State economist says Minn. is in a recession

Minnesota's Commissioner of Employment and Economic Development says the unemployment rate jumped 1.5 of 1 percent last month to 4.9 percent -- the state's biggest monthly increase in more than 25 years.

Commissioner Dan McElroy says the slowdown in housing construction is a nationwide trend, but one that has hit Minnesota employers particularly hard.

"We are finding that the disproportionate exposure we have to building materials, forest products, home finance -- mortgage servicing, particularly -- is causing us to have more challenges than the national numbers," says McElroy.

To illustrate the point, McElroy noted that northern Minnesota has seven plants that make plywood or a similar product called oriented strand board. But five of those seven factories are currently shut down.

McElroy says there are plenty of businesses hurt by 2007's decline in housing starts.

"We have had downturns at Andersen Windows and some of our other door and window manufacturers. We have a moderately large kitchen cabinet industry and it has had some downturns," explains McElroy.

The pain even spreads to workers extremities. McElroy says Red Wing Shoes reports a downturn, because workers are not wearing out their boots as fast as they once did.

State Economist Tom Stinson notes the job losses have spread well beyond the manufacturing and construction sectors and have lasted half a year. In economic circles, recessions are officially tabulated at the national level rather than in individual states. But Stinson says if the national criteria are applied to Minnesota, the recession label fits the state.

"The National Bureau of Economic Research - the group that actually calls whether the U.S. is in a recession -- says what they look for is an economic slump that is broad-based and of some significant duration. And what we've seen over the last six months in employment in Minnesota certainly qualifies," says Stinson.

Gov. Tim Pawlenty took exception to Stinson's readiness to use the R word.

"Tom Stinson tends to be a bit on the pessimistic side of things, to put it charitably," Gov. Pawlenty says.

Pawlenty says governors around the country have shared their concerns about the economic challenges facing Americans. But he says it's important to guard against too much pessimism.

"The economy is deeply challenged, nationally and in Minnesota. But I don't think it's helpful - unless it's clearly justified by the data - for people to get overly pessimistic or overly scare people, either," says Gov. Pawlenty.

Minnesota's economic pain is less than in some other states, such as Michigan where November's unemployment rate was nearly 7.5 percent.

One bright spot in Minnesota is the health care sector, which is gaining jobs.

But ultimately, DEED Commissioner Dan McElroy says, jobs are essential to a healthy economy and Minnesota had fewer jobs at the end of the year than it had twelve months earlier.