ST. PAUL — Minnesota's economy is chugging along, state budget officials announced this week. But the coronavirus could pose a threat to that stability.
Minnesota budget officials on Thursday, Feb. 27 delivered the state budget and economic forecast, an assessment of how the state's economy is doing and what could lie ahead in the next few years. Lawmakers and the governor were quick to pounce on the state's $1.5 billion projected budget surplus in an effort to build support for their respective plans for the money.
And they, along with state budget officials, acknowledged that the ongoing spread of the coronavirus could throw a new variable into calculations around the state's economic wellbeing.
365体育投注Budget officials used private firm IHS Markit's analysis, state data and other sources to make their assessment of the state's budget and economic forecast. And the evaluation of the U.S. and global economic outlook came three weeks ago before reports of the coronavirus spread around the world.
365体育投注Without more analysis about how the virus could spread or about how reduced travel or stalled supply routes could affect Minnesota's economy, Minnesota Management and Budget Commissioner Myron Frans said the state would have to stay the course and proceed with caution for now.
365体育投注"It is a fluid situation and it's not unusual for us to have an issue or two percolating at a time of the budget forecast, and this is no different," Frans told reporters. "There seems to be always an issue or two, and this is a very serious one, and we'll just have to wait and see."
A new risk for Minnesota's economy: Coronavirus
Economic growth in the U.S. and the state could slow if the coronavirus spreads beyond where it was tracked earlier in February at the time IHS drafted its report or if the outbreak lasts longer than experts expect, state budget officials said.
And that could throw a wrench into the forecast of what lies ahead for the state, State Economist Laura Kalambokidis said. While the IHS in early February said the coronavirus would likely have minimal impact on the U.S. economy, stock markets around the world took a hit this week as the disease spread around the globe.
State lawmakers on Thursday said they were prepared to fund emergency disease management and containment efforts in Minnesota. And the state's department of health said it was switching to preparedness mode in anticipation of the coronavirus reaching Minnesota.
365体育投注But exactly how the virus could affect Minnesota's economy was yet to be seen this week.
365体育投注"Every day brings new understanding of the public health effects of the disease, and the economic impact remains uncertain,” Kalambokidis told reporters. “If the impact of the outbreak becomes more prolonged or widespread than it appeared at the time IHS constructed their February outlook, U.S. economic growth would be slower than forecast.”
Labor market tightens, construction jobs see significant growth
The economic forecast also showed that Minnesota's unemployment rate came in lower than the U.S. rate at 3.3% compared to 3.5% in 2019, but the gap between the two shrunk as job gains in the state slowed. Baby boomers continued to retire and with seven people for every 10 open jobs in Minnesota, there weren't enough qualified workers available to fill them.
365体育投注And that trend is likely to persist, further fueling the demand for labor around the state, budget officials said, unless employers and workers find creative ways to match qualified workers to open positions.
The state's labor force participation rate crept up in December, as compared to the year prior to 70.3%. That figure was the second-highest in the nation and 7.1 percentage points above the national rate. Increased wages and an abundance of open jobs likely lured new workers into the workforce, budget officials said, and possibly convinced some baby boomers to delay retirement.
365体育投注Construction along with education and health care services were the industries that saw the most substantial job growth last year, the report showed. And after hitting 128,000 last year, jobs in construction hit their highest level since 2008 and grew 4.7% in 2019 compared to the year prior. Jobs in retail dropped around 1.7% last year compared to 2018. The closure of ShopKo, Charlotte Rousse, Dressbarn and Pier One stores impacted the change.
Economic slowdown, wage hikes likely on the way
365体育投注The longer the current cycle of growth in the U.S. economy continues, the more likely it becomes that a slowdown is on its way, budget experts said.
365体育投注The national economy is expected to continue humming along at its current pace through the beginning of next year given current low interest rates, heightened federal spending and partial relief from ongoing trade deal standoffs among other factors, the report showed. But economists expect the tide could turn downward in late 2021 as the impact of fiscal stimulus fades, tariff uncertainty persists and the labor market slows.
365体育投注And in Minnesota, that means a slowdown is likely as employers struggle to find enough workers to fill open positions and positions set to be vacated by retiring baby boomers.
"Minnesota’s high labor force participation means there are fewer people to draw into the labor force," state economists wrote in the report. "The demographic reality of baby boomer retirements suggests that high labor force participation is not sustainable."
The tight labor market could come with an upside for workers. Wages could climb — at least a little — over the next few years as employers aim to fill open positions, budget officials said.