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Minnesota officials forecast slow economic growth, warn of uncertainties

State unemployment rate and labor demands remain strong despite uncertainties on the horizon.

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Minnesota State Economist Laura Kalambokidis says Thursday that agriculture and iron ore industries are among those with fiscal problems in the state. (DON DAVIS | FORUM NEWS SERVICE)
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ST. PAUL — The demand for labor remained strong across Minnesota in 2019 while unemployment rose steadily but below the national average, according to the state Department of Management and Budget.

In its Thursday, Dec. 5, budget and economic forecast, the department reported that the ratio of unemployed Minnesotans to job vacancies stands at about 0.7 in the continuation of a trend that began in 2017. Remarking on the forecast, State Economist Laura Kalambokidis said that strong state labor demands are likely to persist for as long as the national economy continues to expand.

Minnesota's unemployment rate did rise slightly in 2019 to a rate of 3.2%, according to the state Department of Employment and Economic Development. Kalambokidis attributed the spike to the growing number of employment-aged Minnesotans but said that the state's labor force participation rate remains solid at 70.3%

"Coincidental upticks in the labor force participation rate and the unemployment rate suggest that some new workforce entrants may not have immediately found work," Kalambokidis said.

Individual income tax revenue forecasts for the 2020-21 fiscal year beat out previous estimates by about 1.9% or $493 million, according to the forecast. General sales tax revenue is similarly expected to increase by 2.2%, or $252 million.


The state corporate franchise tax , meanwhile, is forecast to generate 9.2% or $294 million less in revenue than was previously predicted. Corporate profits that fell short of expectations may be to blame, Kalambokidis said.

According to the federal Bureau of Economic Analysis and state economic consultant IHS Economics, the slowing growth of U.S. consumer spending is projected to coincide with that of the national gross domestic product over the next several years. Kalambokidis cautioned that the fluctuating trade relationship between the U.S. and other countries like China may have domestic repercussions.

"Not knowing what the future trade policy playing field will look like makes business owners postpone expansion plans and hold off on investment," she said.

Kalambokidis warned that policy uncertainties can stunt consumer confidence as well.

Lawmakers and business associations had varying reactions to the news of Thursday's budget and economic forecast. Minnesota Chamber of Commerce President Doug Loon hailed the projected budget surplus as a "clear indication that more dollars need to remain in the pockets of families and businesses." Some Republican legislators used the news of the surplus to call for additional tax cuts.

In a statement, Gov. Tim Walz called the forecast "good economic news for Minnesota."

"Minnesota’s economy is working because Minnesotans are working," he said.

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