Minnesota Economy Moderates But Still Seeing Improvement - BMO Economists

Jobless Rate Well Below the National Average

- Exports up

- Manufacturing activity strong

- Foreclosure rate continues to fall

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Feb 14, 2012, 11:00 ET

MINNEAPOLIS and ST. PAUL, Minn., Feb. 14, 2012 /PRNewswire/ -- The Minnesota economy has moderated in recent months, as the strength in manufacturing and exports seen early in 2011 has lost some momentum, according to the State Monitor report released today by BMO Capital Markets Economics.

Job growth was volatile in 2011, and weakened in the second half with declines seen in three of the last four months of the year. Government layoffs remain a drag, with employment in the sector down 1.4 percent year-over-year in December. Manufacturing and professional services supported employment in 2011, up 1.3 percent and 3.2 percent, respectively. Interestingly, total employment as measured by the household survey has surged to a record level, pulling the jobless rate down to a three-year low of 5.7 percent, well below the national average.

"Our commercial customers continue to express optimism and confidence in the state's economic resiliency," said Chip Howard, Managing Director overseeing Commercial Banking in Minnesota for M&I, a part of BMO Financial Group. "Our local expertise, sector knowledge and mid-market focus are real advantages to helping our customers find solutions as they invest in their businesses"

Existing home sales activity remains choppy, but the months' supply of homes for sale in Minneapolis-St. Paul has gradually fallen to 7.2 from a high of more than 13 during the height of recession, though it's still slightly above the 10-year average of 6.7. Prices, however, continue to fall, with the FHFA index down 5.9 percent year-over-year in the third quarter of 2011 and the downward momentum showing little sign of ebbing. The foreclosure rate continues to fall, but at 2.7 percent in the third quarter of 2011, is still well above pre-recession norms of about 0.7 percent—this continues to act as a drag on home prices.

According to Dr. Sherry Cooper, Chief Economist, BMO Financial Group, "Exports were up a solid 9.2 percent year-over-year through the third quarter, led by machinery and electronics, but the pace of growth has cooled from that seen in late-2010/early-2011." The industrial availability rate in Minneapolis-St. Paul sat well below the national average at 11.4 percent in the third quarter of 2011, and has begun to drift lower thanks to improved activity in the manufacturing sector. The office vacancy rate, however, remains an above-average 19 percent.

The full State Monitor report can be downloaded at bmocm.com/economics.

About BMO Financial Group

Based in Chicago, BMO Harris Bank N.A. provides a broad range of personal banking products and solutions through approximately 700 branches and approximately 1,350 ATMs in Illinois, Wisconsin, Indiana, Kansas, Missouri, Minnesota, Nevada, Arizona and Florida. BMO Harris Bank's commercial banking team provides a combination of sector expertise, local knowledge and mid-market focus throughout the U.S. Deposit and loan products and services provided by BMO Harris Bank N.A. Member FDIC. Equal Housing Lender. NMLS#401052. BMO Harris Bank(SM) and M&I® are trade names used by BMO Harris Bank N.A. BMO Harris Bank is part of BMO Financial Group, a North American financial organization with 1,600 branches, and a retail deposit base of approximately $180 billion.