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Minnesota Economic Forecast

Latest: February 27, 2015

Banner_MN[2] Minnesota’s economic expansion continues to make steady progress. The state has added more than 50,000 jobs since employment surpassed its pre-recession peak 18 months ago, and most indicators suggest the labor market has tightened up considerably. Minnesota’s jobless rate dropped to 3.6 percent in December, its lowest mark since early 2001 and the fifth lowest among states. Unemployment has fallen across age, gender, and racial cohorts. The number of long-term unemployed and the rate of involuntary part-time employment have fallen sharply as well. 

Unlike some other states with stronger relative economic performance, Minnesota is not an oil-producing state. Its workers and businesses have benefitted from the oil and gas boom in neighboring North Dakota, but Minnesota’s overall improved performance is more a reflection of its large and diverse economic base, and the resilience of a major metropolitan area. The Minneapolis-St. Paul area has the lowest jobless rate of any large metropolitan in the nation, 3.3 percent. Thus the net positive effects from the recent decline in crude prices are likely to far outweigh the negative impacts on the energy sector. Cheap gasoline means big savings for Minnesotans. This will provide a boost to economic activity in 2015 and 2016.

Still, uncertainties remain. The surging value of the dollar against currencies of the state’s largest trading partners (i.e. Canada and Europe) could hurt demand for Minnesota’s exports, which jumped to a record high $5.5 billion in the third quarter of 2014, up 5.8 percent from a year earlier. The state’s housing recovery has been disappointing in part due to unexpectedly slow household formation. Moreover, Minnesota’s labor force growth remains very weak and wage growth continues to be modest, despite the tightening job market. MMB’s economic forecast depends on stronger labor market conditions beginning to translate into improvements in household formation, the supply of labor, and productivity, thereby putting upward pressure on wages

MMB’s February 2015 economic forecast calls for Minnesota’s expansion to continue to accelerate over the next several years, but at a generally slower pace than the national average. Employment growth is expected to remain modest in 2015 and 2016, and the pace of wage growth is projected to steadily pick up steam. This reflects improvements in household formation and labor force growth, a rebound in labor productivity, and stronger fundamentals in the broader U.S. economy. 

Read More :

>>  Minnesota Economic Outlook (pdf)

>>  U.S. Economic Outlook (pdf)

>>  Council of Economic Advisers' Statement (pdf)

>>  Appendix Tables: Minnesota & U.S. Economic Forecast Summary (pdf) 

Data Tables :

>>  Minnesota Annual Forecast Data (xlsx)

>>  U.S. Annual Forecast Data (xlsx)

Note: These economic forecasts were prepared in February 2015, and are based on information available at that time. 

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