years. We're free look at your project. To get our Finance and Budget Committee ready here certain when the caller meeting to order. I'm at now seem that chair for a committee here. I what really excited about our presentation in just for context. We know that right now are countries, state region and city are certainly facing some serious challenges when it comes to our economic forecast today, we will have presentation on the economic analysis and getting a clear picture of state and regional economy and the macroeconomic outlook with the budget season upon us, it is crucial for all of us at
the table here to understand insights into financial data trends and have all the facts and tools to help us make informed decisions on the city budget. So I do want to council director Wilmes a huge shout out because it was his suggestion for us to bring you all jk. A shout-out first suggesting bring in our guest speakers today. Thank you so much for your time. I do want to intrude it's our speakers. The first have Amanda items, manager of the economic analysis at the Minnesota Management and Budget and then this team is responsible for producing the forecast of Minnesota State General Fund revenues as well as providing updates and analysis on the U.S. And
Minnesota economic outlook. In addition, the team is responsible for measuring forecast accuracy and providing updated report on the volatility of Minnesota tax revenues used to estimate an appropriate size for the budget reserve. They also have or state economist dr Anthony Becker, professor of Economics at Saint Olaf College in Northfield, Minnesota, where he has been on the faculty since 1987. That's a no look. He has served as speech. Johnson professor of business and economics from 2016 to 2019 chair of the economics department from 2012 to 2020 and as chair of numerous faculty committees as well. He has also worked as a consultant and economic analysis, an antitrust and as
an expert witness and economic damages. His expertise is kind of metrics, particularly in the analysis and forecasting of Time series data. In addition, Doctor Becker has expertise in the field of organization, particularly in the economics of antitrust regulation and in the field of public finance. Just incredible vile about the both of you. And again, thank you so much for your time today. During your presentation will be taking questions from Councilmembers. I will also leave time for questions at the very end to the till. So I will hand it off to whoever is planning on presenting first. While ago. First, thank Chair Yang Councilmembers. Its pleasure to be here. I just want to say that, you know, if you want to do this, if you find this useful and you want to invite us back in the
future, we're very happy to come. This is, you know, part of what the role of the sate economists, the economic analysis division is about. We also on a quarterly basis publish an economic outlook that you might find useful and you can get to that from the management and budget website as well. So we're going to start off. I'm here with my colleague, men dimes we're going to start off. I'm going to talk about the outlook for the United States. And we'll talk about the outlook for Minnesota and part of what's Going to be covered here. Is looking at the difference between. The forecast we were working at from in FEBRUARY when we produce the statewide revenue forecast and where that
forecast has shifted now because we've had a a large amount of policy changes and we still haven't. This is my my key word, key phrase for my life. Now, policy uncertainty. We really don't know. I mean, for example, just this week we saw a doubling of the tariffs on steel and aluminum. We saw other terror struck down, but that decision's stayed. And so uncertainty really is the key word. So. Ayway. But begin with the U.S. Economic outlook. I have to wear my glasses. You all are in perfect focus. But anything close to that end she to support so we The number of assumptions that go into our economic forecast so the art consultant for our macro economic forecasting is standard and poors global market intelligence or s p g m I. They released the forecast that we used for the revenue
forecast in FEBRUARY on FEBRUARY 10th, believe it was. And then we're going to be spending some time here comparing that forecast to the MAY 6th forecast. Now in that MAY 6 forecast. They had a baseline 15% tariff tariffs on China, much higher 125%. They even went up a little higher and and now they've come down and it's, you know, again, the policy uncertainty, but their assumption was that those tariffs would come down and they would gradually be reduced over the course of the year. There are also section 2.32 tariffs, which are the tariffs for national security reasons. And those who are unaffected by the international trade courts. Recent decision. And so those are, for example, the tariffs
on steel and Aluminum r r justified under national security grounds. And so that's Those. Those will probably stay in place until the administration changes them. We're also looking rather tight monetary policy, which for our purposes translates into higher interest rates. And that's because the Federal Reserve has been very reticent until inflation is in control with lowering interest rates. And so I think it's reasonable. To expect that standard and poors recipe. Gmi is correct that they'll only be one rate reduction in this year that we're going to see continuing high interest rates it appears many of the tax cut extensions that tax cuts that were passed in 2017 will be extended. That's the current legislation making its way through Congress and cuts in corporate taxes as well. A part of their
assumptions and then the population constraints because of limits on international migration, immigration, specifically and immigration, I'll just say has been one of the drivers of labor force growth in Minnesota in so. That the. This administration does appear to be. In 2 restrictions on immigration and that could have serious impact on labor force in Minnesota. And then again, we also see. Some decreases in the federal workforce. Again, we're seeing a lot of litigation about that. So we don't know how far that'll go. But the assumption by s and p is a half a million fewer federal workers and then the debt ceiling. And I hard that just in the last day or so,
some members of the Senate are on the on the gop side or rather concerned about the effect of the current Just budget legislation and its effect on the national debt. And so there MAY be some discussion there. The other thing is that the Federal Reserve is not they're sitting on the sidelines and letting the Treasury deal some extraordinary measures. Basically some people are calling it the Treasury's version of quantitative easing trying stay within that current debt limit, even though we're sort of bumping up against it. And so we'll We'll see what happens there. Okay. What we're looking at right now, the forecast and this that and snp is is really a middle of the road
forecaster. They tend to be neither overly optimistic nor overly pessimistic compared to the other major forecasters out there. And they're looking at gdp, gross domestic product growth below 2% for the foreseeable future. Now, back in FEBRUARY, they were looking at just over 2% in. 25 in about 2% in 26 and now this is mostly tariff related. And it's not just our tariffs, but its also retaliation from other other our trading partners that. Sort of giving us that decreased. Picture of growth and so fairly low growth. 1.3% is very low by historic standards. Generally
people tend to think about 2% is kind of being around the baseline growth of the economy. In in real dollar terms. And so 1.3 would be fairly low. At the same time. And this is a difficult thing for the monetary policy. People at the Federal Reserve. We seeing some upward revisions in expected in what the forecasts are for inflation. As much as 3.4% for 2025. So up about half a percent from that earlier forecast. Now, on the other hand, the recent up price release or price index release just. Was that last last Friday showed inflation. This remaining fairly moderate. And I some of that is because the tariff effects haven't necessarily fully kicked in.
