The Fundamentals: How Minnesota Measures Up

Presented by:

Steven G. Cochrane,Managing Director

Presented by:

Steven G. Cochrane,Managing Director

January 14, 2009

2

The Fundamentals: How Minnesota Measures Up

Today’s economy in recession

Global linkages

Driving industries; outlook for job growth

Comparative advantages and risks

– Diversity of economy

– Workforce quality

– Productivity and wealth

– Cost of doing business

– Cost of living

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Expansion

Recovery

At Risk

In Recession

Based on employment and industrial production, November 2008

Recession Status – Metro Areas

4

All Regions are Linked to Global Economy

Exports, % of gross state product

4

5

6

7

8

9

10

00 01 02 03 04 05 06 07 08

Sources: ITA, BEA

Minnesota

South

West

Midwest

Northeast

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Minneapolis Would Gain From Global Rebound

Exports of goods and commodities, % of gross product, 2006

Source: ITANear average

< 3.1%

> 10.4%

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A Diversified Export Pattern for Minnesota

% of Minnesota’s total exports of commodities and goods

0 5 10 15 20 25 30 35

MexicoU.K.Asia

Euro zoneCanada

Chemicals Food products

Medical supplies Transport. equip.

Machinery Electronics

By commodity

By destination

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State’s Driving Industries Go Beyond Exports

Wood products – with rebound in housing

Medical equipment/technology – requires continued R&D investment

Medical services – demand by aging population

Banking – must hurdle consolidation

Insurance – must get through financial crisis

Corporate headquarters – near-term cost cutting

1) High job concentration, 2) Significant size3) Strong historical growth, 4) Good future prospects

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Minnesota Long-Term Outlook Close to U.S.

Employment, % change year ago

-3

-2

-1

0

1

2

3

4

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

Minnesota U.S.

Source: Moody’s Economy.com

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Structural Differences Are Narrowing

Diversity index: U.S. = 1.0

0.3

0.4

0.5

0.6

0.7

0.8

0.9

70 74 78 82 86 90 94 98 02 06

Source: Moody’s Economy.com, based on employment by industry

CA

MNMA

AZ

SC

NC

WI

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Minnesota’s High-Quality Workforce…

% of adults over 25 with a college degree, 2000

Source: Census

> 26.5%Average< 21.7%

U.S. = 24%Minn. = 27%

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…Faces Persistent and Relentless Competition

% of adults over 25 with a college degree

10

15

20

25

30

35

Minn. U.S. Wis. Calif. Mass. N.C.

1980 1990 2000Source: Census

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Minnesota Productivity Near Average

Gross product per worker, 2008, $

Sources: BEA,BLS, Moody’sEconomy.com

>105,000Average< 89,000

U.S. = 103,000Minn. = 96,000

13

Minnesota Productivity Growth Just Average

Real gross product per worker, annualized % change

1988 to 2008Sources: BEA,BLS, Moody’sEconomy.com

>1.7%Average< 1.0%

U.S. = 1.6%Minn. = 1.5%

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Putting Relative Wealth at Risk Over Long Term

Net worth per household, 2008, $ Source: Moody’s Economy.com

>511,000Average< 392,000

U.S. = 463,000Minn. = 466,000

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Business Costs in Middle of the Pack…

Cost of Doing Business Index, 2006

102-12393-102 78-93

Minn. = 98

U.S.=100

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…As Are Living Costs

Living Cost by Metro Area, 2006

Very High, above 120High, 102-120Average, 93 - 102

U.S.=100Minneapolis=100

Low, below 92

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