Minnesota's economy, like the rest of the nation's, has experienced a significant downturn for more than a year. Now there are a number of signs that the hard times may be coming to an end. But there are also signs that Minnesota's economic recovery may not be all that robust.
Most every indicator at the national level points to an economic recovery. Retail sales are strong. Unemployment is down from its peak, although it was up in March.
Art Rolnick, senior vice president of the Federal Reserve Bank of Minneapolis, says strong national numbers bode well for Minnesota.
"Our economy over the last 20, 30 years pretty much mirrors the national economy. It's highly diversified, and as a result, its business cycle tends to be similar to the national business cycle. And clearly the numbers at the national level are coming in very strong," says Rolnick.
To Chris Kitchen, only one economic indicator matters. She's working again. Like thousands of Minnesotans, Kitchen lost her job last year as the economy declined. Honeywell laid her off in February 2001 after 22 years of service.
"I didn't actually start looking for work until the first of March 2001. And in January and February, I was hearing from a lot of people I had worked with finding jobs right away; they weren't looking very long. Things were just popping. And about the time I began to look, things began to slow down. Maybe over the course of six or eight months I had four interviews, from 50 applications," she says.
US Bancorp hired Kitchen three weeks ago as a human resources analyst.
Joining Kitchen in the ranks of re-employed is Joe Bogucki, who lost his job as a dispatcher for Northwest Airlines in October. But he thought, barring any more terrorist attacks, his layoff would be only temporary.
"When I saw at Thanksgiving that a lot of people were traveling again, I thought I probably should be called back when the schedule picks up in the spring," according to Bogucki.
On Feb. 15, Bogucki was among those Northwest employees called back to help it deal with rising demand for air travel.
To Kitchen, Bogucki, and others who are back at work, the latest period of economic distress may now only seem a brief pause after a decade or so of economic expansion.
"It's not the shortest recession on record, probably, but I think it will go down in GDP terms as being the mildest recession in history," says State Economist Tom Stinson.
The recession took a greater toll on Minnesota than on the nation as a whole. Unemployment grew more quickly here because of the predominance of manufacturing in the state.
Manufacturing accounts for about $1 out of ever $5 worth of goods the state produces. At the same time, it was among the sectors hardest hit by the recession.
"I don't think I will ever feel secure in a job again."
- Chris Kitchen
Some say it's encouraging to note that for this vital sector, the bloodletting appears over.
At S&W Plastics, a plastics injection molding company based in Eden Prairie, troubles began in January of 2001 when orders for new products plummeted.
"It's as if a marble rolled off the table," recalls Scott Thiss, the company's CEO.
The company laid off a quarter of its workforce as sales dropped by close to 30 percent after Sept. 11.
Thiss pulls out a chart that shows a deep trench following Sept. 11, followed by a series of progressively higher spikes.
"We are seeing that gradual return to orders. We've had some customers place orders that had not placed orders in six months," he says.
Now, after cutting back on staff work hours, Thiss says S&W is busy again. "We were down at times to four-day work weeks. Since the first of the year we've been working quite a few Saturdays."
Thiss doesn't think the rebound at his company is isolated. He's also hearing optimistic reports from peers in the Eden Prairie Chamber of Commerce.
A recent state survey found most manufacturers don't expect any more cuts this year.
3M, the state's largest manufacturer, recently announced that its first quarter earnings would surpass expectations.
Beyond manufacturing, there are other signs that the state's economy is on the mend. Across the country, retail sales remain very strong. Locally, the Target Corporation recently announced a startling seven percent year-over-year growth in same store sales. And reports are that sales of durable goods - like cars and appliances - remain strong.
In West St. Paul, Bruce Heisentreit's Vent-a-Hood store sells high-end kitchen appliances. Heisentreit says he thought business would slump after Sept. 11, but he was surprised.
"I really thought we would see some percentage go down. And after a few weeks after 9/11, it actually picked up quite well. It actually became stronger as the year went along. And after the first of the year, it actually got busier than ever. It was the busiest winter we've ever had," he says.
Heisentreit believes that the reason for his success lies with the housing market. Low interest rates and rising home values have pushed home values up by some 20 to 30 percent in the Twin Cities every year for the past couple of years.
"People are so positive about housing right now," says John Anderson, who runs Twin Oaks Realty in Crystal, a northeastern Minneapolis suburb. He's also president of the state association of realtors.
Anderson says as housing values have risen, more people have taken advantage of new financial vehicles to tap into their home equity. Anderson says that money is seeding all kinds of economic activity, at a time when the economy was otherwise sluggish.
"You talk to remodelers out there, plumbers, electricians, roofers, those type of people, they have never had such a good market as they have in the past couple of years. Because people are also, when they see prices going up, maybe they're not selling, but they have a lot more confidence to say, 'Hey, let's remodel the basement. Let's put a new kitchen in, let's do things, because we know we're going to get our money back,'" Anderson says.
But recent reports showed the state's housing market has slowed a bit, and the Federal Reserve may soon end the series of rate cuts with a hike to stem potential inflation.
"Now, all the good interest rate news is over," says State Economist Tom Stinson, who adds that the low interest rates helped spur the economy in rough times, and higher interest rates will probably slow growth as the recession ends. "We borrowed ahead a little bit on some of this demand for big-ticket items, housing and autos in particular. And that's kept the recession from being worse than it was. But then it will keep the recovery from being as strong as it has been sometimes in the past."
And the state still faces some formidable challenges. Some, even large, manufacturers say business is still weak. High-tech and telecom companies have yet to report any substantial rebound. Thousands of Fingerhut workers may permanently lose their jobs if an investor doesn't buy the catalog retailer soon. Hundreds more at the Potlatch plant in Brainerd will be out of work starting May 20.
The state may have a tough time re-absorbing all of these people into the workforce.
So prospects are perhaps not so bright for people like Craig Gardner, who recently lost his job with Fingerhut as a data processor after six and a half years of employment. Gardner's going to look for another job, but says the odds aren't good at the moment.
"There aren't that many jobs, and there will be a lot of people trying for the same job, so opportunities are limited," says Gardner.
Gardner and others who've recently lost their jobs may be learning what Chris Kitchen, the former Honeywell employee who found work with with US Bancorp, says she learned over the past 12 months: a job isn't always a sure thing.
"I don't think I will ever feel secure in a job again, ever. Because after 22 years with a company, a major multinational employer, where I went to that company because I felt like I could have my entire work career there, I know that's an old fashioned model. And I don't know if I will ever feel like I can trust a company to be there for me like I intend to be there, as a worker, again," she says.