Businesses did a lot of pre buying earlier in the year. And so they're running things off of inventory, running sales off of inventory. Now. But we'll just have to see how that goes for the rest of the year. But we are expecting higher inflation for this year inflation, not really moderating back to the, you know, too percent or so range for a couple years from now. This picture gives a little bit more detail. On this is others were annual averages. This is on a quarterly basis of these would the annual rate of inflation over 3 month periods. And what we can see, there's that. Consultants sp Gmi. We're expecting a spike in inflation in the 2nd quarter, which is where we are now. We won't know about that spike, really if it happens
probably until maybe next month or so. My guess is and this is a that I'm not sure that we're seeing the signs of that spike so things might. MAY have shifted or you MAY not realize is as pronounced a spike in prices. Take question. Yes. Rebecca What can remind us? Are? Tell me for the first time. What's the difference between cpi and core personal consumption expenditures? Okay. So cpi, Consumer Price Index is based on a collection of goods that a typical. Urban consumer purchases. The personal consumption expenditure index is based on the collection of things that
go into the macroeconomic. Definition of consumer spending. Or consumption expenditure. So household expenditure sort of in the aggregate for the Uited States. And the core. Personal consumption expenditure index excludes food and energy goods because those prices tend to be highly fall more volatile. And so the core pce index tends to look at a more stable, more stable, less on a month-to-month basis. Less variable measure to give us an idea of what the underlying inflation is. Because the. Possibility of inflation. We are anticipating minimal changes in monetary policy. That is we don't
expect the Federal Reserve to change its target interest rate, which is the federal funds rate. The lower set of lines here until DECEMBER. And then possibly hold things steady through most of 2026. Before lowering rates down into about the 3% range in the long term. That that's that's the rate that banks pay each other when they have to do overnight borrowing. Doesn't have a lot of relevance for me. I'm not a don't think any of us are. But what is relevant or things like the 30 year fixed mortgage rate and basically what we're in and that's also relevant for, you know, housing starts and residential investment and so
forth. And we don't expect a whole lot of movement in that and other words, we expect those rate says mortgage rates to stay up above 6% for the for that in the near term and only drop down below 6% in the longer term. And you can see there's not a very strong relationship between the Federal Reserve's monetary policy target and those longer rates in the in the the real risk with those of 30 year fixed rate mortgages all say is that I people start anticipating inflation and there's some. Evidence from various surveys that expected inflation by consumers is rising. Then those higher expectations can get built into longer-term interest
rates that kid. For the, the decline in the mortgage rates. The slowdown in economic activity is probably going to be closely related to a slowdown in household expenditure. This shows the amount of real consumer spending that is spending by household on new goods and services so like a lot of the e-bay purchases don't count. But, you know, that's minor, right? You know, this is your your food, your housing, medical care your even insurance expenditures all all the things that you can think of on a mac or economic level and in real dollars that is correcting for the effective price changes. We're expecting some substantial declines in the growth rate. I'm still
growing, but at a much lower rate, especially out there in in 2026, we're looking at fairly low great growth household expenditures. Now, if we don't correct for inflation, tat is if we look at this in in what we call nominal terms and tis wuld be closely related to things like, you the amount of business, transactions, that businesses are experience, retail sales and so forth. We see that there are still declines even with the rising prices that are predicted. We still that see that their declines and especially that we see their declines relative to the numbers that we had available to us back in
FEBRUARY. So that in Twenty-twenty 6, we're looking you know, substantial downward revision in in the amount of total spending by households and that then it rises again by the end of the forecast horizon here. What we're looking at there is something like the 2% growth. Plus the 2% inflation that gives you the 4% total growth in nominal consumer spending. The worrisome picture for as someone who deals with economic data lot is the forecast for real business fixed investment that is this is expended chirs by businesses on capital goods, structures, vehicles,
software, computers and so forth. And Arkansas is now predicting actually negative growth. That is a decline in the amount business fixed investment in 2026. And I will say that as somebody who job is to study these things and has been for many years drop-off in investment. Often pre seeds a recession now in the bsiness of predicting recessions. I mean, the joke is economists have projected correctly predicted 9 of the last 5 recessions. And so I'm not going to predict one. But what I will say is that historically, when you get a drop in investment that tends to create a shockwave that sometimes can throw an economy into recession. Not always, but it does occasionally there are other factors at play, too. But we are looking at
lower levels of investment sort of in the aggregate. Some of that is driven by higher interest rates and then business expectations and also say that policy uncertainty coming at the federal level. Contributes to businesses, not wanting to d things that encrypt make them incur debt. We'll take a question and MADAM Chair. I'm curious why 2026? Us. Appearing over and over again as outlier bad year. I mean, I can understand why it could be worse than 25 given that some of the policy decisions. And 25 could take a while to have impact. But then what's the reasoning for assuming that things are going to get better after that? Okay. So I mean, there are 2 possible explanations. The first one is that there are these things we call fiscal lags, the federal government acts and it takes a while for
those effects to be felt. And I think some of this is assuming that, you know, we're going to get a drop in consumption, then drop in investment and those things are going to take a while. But then the economy might tend to recover because perhaps Congress will make some remedial actions. The Federal Reserve will make some changes with monetary policy and so forth. That's that's one explanation. Another explanation is that when you're dealing with these big dynamic models if you shot it one way, it might tend to decline and then rise and and kind of go back to seeking its equilibrium. And a lot of these big macroeconomic models have as their long run
balancing point, long-run equilibrium something around a 2% growth. So when you you shot them when you disturb them. At one point they are going to tend back to their equilibrium in the long rn. But bill, maybe bounce around on the way there. I like the first explanation better. But the second one is an anomaly. A big macroeconomic models. We have to that could be it. But I think the 2026 decline in investment really has to do with them. Persistently high interest iterest rates persisting at higher levels and then also consumption being suppressed and and also I will say that we don't show it in this presentation, but part of assumptions of the trade policies that are built into these models are that we're going to see substantial decreases in demand for U.S.
