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Economic rebound not expected anytime soon

State Economist Tom Stinson arranges charts Wednesday as he prepares to tell reporters about Minnesota's growing budget deficit. That deficit is caused by less money being produced by jobs.

The bright spot for the Minnesota economy next year may be when the federal government hires more than 8,000 workers to conduct an every-10-year-census.

State Economist Tom Stinson did not paint a pretty picture for the economy when he and other state officials Wednesday released a report about how the economy affects the state budget.

"The recovery will be long, slow and bumpy," Management and Budget Commissioner Tom Hanson said.

The report prepared by Stinson, Hanson and the state's financial consultant predicted that more people will lose jobs until at least early spring. Then, Stinson said, the Census Bureau will hire Minnesotans and the home construction industry should regain a bit of momentum.

Also on the upswing, if only a little, should be heavy construction such as for roads, he added.

Retail sales will continue flat, Stinson predicted, and he did not expect many businesses to build new facilities.

Employment is on track to fall 4 percent this year, the biggest drop since World War II.

Projections show 150,000 Minnesota jobs will be lost in the two years ending next spring, 30,000 more than predicted last February. On top of that, Stinson said, employees who are working put in fewer hours.

The drop in the number of workers means total wages are falling, providing the state less income tax revenue and creating a $1.2 billion deficit in the current budget.

Stinson said economists missed the mark earlier this year. "The economy was weaker than projected."

Income tax declines show the loss of jobs, while a 4.4 percent increase in corporate taxes is misleading, he said. The increase in business income apparently is because many firms have shed workers, and thus costs, producing an increase in profits.

Gov. Tim Pawlenty did not see that as good news because production is not increasing.

"These are not particularly cheerful words," Stinson said about his Wednesday report.

Stinson said a large public works funding bill, also known as a bonding bill, could help the economy. However, he added, that would happen only if it primarily funds projects that are ready to be started in the spring. That would produce more immediate jobs.

The economist said each $100,000 in a bonding bill produces a job. However, Pawlenty emphasized that those jobs often last just a year.

Democrats appear ready to propose a $1 billion bonding bill, while Pawlenty and other Republicans favor significantly less.

Don Davis
Don Davis has been the Forum Communications Minnesota Capitol Bureau chief since 2001, covering state government and politics for two dozen newspapers in the state. Don also blogs at Capital Chatter on Areavoices.