Brightening, but How Bright for 2012

By Lee Egerstrom, Economic Development Fellow, January 24, 2012 at 8:30 am

While the state and national employment picture is brightening, it is too early to say how bright 2012 will be. Minnesota's most recent unemployment numbers show a 0.2 drop to 5.7 percent in December, the lowest since September 2008. Minnesota added 7,900 more jobs last month and 25,300 during the past year.

Separately, the federal government said initial claims for unemployment benefits fell last week to the lowest level since April 2008. That suggests momentum for the economy and jobs markets going forward.

But there is a drag on the economy nationwide and here in Minnesota brought about by cutbacks in government employment. If you follow the numbers closely you see a trend: private sector job growth tempered by public sector losses. Public sector cuts would have been even worse if not for continued federal stimulus efforts keeping schoolteachers in classrooms and city and county employees in the workforce. Minnesota's government employment (all levels) fell by 6,100 positions.

Minnesota is likely to get a little breathing room this year because the state runs a two-year budget cycle. If the economy remains steady, Minnesota can make to June 2013, the end of the biennium, before it has to wield the budget ax again. However, local governments and school districts run annual budgets. They're still coping with previous state cutbacks and will likely be cutting again in 2012.

At the federal level, budget cutting is booting workers and stifling economic momentum. That might continue the employment drag in 2012, with massive layoffs anticipated across the board, including military and U.S. Postal cuts.

Posted in Economic Development | Related Topics: Job Growth  Unemployment