Products from abroad. And that will also discourage businesses from investing. Dr fact, I have question for you about the real consumer spending on on slide 8. There. I know 2020 2021 that was during the pandemic. But it was worth If you could dive deeper into like why the there was such drastic some change in the bike path. There. And years in you know, even compared to 2022. And so on. Sure. A couple things happened so 2021, we know we had a lot of lockdowns and a lot of consumption we couldn't do. We couldn't. Fly on airplanes a lot go to restaurants and so forth. So there was a lot of suppressed demand. At the same time the federal government was engaging in quite a lot of stimulus spending. And so people enter 2021. A lot of
cash. And a lot of suppressed demand. And so you hd a lot of spending. What happened thereafter by 20 to 23 and especially by 23 is that the if you will, the excess funds household balance sheets, if you will, had pretty much been expended. So. There was a suppression of demand at the same time as the stimulus. So that as soon as the breaks came off, things, things really bounced up. And then they went back to pretty much their their normal growth rate by 23. 24. Thank you. Then. The forecast now is for and we did have a forecast previously, of course, corporate profits being somewhat lower in the near
term and then beginning to rise again. Smp is adjusted their forecast to have corporate profits being even lower and in the in the near term. And then not rising as much in the future. Now, I'm not sure how much implication this will have for your city's finances on the state level. We see this as possibly having a negative impact on state revenues from the corporate franchise tax. The it remains to be seen. How how much this is going to happen. We have we're going we're not going know this is happening until it's already happened. Is one of the things because data comes to us with a substantial lag. But this is one of the things we're keeping a close
eye on at the state level. Which in salary disbursements we we pay attention to because it affects income tax remittances. And and of course, it's also tied household consumption spending, retail sales and so forth. We're expecting a much lower growth. And again, this is in nominal dollars. This is not corrected for inflation, but were expecting much lower growth in wage and salary. Disbursements over the next couple of years with things then returning to. More akin to pretty much the same level as we were expecting back in FEBRUARY in the in the longer term. And one of the one of the other, if you constraints on the economy is, of course, a labor force and we're looking at So we have and I'm sure our state demographer will cover some of these
dishes issues for you as well. But we've got, you know, this, this baby boom ball's working its way through the population profile and baby boomers really retiring next few You know, a large proportion, very large proportion of them will have retired if we don't see the immigration, if we see immigration curtailed then we're looking at really only the natural population growth internally to supply additional workers for the Labor force. And that's why we're basically labor force growth total nonfarm employment. And that's going to also account for that lower growth in gdp. If you don't have the workers, it's hard to do the production. Council PRESIDENT
Thanks, chair. Is there any reason why on this slide? It seems like at least further out. Is a little bit rosier than FEBRUARY. I don't know if it's specifically significant, but it seems like different from some of the other sites where MAY is always worse. Yeah, I'm I'm not sure. I in the longer term now there MAY be expecting hgher employment because of greater economic activity and some of that is why we see maybe some lower levels. And 22 I-526 because we're now expecting lower levels of economic activity. I mean, tis is this is the number of people employed. It's not the available labor force, but it's it's still going to be related. Then one of the other things that snp does for us is they give us both an optimistic pessimistic
scenario. Baseline is what they think is is more likely than not. They the baseline scenario. Usually they assign a probability of 55%. Somewhere in that neighborhood. In this forecast, they gave us the pessimistic scenario showing just real gross domestic product here. And when that real gross domestic product goes negative, that's in all likelihood a recession. And so they're pessimistic scenario which they signed a probability of 35%. 2 is showing a recession in 2025. They're optimistic scenario which they assign a probability 15%. 2 was characterized by basically the United States backing off tariffs and our major trading partners backing off
retaliatory measures. And so we then get back up you know, a higher temporarily higher rate of growth and then we would have otherwise predicted. But this this just gives a little more detail. Of that. Of those different scenarios. So if you were to that take sort of a weighted average of these things worst, we're still not predicting or snps should say is still not predicting recession. None of the major forecasters that I'm aware of. And we we actually watch all. Basically we get a summary of all the major forecasters on a regular basis various Federal Reserve banks to that as well. Nobody's saying, oh, yeah, we're going to have a recession. But but the chances out there and the other thing is that when you get fairly low growth, it
doesn't take a very big disturbance in the economy to actually push you into a recession, which is why low growth in itself is is sometimes a concern. Now we talk about these things as forecast risks. That is what what can make our forecast. Not very good and yeah, I put policy uncertainty first because that's my life. And we really don't know what's going to go on with trade policy and tariffs. They change on a daily basis sometimes within the course of the day. We also really haven't seen immigration policy take shape yet. We're we're seeing some things on energy policy especially we're seeing some pushback from rural senators and real representatives on some of the administration's energy policy, especially with respect to clean energy. And so we don't know how that's
going to shake out. They're also disruptions from a lot of the changing situation in federal employment agency. Structures we haven't fully seen the amount of contract expect extensions I was just seeing the other day that. 2 fiscal 26 budget proposal from the administration is to cut, for example, National Science Foundation by 50%. That's going to have an effect on the education sector. Education sector, then has a decline that can sort of add in other places. But there's also, you know, they're also other cuts in there, too. I'm just thinking about that one because you know it. It really does. Minnesota's economy has a substantial amount of education. I mean, just look
at it. The u of them look at all the private colleges we have. So that's that's potentially a major shock to the system here. We also don't know that fiscal policy. We don't know how much of the current House bill is going to survive in the Senate. It MAY be modified to there's going to have to be some compromise when it gets back to the house. And so there's an uncertainty. They're also external factors that can affect inflation, things like, you know, energy prices right now. It looks like energy prices on the international level are going down. But that might not always be the case. And so there are some risks there. There might be some upside risks. If if energy stays low energy prices, stay
