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Economy continues to falter

State Economist Tom Stinson says federal stimulus money will help Minnesota, but "will not jump-start the economy." Watching is Commissioner Tom Hanson of Minnesota Management and Budget. Staff photo by Don Davis

ST. PAUL - Minnesota's economy appears to be mirroring the national one, with employment expected to near 10 percent.

"We think it is going to be a slow recovery," Minnesota State Economist Tom Stinson said Tuesday, with the state not fully recovered until 2012.

Stinson said the recession will cost 120,000 Minnesota jobs through next year.

As part of a twice yearly report released Tuesday, Stinson said only one segment of the Minnesota economy is doing well - health care. Construction and manufacturing industries are among those most affected.

Stinson said 22,500 Minnesota workers would have lost construction jobs had it not been for the economic stimulus package that President Barack Obama signed into law last month. With the federal money, that number will be cut to 14,000, Stinson added.

Even though the federal package will help the economy, Stinson said, it will not provide the jump start that is needed. He suggested another stimulus package still may be needed.

The recession is led by consumers, Stinson said, and it will not disappear until Americans decide it is safe to spend more.

The Minnesota Management and Budget economic report released Tuesday showed that Americans are buying fewer goods, which leads managers to reduce employment. That, in turn, leads to more cutbacks in consumer demand.

Minnesota's economic consultant firm, Global Insight, predicts a 2.7 percent economic decline by year's end, more than twice as bad as it predicted last December.

House Speaker Margaret Anderson Kelliher, DFL-Minneapolis, said construction and trades workers are so hard hit that a state-funded public works project should be considered as a way to put them to work. Such a package could provide thousands of jobs for workers fixing and constructing state buildings.

Sen. Keith Langseth, DFL-Glyndon, proposes a $300 million public works bill. He is chairman of the Senate committee that deals with such issues.

However, Gov. Tim Pawlenty on Tuesday said he only favors borrowing more money for public works projects if it is needed to match federal money designated for such work. Pawlenty, a Republican, said the state already has a higher percent of its budget going to pay off loans than it should.

Don Davis
Don Davis has been the Forum Communications Minnesota Capitol Bureau chief since 2001, covering state government and politics for two dozen newspapers in the state. Don also blogs at Capital Chatter on Areavoices.