This week’s blog is adapted from BBER Director Monica Haynes’s recent presentation on Duluth-Superior and the surrounding region’s economic conditions for local business leaders, hosted by Bremer Bank. We share five of the most informative and revealing charts and what they tell us about the region’s economy.
Shown in yellow in Figure 1 is the historic GDP levels for the Duluth-Superior metropolitan statical area (MSA), which includes Carlton, Lake, and St. Louis counties in Minnesota and Douglas County, Wisconsin.
The chart shows that the Duluth MSA had a total GDP of $14.2 million in 2020, which was a slight decline from 2019, likely due to the economic slowdown from COVID-19. Over the past twenty years, the Duluth MSA’s GDP has grown by roughly 70%, but its growth has been slower than some similar sized MSAs in the Midwest, such as Fargo (160% growth) and Rochester (105% growth).
While GDP for the Duluth region is only available through 2020, there are some other local indicators that can help us gauge what direction the economy is headed. Figure 2 shows shipping levels for the years 2019 through 2022. 2019 was the strongest year, and 2020 was the weakest, due to the economic slowdown related to COVID-19. The blue line shows 2022. As of September, shipping tonnage was roughly 10% lower than in September 2021, driven largely by declines in shipments of iron ore. These year-to-date totals show evidence that a slowdown may be in progress.
While total employment numbers for the Duluth MSA have been steadily rising since the large losses caused by the COVID-19 pandemic, employment is not yet back to pre-pandemic levels. Yet this varies by sector. The goods-producing sector—which includes construction, manufacturing, and natural resources and mining—reached its pre-pandemic level around August of last year and is now in positive territory, thanks in large part to strong job growth in the construction industry. On the other hand, the service-producing sector is still about 5% below its pre-pandemic levels, as shown in Figure 3. This is a concerning sign, as the service-producing sector represents roughly 85% of all jobs in the region.
Labor availability remains one of the top concerns among businesses, and for good reason. During the Great Recession, there were nearly 12 unemployed people for every one opening, as shown in Figure 4. By the fourth quarter of 2021, the number was 0.5, meaning there were two job openings for every one job seeker in the seven-county region.
According to DEED’s most recent Job Vacancy survey, sales, transportation, healthcare, and social services were the occupations with the highest job vacancy rates in Northeastern Minnesota.
With the job market being so tight, there is a much greater focus on reducing barriers to employment for job seekers. The Minneapolis Fed conducted focus groups with job seekers last spring while in Duluth and found that childcare, housing, transportation, and wages were the top obstacles facing the job seekers.
Given the importance of housing on the labor market, personal income levels, and consumer confidence, it is helpful to highlight trends impacting the housing market. Figure 5 shows the median number of days that houses spend on the market in the Duluth MSA. Lower numbers tend to suggest a more competitive housing market and/or higher demand for new houses, while higher numbers mean houses are staying on the market longer, which would indicate lower demand. As shown in the figure, the median number of days on the market follows a cyclical trend—where houses listed in the summer months tend to spend fewer days on market. In general, the trend has been downward since 2016 with fewer days on the market overall, except for a slight reversal upward in the 2019-2020 cycle. That blip might have been caused by COVID or the influx of new housing that came on the market in 2019, but regardless, in the two years since, we’ve seen the market tighten again.
Many economists are predicting that rising interest rates will have a negative effect on housing nationally. However, this graph does not yet show reduced demand for housing locally.
In summary, Duluth-Superior’s GDP growth has slowed in recent years. Mining and shipping performance have been lower in 2022 than 2021. Employment is not yet back to pre-pandemic levels (except for the goods-producing sector). Workers are still in high demand, despite business challenges. Housing and childcare are top concerns for job seekers. And the housing market shows no signs of slowing, despite rising interest rates.