low, that could help spur economic growth, course, is going to have some domestically, which are not good. If international prices stay low, for example, probably get deeper, decreased production and exploration in our oil producing states. And also decreased incentives for clean energy products as well. 3rd production as well, monetary policy. We kind of have an idea what the Fed's going to do, but we're not sure and then there's some things going on in the bond markets right now with high higher. Re yields higher rates on long-term Treasury debt that that could be an issue. And certainly, you know, at the state level and local level for bonding, if interest rates on long-term are higher. And then the other thing that we always say is that, you
know, we work on the by of the state government end? We've got a long time until the coming biennium ends. And so. Yeah, was just sort of. Who Knows Inc in a sense, but that there's there's a great deal that can happen between now and the end of fiscal year, 27. Then in terms of our revenue, For a statewide basis certainly your revenues a city basis they're all of these macroeconomic uncertainties translate into state uncertainties which translate into revenue. Uncertainties so that's, you know, yes, we have a number. Subject to change. And one of the things we do at the state level is we published routinely reports of how our forecast is matching
up with actual revenues. We actually do that on a on a monthly basis. But then also on a on a regular based on an annual basis. We we sort of do a retrospective of what our revenue forecasts were and what they actually turned out to be. And then we come up with confidence range for where we expect or what we expect with 90% confidence where our revenues will be at the end of the the forecast period. So that's all that I have about the national outlook. If there are no more questions, I'll turn it over to my colleague. Has acre. Thanks, MADAM Chair. Thank you so much. This has been really informative and terrifying at the same time, especially if all of the uncertainty.
I'm I'm just. Could use a little bit more about inflation and curious. Usually I'm used seeing inflation with higher spending, higher wages, heating up economy. It seems like what you're saying is everything is slowing down and yet still seeing inflation. So what can you help paint the picture for why that is had a chalkboard yeah. So. What they're there? I mean, they're kinds of inflation often we think about inflation is when you have an expanding economy and there's greater demand for goods and that's almost pulling prices up. And we actually talk about them and pull inflation. So expanding demand fr goods, forcing rising prices. What we're expecting or what s and
p is expecting what you know, I personally I'm expecting is that a lot of the trade policies. Are going to end. The policy uncertainties are going to be actually pushing costs up. So firms that rely on imported lumber from Canada, a large proportion of our lumber is important and it's now been hit with 25% tariffs and maybe that will be rising. So home builders are going to be faced with higher costs. Our auto producers are going to be paying more for steel and aluminum when you put a tariff on and it's compared to the world price. And so that we've got this world price out there. And now you add a bump up from that domestic producers are going to charge more to so you know that it's basically going to push up, for instance, you
know, even from the point you know, beer and soft drink producers pay more for cans to automobile manufacturers. Pay more for steel and aluminum. All the costs are rising. And so we have this thing we call cost, push inflation. And that's a real in some people call it stagflation. That's that was the name that was point during the Carter administration where? You have costs rising and you basically have the on the supply side of the macro economy. You have the inflation coming from there. And that's a really hard. Place to be for of Mount Airy policy authority like Federal Reserve because if they lower interest rates to handle the suppression of economic activity, they wrist pushing up inflation by creating more demand. And if they lower, if they raise interest rates, they have the
effect of decreasing production and and also smite suppressed demand, but might also decreased production. So kind of they're kind of stuck, which was the quandary that the monetary policy authorities were in in the in the late 70's as well. And early 80's I don't that answer. And I'm srry for being terrifying early. My job to be terrifying. Back t the economy in the 70's. A super has heard Jones. Thank you Thank you, Dr thank you for this presentation of having a lot of flashbacks. My economics class in college figuring out how much I actually remember from that class at it says here that you're so the FEBRUARY 2025. Forecast
is the second of 6 or these forecasts. Monthly that that you do or put together? Well, we're actually updating this analysis on a monthly basis but when we talk about the number of forecast, we do, we of of revenue forecast in NOVEMBER and again in FEBRUARY. Oh, I see ok, will be. Thank you so much. Talk Kate's been my pleasure. We'll go Amanda. ok, so I'm really excited to talk to you. I love talking about the economy and in Minnesota. I think I just want to start by saying. I lucky that I get to tell a good story about Minnesota's economy. And there I get to tell a good story is that, you know, people like you are working to make our cities vital and places that people want to live and work. So that we keep this positive momentum
going in Minnesota. So Dr Becker just shared with us. You know, some like doing things. So we're going to talk a little bit some of the things that are a persistent assets. What are the secret sauce of Mnnesota and preparing for this presentation? I did try to look at the nsa of Saint Paul, Minneapolis. But because number one, because you're lumped with Minneapolis, it's kind of hard sometimes to like percent Saint Paul and number 2, because the Minneapolis Saint Paul and the essay is so significant. It's really not that different than the state and a lot of these indicators. So when we talk about what's happening at a statewide level, it's really translates very nicely to the Minneapolis
Saint Paul. And so I apologize that I can't speak more specifically to Saint Paul. I did look for those things, but I just decided that I would share that with you. Instead. So, ok, what makes Minnesota? Kind of this powerhouse little engine that could economically like if you look at all 50 states, Minnesota has a aaa rating. We have. We typically like rank pretty high and a lot of different quality of life indicators and we do a lot of things. Well, so why is that? I think the one of the biggest thing that's our secret sauce I we have a very highly educated specialized labor force. Here we have. We consistently have one of the highest educational attainment rates in the country. We have a diverse industry base which I'll show you and one of the next
