Wednesday, July 22, 2009

When the economy turns around, where will the jobs happen? 

When the recovery comes, job growth also is most likely to resurge first in the red states, while the blue states continue to lag behind. For reasons as diverse as regulatory policy, aging infrastructure, and high levels of taxation, blue states continue to be more susceptible to recessions than their red counterparts.

This assumption is borne out by an analysis of economic cycles by the website, which has found that since 1990 the states most vulnerable to economic downturns include the Great Lakes states of Michigan, Illinois, Ohio, and New York as well as Connecticut and California. Those most resistant have been generally red bastions such as the Dakotas, Nebraska, and Texas, and resource-rich states such as Alaska, Montana, New Mexico, and Wyoming.

This suggests that even the hardest-hit red states, notably Florida and Arizona, are likely better positioned in the long term for a recovery. A generation of out-migration may be slowing down temporarily due to the recession, but many people moved to places such as Arizona, Florida, Texas, and Georgia over the first seven years of the decade; in contrast, the high-tax blue states, including New York, New Jersey, and California, lost 1,100 people every day between 1998 and 2007. Most of them headed to the red states.

�When the economy comes back,� notes veteran California-based economist and forecaster Bill Watkins, �there will be a pent-up demand. People will compare and move to the places that are affordable and don�t have the fundamental tough tax and regulatory structures.�

From Joel Kotkin. The Pacific Research Institute's Economic Freedom in the States index makes Minnesota look only so-so on this scale, scoring below 30th of the fifty states for the size of government, fiscal, and regulatory policies.

I was interviewed yesterday for a longer piece by a reporter on which sectors would grow in central Minnesota, and where could you look for jobs now. The reporter had in her hands the results of a search from DEED's Employment Outlook Tool. Their projection is that we grow 1.4% a year in jobs in Central Minnesota. But they also expect heavy turnover of jobs as aging workers retire, with an additional 2% of per year needed to replace them. Suppose taxes rise; will retiring workers be replaced? Will skilled labor stay in-state?

Projections of labor force in Minnesota like these depend on assumptions about the cost of working and living in Minnesota.

(h/t: Stephen)

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