Task force ponders job-growth strategies

Members of a House task force charged with finding ways to put unemployed Minnesotans back to work may have a tough job ahead of them.

The House Jobs Task Force held its first meeting to discuss possible strategies for ending the high unemployment caused by the recession. Economists and state officials urged bipartisan group to do what they can to help the state’s job market recover; however, they also warned that their options may be limited. (Watch: Part I, Part II)

“There is little that states can do in the short run to make a change and accelerate this recovery,” said State Economist Tom Stinson.

Stinson testified that Minnesota lacks the budgetary resources to provide an economic stimulus package similar to the federal stimulus, which he said successfully saved or created 45,000 jobs in the state. Instead, Stinson said lawmakers’ best bet would be to pass a bonding bill early in the 2010 legislative session that would put people to work on various capital projects.

Stinson said the key would be to get the bonding money distributed quickly. In the past, he said only 15 percent of capital budgets have been spent within a year of being authorized by the Legislature.

Art Rolnick, senior vice president and director of research for the Federal Reserve Bank of Minneapolis, agreed with Stinson that there is little lawmakers can do in the short term to spur job growth. Instead, Rolnick said lawmakers should focus on the long-term and invest more money in the state’s education system — particularly in the area of early childhood education — and also in programs that retrain laid-off workers.

The testifiers offered differing opinions on tax incentives and wage subsidies — two economic development strategies frequently endorsed by legislators. Stinson said tax incentives don’t yield results quickly enough to mitigate the short-term impacts of a recession. Rolnick and Ann Markusen, an economist and professor at the University of Minnesota, agreed, and also criticized tax incentives as pitting states against one another in a zero-sum game to attract companies.

Markusen advocated a more proactive approach to creating jobs, and suggested the state provide wage subsidies to help employers rehire laid-off workers until the job market picks up. Rolnick disagreed, saying that the economy is going through a process of “creative destruction,” and that government meddling in private markets would only worsen the situation.

Slow recovery expected

At the meeting, state officials also gave lawmakers an update on the state of the economy.

Stinson said economists are expecting a “very slow recovery” from what he said is the longest and deepest economic crisis since the Great Depression of the 1930s.

“The good news is that we have almost certainly emerged from the recession. The (gross domestic product) in the third quarter is almost certain to be positive,” he said, but added that unemployment is expected to remain high for the near future.

Steve Hine, research director at the Department of Employment and Economic Development’s Labor Market Information Office , said that by the time Minnesota employers start adding new jobs – probably early next year – the state will have lost 140,000 jobs since the beginning of the recession. He said the state’s unemployment rate is not expected to return to its pre-recession levels until late 2012.

The task force is scheduled to meet again Oct. 27 in Milaca.