slides. We a strong headquarters economy here and very high levels of innovation, which I'll talk about a little bit. We have per capita personal income that's persistently above the U.S. Average below poverty rate. And again, we perform well in standard of living indicators. So the diverse industry base, what that means is the dark blue bar is Minnesota and the Gray bar is the United States. And then it's showing as a share of total employment. How much is made up in education and health services is the top one. And then it kind of goes down with you can see. So it's helpful to be granted. Sometimes w talk a lot in Minnesota about mining and logging. But if you look at as a share of total employment,
how small it is relative to everything else that's happening here. What's special about Minnesota is that you can see our buyers are pretty well matched to the U.S.. And so what that means is if there is a shock to anyone industry like if agriculture has a really difficult year, maybe because of something like tariffs or if oil has a bad year, some states are going to be in a much worse position than Minnesota. Like, you know, Iowa would be really affected if something happened to their culture, Alaska, with oil. So it's a good thing to have this diverse industry base. We are. We do outperform the U.S. In a couple of areas. One area is private education and health care services and health care services as the why and share that with 85% and health care services. And we have a larger share of
employment in the U.S. In health. Said that one manufacturing, wholesale trade and financial activities. So the manufacturing is both durable and nondurable goods. So durable goods being like food-related things. You know, you're cereals and things like that. And then you nondurable goods are things that you would buy like at a target. So we do have a larger share of that happening here. And we have for a long time. Part of that is kind of are history has of your cultural state where we have a lot of manufacturing really de and then now in 2025 we have a lot of manufacturing of like Med Tech tip of things. So one thing I'm sure you're aware of is that we are among the top states for Fortune 500 companies. Headquarters. When you look at a slide like this, these are called naics codes
and one of these is called It's called management of companies and enterprises. And so everyone who works at ecolab no matter what their job is, if they're in a jar or finance or whatever they fall into this management of companies and enterprises, same everything works like the 3 m had quarter would fall under this. And Minnesota has and 2024 hd over 88,000 jobs in that category, which by concentration of jobs, Minnesota rings first among states at 83% higher than the national average. Some other top states include Arkansas, Washington, Ohio and Maine. Those types of jobs tend to b higher earnings. So the average earnings for that temperature at 168,000 per
year and Minnesota had 2400 businesses that fall into this category in 2024. So Fortune 500 is a subset of this industry. We are currently home to 17 Fortune 500 companies and 8 of Forbes largest private companies. And one thing that's really interesting is that if you go back 50 years, we still had about 17 Fortune 500 companies, but almost none of them are in existence today, which means that, you know, even as companies common goal, Minnesota, is this staying power as a place where these type of businesses either want to be located or they're located because we have well educated people who, you know, enter and build businesses and start companies and the Twin
Cities ranks 3rd in Fortune 500 per 1 million people. Among the 30 largest U.S. Metros. Many of the nation's largest and most recognizable companies are based in Minnesota. I think you all read through those at your own time. This is a kind of just shows how it breaks out by industry. And so, you know, some if we focus on just Fortune 500, you missed a lot of things because they're like these hidden headquarters that are not fortune 500, but maybe there and then probably really large nonprofit or like, for example, Thomson Reuters has a huge presence here, but it's not there to this, not actually their headquarters. And you can kind of see how those are broken down. Like again, I mentioned the food processing financial services, health and medical are some of the big ones. Retail. And then these are the high quality or high standard of living
indicators that Imentioned. So it's worth noting that these don't capture. Disparities and we know that the is, you know, that these high educational attainment rates aren't the same when they're desegregated. On a whole we perform really well and terms of educational attainment. We the 3rd lowest poverty rate. We have a pretty high homeownership rate here in the state. We we have a lot of patents per capita. And so you don't think like why is a patent per capita high quality standard of living thing and it kind of just get back to that idea that if people have resources, good roads, access to a good labor force to be employed there. They're going to be able to be innovative. And, you
know, having filing patents, whereas if you don't have those things, it becomes harder. And then we have one of the highest labor force participation rates in the country. Always. We also have one of the highest rates of people with more than one job, which is out not actually a good thing probably. But it's just the way that Minnesota is because we have this demographic situation where we have more job openings than we have people wanting to fill those jobs. So anyone who wants to have 2 jobs can have 2 jobs kind of and. People. In Minnesota out. Well, a lot of people we have a high labor force participation rate anyway, but the ok? So then we'll talk about what's going on in Minnesota. So here we see our unemployment rate. Again or pretty much always lower than the U.S. Rule of thumb people like to talk about, not just Minnesota, but
everywhere will talk about is they say that Minnesota is like for us and for us out of recession. Covid is kind of an outlier to that because that was a not a attritional business cycle recession. But that's just something that might be helpful for you to have in your mind if you ever noticed, like Minnesota's unemployment rate taking a Well ahead of the U.S. Or something or if you notice that gap closing so right now we have a very historically low. You know what, relative to the history of low unemployment rate. We? The labor market has maintained its resiliency despite some of these headwinds over the last few months. And that's true in both Minnesota and the U.S. That's all I want to say about that for now. Take a question
from comfort jobs. Thank I appreciate just kind of getting the state outlooks as well, especially as we dive into the unemployment rates. I just my question is actually related previous eye on the standard of living mostly because I was kind of wondering if it varies like if some of these very fi you mention the previous I was like anything around rule. Urban do see differences in when the data is the segregated by certain portions of the space. Just kst. So absolutely. I would say I wish I could present that dated to you. Like either not available or very sometimes is very unreliable. When you move down. So like, for example. When you look at the unemployment rate statistics
in Minnesota by race. Sample size for one of the group says only 900 families. That's really small you know, so you can have. A lot of movement and unfortunately, there's really nothing we can do at the state level. Like improve that type of data cllection. So I think I hope that answers your I'm sorry. I wish I could give you like as we all know. You know, it's obviously not the same the same experience for everyone everywhere. That being said, if I do, as I see things that I think might be of interest. If I see a better breakdown, I can always e-mail j and you can pass it Okay. So talking about the labor market Minnesota, if you look at the history like 2010 or 2011 to 2019, we average around
