Governor Tim Pawlenty and State Economist Tom Stinson have frequently declared that Minnesota is in its worst recession since World War II.
If that is the case, how long will it take to return to the halcyon days of a thriving Minnesota economy, with unemployment returning to its pre-recession levels of a year ago?
If past is prologue, many, many years.
The current recession, says Stinson, began a little over a year ago. At that time, the unemployment statewide was hovering around 4.5 percent, according to the Department of Employment and Economic Development (the seasonally adjusted unemployment rate was 4.5 percent in November 2007, January 2008, and February 2008, and 4.7 percent in December 2007).
Since then, the jobless rate has climbed to 8.1 percent through February’s estimated numbers.
The last time the Gopher State flirted with numbers this high was June 1983, at 8.0 percent – about a half year after the state’s unemployment rate peaked at 9.0 percent in December of 1982.
The state first reached 8 percent unemployment back in June 1982. However, it took 2 years and 8 months to rise from 4.5 percent unemployment in October 1979 to reach that 8 percent mark. In the current recession, it has taken only 12 months to rise from 4.5 to 8.1 percent unemployment.
And the Reagan recovery?
After dropping from 9.0 percent unemployment in December 1982 to 8.0 percent in June 1983, it took an additional 5 years and 2 months to return to jobless levels of 4.5 percent, eventually achieved in March 1988.
So, what about today – if there is an “Obama recovery?”
Following the 1980s model, here is one best case scenario:
If, hypothetically, unemployment levels have peaked during this current recession (and no economist is saying they have), that would mean Minnesota would not return to its February 2008 jobless rate of 4.5 percent until December 2013, holding to the Reagan recovery blueprint.
If, however, unemployment levels continue to rise to 9 percent during the coming months, as many economists predict, the end date for Minnesota to return to pre-recession jobless levels will be extended several months longer into 2014.
And that’s a best case scenario?
Counting from the date unemployment last hit 4.5 percent in Minnesota during the Jimmy Carter administration, in October 1979, it took 8 years and 5 months to return to that level, in March 1988. Using that formula as a guidepost, Minnesota wouldn’t see pre-recession unemployment levels statewide until July 2016.
There are, of course, many unknowns at this point. When will unemployment reach its peak? At what level will it peak? Will the eventual recovery be uninterrupted or will there be bumps and bruises along the way? Moreover, the Minnesota economy of 2009 is different than that of 1983, as are the national and world economies.
But what makes the rate of recovery (that has not yet begun) even more difficult to project is that the escalation of jobless claims have risen at record rates during the past year – it’s been a recession on steroids.
While Reagan keyed on tax cuts while presiding over his recovery, one wonders if the nation and Gopher State can more quickly curb this recession and expedite a recovery with the performance-enhancing drug it received this year – in the form of the federal government’s recently-passed stimulus package.
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