A Tale of Two Metros: Detroit and Minneapolis – Real Time Economics

Diversity is turning out to be a key ingredient of a healthy and durable regional economy.

Unemployment has fallen sharply across the U.S. over the past year, sitting at 6.5% in July without adjusting for seasonal differences, down from 7.7% a year earlier. But labor-market conditions vary greatly across the U.S., hinging largely on how diversified a local economy is.

In Detroit, for example, unemployment remains at crisis-like levels more than five years after the recession ended. The unemployment rate in the Detroit-Warren-Livonia metro area—a region at the center of American manufacturing’s decades-long decline, and wracked by crime and urban decay—the jobless rate stood at 9.8% in July. That stood as the worst among the 49 largest metro areas, Labor Department data released Wednesday show.

It’s easy to see why. Detroit has long been a manufacturing-based economy, and few industries were sacked harder during the recession than factories that make durable goods like cars. Detroit’s leaders are trying to diversify the city’s economic makeup, but that process can take many years and even decades, as cities like Pittsburgh can attest.

Contrast the Detroit metro with Minneapolis. Its metro area, which also includes St. Paul and Bloomington, had the nation’s lowest unemployment rate among large metro areas in July at 4.2%.

And you can’t credit a natural-resources or tech boom.

“What distinguishes Minneapolis in general is that it’s extremely well-diversified,” said Fatih Guvenen, a University of Minnesota economics professor. “Even if you look through the recession, we actually had a small rise in the unemployment rate” relative to other parts of the country.

The region is home to major retailers like Target Corp. and Best Buy Co. But it also boasts the headquarters of food manufacturer General Mills Inc. and medical-equipment makers such as Medtronic Inc. The diversity of industries helped buffer the area against the housing collapse and recession, Mr. Guvenen said.

Unemployment in the Minneapolis-St. Paul-Bloomington area peaked at 8.5% in June 2009 but has stayed below 7% since mid-2011. In Detroit-Warren-Livonia, the jobless rate reached 16.9% in July 2009 and has mostly stayed above 9% since then.



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27 August 2014 | 6:03 pm – Source: blogs.wsj.com

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