38,000 new jobs created per year and in job creation is like actually a percent. In a job, not a job opening and then w have the job loss from the covid pandemic. And then, you know, 21 22 was a lot of drawing tose people back into their jobs. And now we're bumping up against the demographic reality that people have been warning about. For many years. You know, in the percent person before Tony, was there for a decade. And the person before that's name was Tom. And he did this big tour around the state kind of warning about this demographic reality that we're living in right now, which is that we have a lot of people retiring and not a lot of people tree place. Those people retiring. And so what
we bumping up against in the U.S. As well. You remember the u.S. Live look similar to this. That we just don't have enough people in the labor force t replace all the jobs that we're losing as people retire. And this is something like we don't know what this looks like as a state. We've never experienced this as the state. All of us are used to having these monthly job numbers that are. Above 10. You know, in this annual job growth above 10,000 per year where so none of us have experienced this really well. Slow levels of job growth. And I think this is one thing in our area that we wonder about a ladder worry about like, what does this look like for state when we slow to this level of job growth and part of the driver of this job
growth is immigration. So there is there's 3 components of population growth. One is your natural You bres minds your deaths. The second component is how many people are choosing to stay in Minnesota are moved to Minnesota versus how many people are choosing to leave Minnesota. So we want to have more people moving to Minnesota, then leaving Minnesota and then the 3rd component is in a national immigration. And as it turns out in 23. 24, I think a lot of the a lot of that growth in flu virus can be attributed to higher levels of international immigration, which is my next slide. So this slide shows those 3 components of population change. The Lion
green bars are the domestic net migration. So mny people are we losing or gaining to from other states and in 2017 2018? So my first years on the job we're gining people from other states and we were obviously, this is you know, we're tuning that had Minnesota's place to be then out, we haven't repeated that sense. But we're really excited about this tiny little sliver in 2024. So that's a much better. So we hope we can flip it a positive. And then the international immigration. Is the Teal Bar. And if I culd just delete the other bars for you, so be easier for you to tell you would be able to at easily see that in 20 to 23. And 24, we experience. Really, really high levels of international
immigration, like double our normal. Basically. And so that was really sustaining and allowing us to have job growth in years where we otherwise might have bumped up to that demographic. Reality a little sooner. And we know in 2017 in 218, 2019. That those international immigration buyers got pretty small. So the last time we are in this administration, so if we expect that to continue in. 25 26, you know, I think we would expect those buyers to get pretty small in the next few years. Oh, sorry, go ahead. No, thanks so This is happening to do you. What are the factors behind the negative domestic migration? Why? Why do we tend to lose people to other state? To all the sun belt effect. And it's only gonna get worse as boomers retire. Attacks or other. I think there are. That's a
great question Dr Broward when she comes. So she's kind of the expert on that and we work with her all the time. She is like a honorary member of our team. But I think she couldn't answer that better than I could. And then just sort of as a corollary do. How does our international division compare? To other states and what are the factors behind whether we're better or worse for if you know, the that can often So if you think about like some states along the southern border, for example, their international immigrations me much higher than ours. But w performed pretty well for like being deeply You know, 48 continental, 48. So we tend to be a pretty welcoming place for international immigrants. And again, I think Susan might be
able to answer that better, but I think we do. Get pretty high levels of immigration for our location. Consumer products, Key. Thanks reading. Yeah, I was I was going to just know on top of council PRESIDENT Makers question. I think there's a lot of things on this in this presentation and that early presentation that impact us and we need to be aware of. And there are certain things in here where we can play a driving role as a city. And I personally find, for example, domestic migration, I guess not necessarily directly with immigration, but even if folks immigrate to the U.S. And then have to find a place to go. We as a city can drive a tremendous amount of how welcoming how magnetic we are
for people to move here by adding more husing by making our neighborhoods more livable by Owning so more housing can come through by having, you know, transportation and parks and library systems that families want to come to. And so particularly I remember have vivid memories of when the census going on. And we barely barely barely holding on to our it I always thought about how it really is like the cities, individual cities, jobs to welcome new neighbors and bring in new neighbors because otherwise we're relying entirely on international immigration where? I'm so excited grew over the last 3 years. I doubt we're going to be in a place where that's I do. People are going to be coming here in the same numbers. You know, who knows? We're not exactly
coming as a country. So I think that domestic migration, even what we can do to welcome international migration by the time they're in the U.S. Is something we can drive a lot So a lot of our housing and transportation and land use or cause a big driver there. Yeah, thank you for staying. I think the governor also focuses a lot on like how can you make minutes at a place that people want to comment? You know, from my perspective, like even like the park system and things like that, so I this is a question MAY be right down for Susan Brower. Maybe I'll have to come to her presentation. She had shared with us like statistics of people moving here from Illinois from Chicago. There's been a like over the past decade like a pretty big shift of people saying like, alright and then
Russia ca going coming to the metro and that I think makes a lot of sense. You know. What those 2 cities have to offer for people. And another thing that's really important to also for you know, families as the public school system. Number Johnson. Thank you. I yeah was. I mean, I guess is a pope o Councilmember skews comments. I was just kind of noting big under what which administration and guess I'm just wondering from, like the projections of yours that are now since we're repeating. Thank, you know, like the earlier years where it looked like there was a little bit of a decline in international immigration. But increases in domestic migration or are their predictions of what the trajectory would look like.
