Fed report: Upper Midwest's economic recovery lagging

The Federal Reserve says the nation's economy is starting to show signs of a turnaround in most places - but not in the Upper Midwest.

The Fed's Minneapolis branch says economic recovery from Montana to Michigan is lagging the rest of the country -- in part because the economy here didn't get hit as hard as other places.

"I don't think we've suffered in the recession as much as the rest of the country, so what you're seeing is the rest of the country stabilizing from very low levels," said Art Rolnick, senior vice president of the Minneapolis Fed. "And our contraction wasn't as great, so our expansion, our coming out of this recession is probably going to look, as it does in this last recession, a little bit slower."

Rolnick says employment continues to drop, and manufacturing is sluggish. He says the region's economy is being dragged down by the downturn in the auto sector in Michigan.

And while unemployment rose to 8.4 percent in Minnesota last month, Rolnick sees some signs of recovery.

"We know we had to hit a bottom at some time," he said. "Prices had come down quite a bit. That's what had to happen for this housing market to turn around. It looks like it has. So that's a sign we're working through these foreclosures and the market is getting back to normal again."

The 11 other regions in the federal reserve system showed economic upticks in the latest so-called Beige-Book report, although Boston, Philadelphia, Richmond, Atlanta and Dallas all reported "subdued" growth.