Minnesota economy beats Wisconsin: 7 charts, 1 table

Minnesota’s economy outperforms Wisconsin’s economy. The trends have accelerated since the end of the Great Recession. Economically, Minnesota continues to pull away from the Badger State.

Those facts haven’t changed in the four years (Yeesh!) that I’ve been pointing it out.

This is, in fact, the four-year anniversary of my first post on the matter. To commemorate, we’ll look at seven charts and one table that say, collectively: Goodbye, Wisconsin.

Coincident Economic Activity

This index is a good apples-to-apples economic comparison created by the Federal Reserve Bank of Philadelphia. It combines four indicators (nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and inflation-adjusted wages) into a single statistic.

Minnesota and Wisconsin ran neck-and-neck for years, then Minnesota started to pull away in the late 1990s.

fredgraph.coincident

That trend has accelerated since the Great Recession. Minnesota is leaving Wisconsin behind.

fredgraph.coincident.close

So there’s not much room anymore to debate which economy is performing better. Now, let’s ask why.

Health, education jobs

It’s not completely the reason Minnesota is outpacing Wisconsin, post-recession. But it’s huge.

fredgraph.health

Much of that was driven by Minnesota’s health care industry, from hospitals to ambulatory care and other services. As we’ve noted before, that job growth saved Minnesota’s bacon in the Great Recession. It continues to drive Minnesota’s post-recession success.

Hard to believe that 10 years ago Minnesota and Wisconsin had nearly an equal number of health and education jobs. As of November, Minnesota had 74,000 more.

Unemployment rate

This is not my favorite statistic. Each month when we report this data, a colleague of mine reminds me that this stat does a lousy job showing the state’s true labor picture. He’s right. But it is widely followed and it serves as another reminder of how Minnesota has recovered and Wisconsin has not.

fred.mnwiunemployment

Yes, in October 2007, two months before the official start of the Great Recession, Minnesota and Wisconsin had nearly identical unemployment rates.

Minnesota catching up to Wisconsin in total jobs

Wisconsin has a larger population than Minnesota, so it makes sense it would employ more people. But change is coming. And this is not about Minnesota adding government jobs.

At the start of the recession, Wisconsin had about 108,000 more private sector jobs than Minnesota. Minnesota has closed that gap dramatically in the recovery. It’s about 42,000 as of November and was as low as 31,000 in September.

fred.totalprivate

It will not be surprising to see Minnesota eclipse Wisconsin in a few years. As the graph above shows, Minnesota recovered its pre-recession private sector jobs nearly two years ago. Wisconsin recovered two months ago.

GDP muscle

As you might expect, all the jobs and other economic activity are good for Minnesota’s gross domestic product, the value of all goods and services produced here.

In this graph, it’s easy to see Minnesota left Wisconsin in the dust, post-Great Recession.

fred.gdp

Minnesota’s real GDP came in at $17.4 billion more than Wisconsin in 2008. By the end of 2013, the gap had widened to $25 billion.

And with private sector jobs and GDP in Minnesota growing faster than Wisconsin, it makes sense that Minnesota would also be stronger when it comes to wages and salaries.

fred.totalwages

So, there you go.

Usually, at this point people want to talk politics. Are we cherry picking data that makes Wisconsin Gov. Scott Walker look bad? Did Gov. Mark Dayton’s tax and budget plans lay the groundwork for this success?

No and no.

My view has always been that we overstate the effects of fiscal policy.

Really, the job makeup of the two economies is remarkably similar. Here’s a breakdown by major sector of Minnesota and Wisconsin employment as of October.

Bureau of Labor Statistics

Essentially, Minnesota has an advantage over Wisconsin in key growth sectors — education, health services and professional and business services. (Those sectors have also driven U.S. job growth, as the Wall Street Journal reported recently.) Wisconsin has a bigger stake in manufacturing, which has been in steady decline for years as a jobs creator. The Great Recession accelerated those changes and Minnesota benefited.

“Business environment” rankings go up and down. Taxes and services are cut and added and cut again. Politicians spend lots of energy trying to lure businesses with tax breaks and “open for business” slogans.

But here’s what Forbes magazine highlighted when it listed Minnesota No. 9 in its 2014 ranking of best states for business:

Minnesota cracks the top 10 for a second straight year based on a strong current economic climate and quality of life. The Minneapolis-St. Paul metro area is home to 62% of the state’s population.

It is also serves as the state’s economic hub, with companies such as Target, U.S. Bancorp, General Mills, 3M and Medtronic headquartered there. Minnesota has the fourth highest percentage of adults with a high school degree at 92.4%.

With its good schools, low poverty rate and healthy populous, the state ranks second overall on Forbes’ quality of life measurements.

Wisconsin, by the way, came in at No. 32.

Yes, it’s more about a region’s quality of life, education and workforce. Those fundamentals tend to lure people with ideas. People with ideas tend to build a diversified, thriving economy.

  • Dave M

    You say politics isn’t a factor, but I’m not sure. Mark Dayton has a pro-education platform, whereas Scott Walker and the hard-right Wisconsin legislature has been openly hostile to educators. Right out of the gate, he declared that teachers were practically one of Wisconsin’s greatest hindrances to freedom.

    Minnesota may have had an advantage in education employment, even before the recession. But if education is one of the pillars of growth post-recession, then Walker certainly hasn’t helped his state in that regard.

    • Nick K

      If you look at the Education and Health Service graph, Minnesota started to pull away from Wisconsin in about 2005-2006 (when Jim Doyle (D) was governor of Wisconsin). Since we don’t know, from the graph, which jobs are related to education vs health services, it would hard to draw some sort of Walker-hates-teachers-causes-slow-growth conclusion.

      • johnepeacock

        But as a general policy, supporting education looks like it may lead to benefits elsewhere in the economy, so regardless of Walker, that’s the case. It just so happens that he’s very public about his stance against education, so you can conclude that continuing this policy is at least not a benefit to the state’s economy.

      • Gener7

        Looks to me like the split started becoming noticeable about the time we had the actor/wrestler governing the state.

    • jon

      I can’t speak to education, but for the health care side, I think that might lay in the hands of some of MN’s largest companies…

      United health group (which was probably helped by the ACA more than it was hindered)
      Medtronic (at least for a little while longer a MN company.)
      St.. Jude (still a MN company)

      As while as Boston Scientific and other medical companies in the area…

      These are growth industries as the Boomers get old and get sick.

  • Noelle Bakken

    Actually, according to the Forbes article you cited, Wisconsin is 17th for quality of life – 32nd for “best states for business” (which is also ironic considering Walker’s position as fostering a pro-business state).

    Still not stellar.

  • http://www.fark.com/ Onan

    Wisconsin lagging due to Walker’s policies?

  • Jeff

    Just to pile on, don’t forget the $2B deficit.

    • paul123454321

      Or the MN budget surplus of nearly $1 billion. Weird how the “fiscally conservative” walker is in the hole on his budget and not able to help businesses or people in his state, but he does keep the Koch brothers happy.

  • Commie Dearest

    Well, yes, one can say the difference isn’t Scott Walker’s fault, but if your policies are sold as the magic elixir to create prosperity for all, shouldn’t your state at least keep up with the godless liberal-policy dominated state next door? After all, it’s not like Minnesota’s prosperity is because of a huge oil find like North Dakota’s is.