Again, the 20 2025. 2026 pieces. So thank you for asking that question. And if you are in one of our classes, we would give you an a because as an excellent question, I should our it is so yes, so that Forecast for international immigration. Have a big role to play in this So I I don't know when it's me and in this chart of the employment growth. And so part of the reason why we're seeing this really slow employment growth is assumed lower levels of immigration. So like our macro forecasts, lord their forecast by 500,000 people per year. And that is baked in at this point. Thank you for that. Ok? So I'm in I another thing I would say they're not
very good. None of us are very good at forecasting the domestic migration. I think that's more of an unknown. This next chart. I wanted to show that This is by industry. What's happening in job gains and losses. And I think my chair to sightly different than yours because I updated it by a after a stint you those slides. But the point of this chart is to show that some industries are gaining jobs in some industries are losing jobs we're not experiencing job growth across the board. And we just hope that the gains came continue to outpace the losses. I guess. This is employment by msa in the state. This is the on seasonally adjusted year-over-year percent change by msa. And you can see Minnesota still having a
positive employment growth year-over-year in Rochester is Terry. And I think a little bit with employment growth down there so just wanted to show that. So. I saw a headline recently that said something like Everyone is worried about recession and it's everywhere except for the data. And I think. Dr Becker shared, you know, sometimes I you can be in recession before the data really shows up. So we watch these things called Lake leading indicators to show a signs of of issues. And so none of the big indicators are, you know, the job market is hanging steady. Consumer spending has been hanging steady. So but some indicators I'll show you are maybe a little more concerning. So job openings. You can see that in Minnesota. The job openings have been drifting downward and the number of unemployed
averages have been creeping up. And one thing that's captured in those number of unemployed people that can sometimes be missed by other statistics is that graduate who enter the job market are people who enter labor force who weren't working, but they decide they want to get a job can't get a job or better captured in this number of unemployed. And then the private work week is something that's typically associated like a recession indicator because employers can cut your hours without cutting you as an employee as like a cost saving measures. So we see the number of hours coming down and then similarly temporary help is something that goes way upgraded the beginning of recovery and it goes down during a recession because it's one of those things where it's like, well, we can let go of the temp help. And then when you're coming back, maybe I don't want to bring back a
salary employee bringing temp help. And so we see that also kind of flashing out a little bit of an indicator for us. This is our total nonfarm employment. You can see that we are past our pre-pandemic peak. We got there a year after the U.S. We tend to so like the labor force growth in the U.S. Is that 104% of its pre-pandemic level. And we're just at 101%. So our labor force has a recovered as much. And that's because of our older population here like people retired. They're not coming back to and take out question over Johnson. Thank you and sorry to interrupt your flow. I just was wondering and on the national presentation of that national outlook, we talked a little bit about salary and wages and I'm just wondering, you know, kind of in regards to the last slide, just like private recreation, temporary help.
What is Minnesota's trajectory around like salary, which is pretty in alignment with the national outlook when it comes to just like how where painter workers, Iran, I guess how does that relate to like the the numbers in te future around the poverty rate, the unemployment rate and things like that. Yes, another excellent question. So we for a very long time had weeds growth that exceeded the the U.S. Grow 5% and wages. Minnesota grow 6%. We were always like growing a little bit faster than the U.S.. And since 2017. That's what so we're growing a little bit slower than the U.S., which is a bit puzzling because of our super tight labor market. You wouldn't. Expect that. I think you would expect that we would still be kind bring a little bit faster than us. So that's another thing that kind of like
concerns us or worries us. But do still perform very well. I mean, we're we're in it in line with the U.S.. But just under usually. Need That's actually my last slide. So if you have any questions for Doctor Becker, I we're happy to answer 5 more minutes. thanks, MADAM Chair, following up on this Johnson's question because, you know, she so I want sound like question I thought you MR. Lee pointed out that there's there is only one only one side that actually projects forward, which is the stagnating payroll employment growth. Curious what the outlook is for. All these other. From matters that we were talking about with the U.S. Because seems like only have one actual projection here. So we do have projections for all of
We it, I guess we don't tend to like. Show them that much. Don't know why that is it just a practice that we have? But I think pretty much the reason is because the U.S. Tells the story for Minnesota, the car, we have a special model for Minnesota that we're on. Large. You know, the story is usually go together. So it's like if growth is expected to girl in the U.S. We expected to grow here, maybe jst like it's just not going to be at the same girl 3 or if we're expecting. Consumer spending to decrease in the U.S.. It's gonna decrease here. And you know, so I think we just don't tend to go to that level under the hood with audiences that that was sort of a one during about because you started with
all the good news about Minnesota. And just wondering if does tat mean that we're somewhat protected from some of the negative effects that might be happening nationwide or to your point just now, do we pretty much tend to follow where the rest of the country goes. And so for policymakers, we can use the first few slides in the scene that that's going to apply to Minnesota or for some reason should be not a scene. That sounds like you're saying should we're going to wear pretty else. I think it's a little bit of both because I think number one, yes, like we, our economy is going respond the way that the U.S. Economy years funds. But like also. We're in a really different position in terms of how rc government is managed and are, you know, we have a rainy day fund and we forecast out 4 years in advance and we
