, Division Street, crosses the Mississippi. Go ahead, try it yourself.)

What these numbers should tell you is that the American economy is a job creation machine and a job destruction machine. This is sometimes called "the churn" or historically as "creative destruction". And the most beautiful thing about it is not the jobs it creates but the opportunities for new goods and services that produce happiness, in things from lawn care to health care. But these data are a marker that, somehow, the Minnesota economy still is able to provide opportunities for jobs and the dynamism to reduce or even eliminate those industries where we no longer have a comparative advantage.

People wonder, when I show them the maps, whether this is a problem for St. Cloud. What does it mean for an increasing share of St. Cloud residents to work in the Cities? What does it mean for an increasing share of St. Cloud workers to travel substantial distances to their jobs each morning? (A local manufacturer told me of a worker he had from Randall, for example -- he lost that worker when a manufacturer in Aitkin offered a similar job at about the same wage.) I reply to them, it's better than the alternative, to have job loss without job gain.

The question is what leads to job gain? What reduces job loss? For example, the discussion whether you can "government your way to prosperity" should turn on that. For it is only in knowing how to keep the churn moving that can lead to prosperity.

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