• Twin Cities regional economy stabilizes, poised for healthy growth in coming year

• Unemployment remains below national average

• Modest job growth foreseen for 2003

• Rise in personal incomes braces retail spending

TWIN CITIES ECONOMY  Businesses were boosted by a year long rebound in the Twin Cities’ economic growth rate, but the results didn’t translate into uniform prosperity for either the commercial real estate markets or the employment market. Employment actually turned to a negative growth rate of approximately 0.9% in the metropolitan region for the year, contributing to a bulge in vacancy rates for the office, industrial and apartment markets.¹ Low interest rates have also spurred record demand for new for-sale housing in the Twin Cities, which also reduced the pool of apartment renters.

Employment numbers were stabilizing at year-end however, leading to a 3.5% unemployment rate for the metropolitan area – below both the statewide 3.6% and 5.7% U.S.-wide rates. The number of Twin Citians filing new unemployment claims fell to 11,930 in November, a 19.1% drop from the 14,752 such claims filed in November 2001.²

Some local economists’ predictions for regional economic growth range from 3% to 4.5% for the coming year, accompanied by job growth of about 1%. Even such a modest increase in employment would produce about 17,000 new jobs, or approximately half of the estimated 35,000 jobs lost in the last two years.

Job growth is essential not just to filling empty office cubes and industrial spaces and vacant apartments. It’s also necessary if Minnesota is to maintain its title as the hardest-working state in the nation. Minnesota leads the nation in work force participation, according to a recent U.S. Labor Department report.

Diverse Twin Cities' Economy Weathers Economic Slowdown Better Than Nation
Due to the diversity of its economy, the Twin Cities weathers economic downturns better than the nation as a whole. The current economic slowdown proved to be no exception. Even though business growth slowed, regional unemployment rates remained well below the national average over the past three years. Consumer spending in the Twin Cities has also held up well, boosted by continuing growth in average personal incomes in Minnesota in each of the past three years – including a 2.8% growth rate in 2002.

Although local boosters like to point to the 14 Fortune 500³ companies – and seven Fortune Global 500 companies -- headquartered in the Twin Cities as evidence of the region’s economic strength, most new job growth results from hiring by small- to mid-size companies. The Twin Cities has a strong entrepreneurial culture as well, evidenced by the eight locally headquartered companies that made the 2002 Inc. 500 list of fastest growing private companies in America. 

Even Slow Growth In 2003 To Set Stage For Recovery In 2004
Slow job growth in 2003 will not solve the high vacancy rates in the office, industrial and apartment markets in the Twin Cities. But it will set the stage for stronger recovery in those markets in 2004. Consumer spending will remain healthy, and barring the unforeseen in international events, the Twin Cities economy will continue to gradually improve in the coming year.

¹ Minnesota Economic Outlook – December 2002, by Dr. Sung Won Sohn, executive vice president and chief economic officer, Wells Fargo Banks
² Minnesota Department of Economic Security, November, 2002, Minnesota and Twin Cities unemployment figures are not seasonally adjusted
³ Fortune, April 15, 2002 issue