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December 2013? July 2016? Estimating When Unemployment Will Return to Pre-Recession Levels in Minnesota

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Governor Tim Pawlenty and State Economist Tom Stinson have frequently declared that Minnesota is in its worst recession since World War II.

If that is the case, how long will it take to return to the halcyon days of a thriving Minnesota economy, with unemployment returning to its pre-recession levels of a year ago?

If past is prologue, many, many years.

The current recession, says Stinson, began a little over a year ago. At that time, the unemployment statewide was hovering around 4.5 percent, according to the Department of Employment and Economic Development (the seasonally adjusted unemployment rate was 4.5 percent in November 2007, January 2008, and February 2008, and 4.7 percent in December 2007).

Since then, the jobless rate has climbed to 8.1 percent through February’s estimated numbers.

The last time the Gopher State flirted with numbers this high was June 1983, at 8.0 percent – about a half year after the state’s unemployment rate peaked at 9.0 percent in December of 1982.

The state first reached 8 percent unemployment back in June 1982. However, it took 2 years and 8 months to rise from 4.5 percent unemployment in October 1979 to reach that 8 percent mark. In the current recession, it has taken only 12 months to rise from 4.5 to 8.1 percent unemployment.

And the Reagan recovery?

After dropping from 9.0 percent unemployment in December 1982 to 8.0 percent in June 1983, it took an additional 5 years and 2 months to return to jobless levels of 4.5 percent, eventually achieved in March 1988.

So, what about today – if there is an "Obama recovery?"

Following the 1980s model, here is one best case scenario:

If, hypothetically, unemployment levels have peaked during this current recession (and no economist is saying they have), that would mean Minnesota would not return to its February 2008 jobless rate of 4.5 percent until December 2013, holding to the Reagan recovery blueprint.

If, however, unemployment levels continue to rise to 9 percent during the coming months, as many economists predict, the end date for Minnesota to return to pre-recession jobless levels will be extended several months longer into 2014.

And that’s a best case scenario?

Counting from the date unemployment last hit 4.5 percent in Minnesota during the Jimmy Carter administration, in October 1979, it took 8 years and 5 months to return to that level, in March 1988. Using that formula as a guidepost, Minnesota wouldn’t see pre-recession unemployment levels statewide until July 2016.

There are, of course, many unknowns at this point. When will unemployment reach its peak? At what level will it peak? Will the eventual recovery be uninterrupted or will there be bumps and bruises along the way? Moreover, the Minnesota economy of 2009 is different than that of 1983, as are the national and world economies.

But what makes the rate of recovery (that has not yet begun) even more difficult to project is that the escalation of jobless claims have risen at record rates during the past year – it’s been a recession on steroids.

While Reagan keyed on tax cuts while presiding over his recovery, one wonders if the nation and Gopher State can more quickly curb this recession and expedite a recovery with the performance-enhancing drug it received this year – in the form of the federal government’s recently-passed stimulus package.

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1 Comment


  • Well, I do not have a computer at home, nor email, but I am not not surprised by these numbers and predictions, as I lived through them in the 1970s to 1980s. The worse thing, though, is that Clinton had the formula used to calculate unemployment changed. The old formula, now called U-6, indicates that true unemployment is over 17%, with some experts claiming that it is over 22%. If Obama's past performance is any indication, his employment summit will lead to proposals that--if carried out--will worsen the situation. Bear in mind that large retailers such as K-Mart and Wal-Mart are highly dependent upon banks for funding their daily operations. If the banking industry recieves another shock, such as the collapse of Abu Dhabi, then it is possible that many retailers will close stores and merge their remaining stores with other marginal firms. The same is true for our remaing factories. Some states, such as Ohio, Michigan, and Minnesota--as well as Oregon, washington state, California, as well as Massachusetts and New York, will be hit as badly as they were in the depth of the Depression.

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