balance the budget so we are very responsible in a lot of ways that can protect the state. If there is a recession, we have a rainy day fund whereas in other states that's not the case. So they're in a different position than we are. Then I think like some of the things i mentioned offers some economic resilience for us where it's like, if we suddenly were to lose a lot of jobs in. Food, production, manufacturing, maybe those people would shift to med tech manufacturing. You know. I think people ought to share my overall thoughts that as I'm reflecting on the presentation from the both of you, this is another really important reminder about how important elections are and why it matters so much. Who is sitting in the seats? And policy makers are decision makers of budgets and you
know, for me personally, as somebody who I so opposed to a lot of what's happening in at the national level in terms of our government here. I think that. I'm for me. I'm so proud to live in Minnesota where there are so many things that we can continue to protect to be really proud about. Immigration especially being one of those building resilience in Ari in our communities here and just continuing t advance progress our communities. And I think that in in some way, shape or continue to see that show up in the Minnesota slides that you have your And and so I'm I'm wondering, you know, have a question for the both of you there me. First off, I'm really looking forward just the budget presentation from our Office of Financial Services that way we can get a really close look on what you
know, similar to this like what are the hopefully the trends that we're seeing in Saint Paul here? What's impact of many of the different of like these different nursing pod residence. I'm even thinking about now. What is the experience of Saint Paul residents when it comes to their work experiences and inflation and everything. And I'm wondering if people can each just name it. The top 3 things that you would urge city. It city elected officials to consider as we are entering into budget season here. you go first I from a city perspective. Some of thoughts that come to mind. Liveability. And so. That involves, you know,
housing. Transportation. And you also, you know, things like things like crime rate static, some so forth recreation. So, you know, the parks and so forth. So I think that's a big one. Thinking about relocating from elsewhere. I mean, there's nothing we can do about the climate. Okay. I grew up. I grew up in the Washington, D.C. Area. There's nothing you do about the climate there. It's going to be hot and humid right here. It's going to be cold and you just have to live with that. But what what people tend to focus on is the relocating they do. They do put an awful lot of attention on taxes. But what it turns out is that once people get to Minnesota, they'd stop worrying about taxes so much and so the idea, I think is
really to how do you how do you get people past that that reticence and and get them to come here because once they come here, pretty r going going to stay. And so thinking about and I don't have an answer for this, but how do you attract people from other places to to come here to, you know, provide the vibrant community that we want. And then I guess I would also. You know, in terms of liveability, I would actually say also there's just got to be consideration of of the arts and social social situation, which I think Minnesota very good on and especially the Twin Cities is is very good on yeah, you know, in so far as
as you encourage location of you know, jobs and so forth, bring those in to to the city. I would say that would be that would be another issue. But also we have to be mindful of the fact that, you know, people might live in Minneapolis work in Saint Paul or vice versa or they live in South Saint Paul and work in the city. And, you know, so we are mobile, but things tat I care. I think my 3 like big answers are pretty simple. So education, education, education, education, I think is really, really important. And then number 2, is that connecting people to jobs? So people who aren't working finding creative ways to connect people to jobs and helping that pipeline from a school to that rage or whatever it is And the 3rd
thing is housing. So affordable housing. Thank you so much for having council PRESIDENT. Thanks, MADAM Chair. And I'm sorry. I know that was perfect closing question of the camera app. But because I had the same question to and I really appreciate your asking. And I'm wondering if I could just piggyback on that by asking if there's anything in particular. To our chairs point as we go into our our budget season in a time. And it sounds like all of these recommendations. I completely resonate. I understand them. They make sense sort of all the time. I'm wondering if in this particular moment of particular uncertainty fiscally anything, you're advising the legislature as they think about budgeting that you would maybe advise cities as they're thinking about specifically when when
it comes Our fiscal policy. I'm sure that you're and are thinking about this, but I think just like being aware that like sales tax revenue might soften up. Or that other sir streams of revenue mght soften up. So kind of trying to have a like a good understanding. Where is that like lower bound? And planning accordingly? Like, where could things be? You know, if this turns fom positive grocery to a recession, having a good. Dr Record. You have anything you need to shoot. No, I think that I think that's good. I mean, we we tend to not advise the legislature and the governor on spending. But just to both the governor and legislature aware of what's going to happen or what is likely to happen with revenues. And so sales tax could soften if we have an economic downturn. The
economic downturn. And actually higher interest rates are suppressing the housing market. That could certainly have an effect on property taxes as well. And just to be aware of those things. All right. Well, thank you both again, so much for your time. Your expertise. Just so, you know, this is the first year the flash having all year round Finance and Budget Committee. I just want to put out there that I think having a topic like this, every single year at the beginning of the year here would be really great for all councilmembers moving forward. If they have more questions that we will definitely Sunday your way. And again, thank you so much. I will wrap up our meeting here by sharing that that Come. Vice Chair Kim will be chairing our committees moving forward because I'll be
on maternity leave starting JUNE 16th, but I will still be here every Wednesday for a council meetings boards and and Official City business I know that you and also up meet your legislative to a fantastic job carry on the baton. Take for the committee here. So I want to say thank you for your work and also for you put 2 for assisting. So thanks, everybody. In our meeting, here's a extreme.