Writer: Eleana Teran
2 min read December 2022 – The Twin Cities are expected to continue thriving in 2023, with diverse industries such as healthcare, finance, manufacturing and technology playing an expanded role. The region boasts a strong sense of community and high quality of life, making it attractive to businesses and individuals alike. Despite current economic challenges, the Minneapolis-St. Paul metro area is expected to continue to grow into a regional hub for business and creative industries.
On a national level, the U.S. economy saw its fastest growth in 37 years in 2021, but slowed down during the first half of 2022. This has led to speculation that the country may be entering an economic downturn, although many market indicators, including job growth, suggest that this is not the case. As a result, the Federal Reserve has been raising interest rates in an effort to curb inflation, but this could lead to a recession, according to economists.
As the year comes to an end, the Bureau of Economic Analysis reported that the economy saw positive growth in the third quarter of the year, easing concerns about a potential recession. At the same time, the Gross Domestic Product (GDP) for the period of July to September increased at an annualized rate of 2.6%, which follows two consecutive negative quarters earlier in the year, meeting the commonly accepted definition of a recession. However, the official determination of a recession is typically made by the National Bureau of Economic Research.
Minnesota has followed a similar trend, encountering economic headwinds. It has experienced two consecutive quarters of negative GDP growth, coupled with low consumer sentiment and falling business investment. On the other hand, the labor market across the state remains strong and overall demand in the economy remains stable. Unemployment remains at historically low levels, and employers in the state have continued to add jobs this fall, with October being the strongest month of job growth in 2022. These trends are unusual and have occurred while Minnesota works towards recovering the 418,000 jobs lost in early 2020.
For the state, the inflationary pressures and increasing interest rates add up to economic uncertainty. According to Minnesota Department of Employment and Economic Development Labor Market Analyst Dave Senf, the severity of any potential recession is uncertain and could range from mild to severe, with the low current unemployment rate potentially impacting the outcome. However, it is important to consider that these scenarios are based on historical data and should not be taken as predictions.
Despite the current economic landscape, the region has continued to grow. According to the Minnesota Chamber of Commerce, the state’s exports saw a significant increase in the third quarter of 2022, reaching a record $7.3 billion, a 28% increase from the previous year. While Minnesota’s exports have grown more slowly than the national average in recent years, the state still ranks 28th among states in terms of export growth from 2019-2021.
Additionally, business is booming. The number of new business applications filed in Minnesota from January to October 2022 was 34% higher than the 15-year average. The state has seen a high level of venture capital investment in startups, with 116 startups raising $1.23 billion in venture capital through September 2022.
Minnesota’s leaders remain optimistic about the growth and development opportunities in the region. In an interview with Invest:, St.Paul Mayor Melvin Carter expressed excitement about the city’s future. “We are probably entering the most prolific period of economic expansion in our city’s history. We literally have billions of dollars that will add to our tax base in the immediate term. I’m really excited about all the opportunities that exist here and that we’re a growing city. Every day, we see more and more people coming into our community and recognizing this as a really great place to live or raise children or open a business,” said Carter.
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