Bureau of Business and Economic Research Economic Outlook 2006 Northeast Minnesota and Duluth Jim...

Bureau of Business and Economic Research

Economic Outlook 2006Economic Outlook 2006Northeast Minnesota and DuluthNortheast Minnesota and Duluth

Jim Skurla, Acting DirectorBureau of Business and Economic Research


Brought to you by,

James A. Skurla,James A. Skurla,


ACE FORECASTER


How is the U.S economy doing?How is the U.S economy doing?

x


U.S. ECONOMY


U.S. ECONOMYPrices shot up from Katrina. Crude oil prices hit highs in summer 2005.

Source: David Lereah, chief economist for the National Realtors Association

Consumer Prices Annual Growth Rate

0

1

2

3

4

5

6

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2005 2006 2007

# G

row

th

%


U.S. ECONOMYGreenspan and the Fed’s interest rate raises . . .


U.S. ECONOMY. . . are putting downward pressure on housing prices

Source: David Lereah, chief economist for the National Realtors Association

Housing Market

Existing Home Prices

New Home Prices

0

2

4

6

8

10

12

14

16

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2005 2006 2007

% C

han

ge

Yea

r A

go

01234

56789


SOARING ENERGY PRICESexpected to remain high through ’06, weakening in ’07.

Source: Energy Information Administration


How is the Minnesota economy doing?


Demographic Projections U.S., MN, Duluth

U.S.

• projected to reach 300 million this year • Three states — Florida, California and Texas — will account for

nearly one-half of total U.S. population growth to 2030.

MN • State Demographer says

Minnesota will have . . . – net in-migration from

other states and countries – older population


Source: Minnesota Population Projections 2000-2030, MN State Demographer, MN Planning

Demographic Projections (continued) MN, Duluth


Minnesota Budget Forecast 2006

SURPLUS?

Source: Minnesota Dept of Finance

millionsBalance forecast for FY 2006-07. . . . . . . . . . . . . . . . . . . . . $701

Buyback to school aid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $370Required to complete buyback portion of school aid

Buyback to property tax . . . . . . . . . . . . . . . . . . . . . . . . . . . $331Required for a partial buyback of the property tax recognition shift, reducing the recognition percentage from 48.6% to 10.8%

Still needed to complete buyback. . . . . . . . . . . . . . . . . . -$94


$ MN capital expendituresPawlenty’s bonding proposal for the 2006 legislative session:

Millions

Investments in Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$289.3 including $15.3 million for a new building for the Labovitz School of Business and EconomicsLabovitz School of Business and Economics (Duluth campus)

Water, Agriculture, Environment and Natural Resources . . . $209.3

Jobs, Housing and Transportation . . . . . . . . . . . . . . . . . . . . . .$203.8

Safer and Healthier Communities . . . . . . . . . . . . . . . . . . . . . . $150.7

Effective Government and Public Services . . . . . . . . . . . . . . . $41.3

$897 million total when other bonds and cash are included.

http://www.governor.state.mn.us


Minnesota Economic Indicators

Source: MN Dept of Finance ;Minneapolis Fed Reserve; Star Tribune

–GROSS DOMESTIC PRODUCT

Real GDP not expected to change through FY 2007.

↑PER CAPITA INCOME

In 2004, MN ranked 9th for per-capita personal income, up from 11th in 2000.

↑CORPORATE PROFITS

Corporate Profits expected to rise in 2006

↑PERSONAL INCOME GROWTH

Healthy growth for personal income in FY 2006 (as predicted by Minneapolis Fed).


Minnesota and U.S. Nonfarm Employment Growth % Change

Source: CES data, Global Insight, and MN DEED


How is the local Duluth economy doing?

“The answer is blowin’ in the wind”

Bob Dylan

blowin’ in the wind?


Booming 90s!

