Jobs Growth Not What It Seems

Mike Mulcahy, who covers the state capitol for Minnesota Public Radio, has this to say about the governor's agenda for this legislative session (and election cycle) -- first quoting from the state revenue forecast:

"... in the last two years, employment growth in Minnesota has fallen further behind the national averages. During the second half of 2005 Minnesota payroll employment grew at an annual rate of just 0.4 percent. U.S. payroll employment, even with the disruptions from the hurricanes along the Gulf Coast, grew nearly twice as fast."

So how concerned is the current governor about this? Not very. I asked him about it on Midday yesterday and he said basically the job growth lag is not a big deal for a number of reasons. First, he said there's not enough data to indicate a trend. Secondly, he said, the defense industry is leading the national economy, and Minnesota doesn't have many defense companies. And he said the numbers are lower because he's cut government jobs, and because the state's population is aging and the numbers reflect people leaving the workforce.

Mulcahy implies that jobs growth is an important measure of the economy, and Pawlenty says slower growth is not a big deal, but then gives some lame explanations why.

Joel Kramer of Growth & Justice will tell you that jobs growth comparison doesn't provide a good barometer of economic well being -- especially for Minnesota. Here's why:

1. Minnesota will never outstrip jobs growth in the Sunbelt, because that's where population is growing fastest. The problem isn't Minnesota's aging population (which Sunbelt states are getting younger?) or lack of defense jobs. It's the shortage of 70 degree days between November and April.

2. If jobs are growing at a higher rate, the growth is typically accompanied by an influx of people, which creates a greater demand for government services, from schools and roads to public health and safety. (See also: controversy over immigration.) That means government must spend more to provide the same level of services.

3. But new jobs are generated disproportionately at the lower end of the pay scale -- in retail services, small businesses and cleaning up after hurricanes, for example. The lower income earned by these workers (and by extension, their ability to pay taxes) means the state collects less per capita to provide services.

Kramer argues that a better measure is growth in average personal income, because it indicates an improving standard of living plus an increased capacity to invest in the community. Without necessarily raising taxes or fees.

You'd think the current governor would be all over that one.