Duluth-Superior MSA Employment

Source: Bureau of Labor Statistics (BLS)


Unemployment RateMetropolitan Statistical Areas Dec. 2005

Duluth, MN-WI 4.9%

St. Cloud, MN 4.4%

Minneapolis-St. Paul-Bloomington, MN-WI 3.7%

Rochester, MN 3.5%

U.S. 4.6%

Minnesota 4.0%

Source: MN DEED


Trade, Transportation & UtilitiesTrade, Transportation & Utilities

Education and Health ServicesEducation and Health Services

Leisure and HospitalityLeisure and Hospitality

Natural Resources, Mining & ConstructionNatural Resources, Mining & Construction

ManufacturingManufacturing

Duluth-Superior MSA Industry Employment 1995-2004

Source: BLS


High Growth/High Pay Industries Projected for Northeast Minnesota 2002-2012

Source: MN DEED

–employment growth higher than average–annual salary higher than median –at least 0.1% of total employment

. . . Etc.


Region’s Top IndustriesNEW Mining construction and expansions proposed: – NorthMet – Mesabi Nugget – Mintac– Keewatin Taconite– Minorca Mine– Hibbing Taconite – United Taconite – North Shore Mining

• Mining• Wood and Paper Products• Shipping and Trans.• Health Care• Tourism

2006 Outlook:Taconite output remains steady

– worldwide demand– weakening dollar – stable economy– high scrap prices

Source: UMD BBER, Duluth News Tribune, Bureau of Labor Statistics


Duluth’s Top Employers

Major Employers:St. Mary’s/Duluth ClinicBenedictine HealthU of M DuluthSt. Luke’s HospitalAlleteCanadian Nat. Railway

Source: Matt Shoeppner (DEED) and Northland Connection


How’s Business in Duluth?

NOTABLE ACTIVITY

–Over $190 million in construction projects either under way or just completed in Duluth

–Cirrus Design Expansion

–Hospital District Expansion

–Mining on the Range impact

Source: UMD BBER and 2006 State of the City Address


Duluth Economy$280 Million in Unfunded Benefits to Retirees

TASK FORCE SUMMARY RECOMMENDATIONS:

Combine new health plan savings

Put $26 million a year into a health account for 30 years

Increase all utility rates 4 to 5%

Cut the city's share of retiree health costs by 20%

Source: Post Employment Health Care Benefits Task Force Final Report and Minnesota Public Radio


In short . . .

Most economists believe economic growth will slow to around 3% by the 2nd half of 2006– Higher fuel– Lower consumer spending– Slower real estate– Deficit drag

However, Duluth may see jobs from mining projects on the Range, and export possibilities to China.


Follow these and other stories online with the Labovitz School’s Bureau

www.d.umn.edu/sbe/departments/bber/

Economic Impacts of PolyMet’s Economic Impacts of PolyMet’s NorthMetNorthMet Project (in progress) Project (in progress)

Alternatives to PetroleumAlternatives to Petroleum Based Based Fuels for Marine Vessels (in Fuels for Marine Vessels (in progress)progress)

Economic Impact of Constructing Economic Impact of Constructing and Operating an Integrated and Operating an Integrated Gasification Power-GenerationGasification Power-Generation Facility on the Iron Range (pdf)Facility on the Iron Range (pdf)

Grand Marais Grand Marais Harbor ExpansionHarbor Expansion Impact 2005 (pdf)Impact 2005 (pdf)

Under, Over, and Mis-Matched Skills Under, Over, and Mis-Matched Skills Employment in Northeast Employment in Northeast Minnesota, Including the Port Cities. Minnesota, Including the Port Cities. March 2005, for the Minnesota March 2005, for the Minnesota Legislature, Legislature, and MN DEED (pdf)and MN DEED (pdf)

Development Enterprise Network Development Enterprise Network System Analysis 2005 (pdf)System Analysis 2005 (pdf)

Mesaba Metals, LLC Impact Study Mesaba Metals, LLC Impact Study 2003 (pdf)2003 (pdf)

Tax Revenue Impacts and Marketing Tax Revenue Impacts and Marketing Northern Minnesota’s Iron Trail 2003Northern Minnesota’s Iron Trail 2003 (pdf)

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