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June 15, 2006

Whizzing On Yoiur Parade

As Minnesota's unemployment figure drops to 3.7 percent - 1.3 below what they used to call "full employment" - the Strib's editorial board dings Pawlenty and his tax cuts because...because unemployment apparently isn't negative:

But the May employment numbers are not quite as good as they appear, and voters should read them carefully. As the Department of Employment and Economic Development pointed out, actual job creation in May was modest. The unemployment rate went down chiefly because some 9,000 Minnesotans simply stopped looking for work and weren't counted as jobless. Consider the bigger picture: The share of working-age Minnesotans with jobs is still lower than it was five years ago, when the last recession began, 70.4 percent vs. 73 percent.
No context, naturally, is given for these numbers. Why is the percentage lower? Are those extra 2.6 percent of the work force retired? On welfare? On chemotherapy at Mayo? Discouraged workers?

Just saying "not everyone has a job" without knowing why is fairly meaningless, except as a way to propagandize against a hated (by the Strib) governor and his policies.

While it's true that Minnesota has surpassed the nation in the pace of job creation during the last 12 months, it has underperformed the nation in job creation over the full period since the 2001 recession ended.
Perhaps - this is a theory (Kiiiiiiiiing?) because we didn't lose as many jobs as the rest of the nation during the recession? I mean, our unemployment was relatively mild (generally - personally, it was about 70% in '03)? It's a fairly key point, if true...
That's a sharp departure from the 1990s. Similarly, while Minnesota climbed up the state-by-state income rankings steadily during the 1990s, it has been stuck or falling in the income ranks since about 1999.
Er, because our income was already very high in the income ranks (IIRC) in the '90s, perhaps?
No one should give a governor too much blame or credit for these broad trends. The Minnesota economy is dynamic, complicated and mostly beyond the control of any one politician. But Pawlenty came to office promising that he would improve Minnesota's economic performance, and he has held the state to an austere budget regimen to achieve that goal.

The new Minnesota -- with a lower tax ranking and a leaner government -- may yet surpass the Minnesota of the 1990s, but so far its performance is nothing to boast about.

3.7% unemployment is nothing to boast about?

And that number doesn't give anywhere near the whole picture; while some sectors in Minnesota's job market might be lagging (auto manufacturing, I'm suspecting, will be a key one soon), others - health care, information technology - remain superheated and unable to find enough people.

The Strib - all the truth that's convenient for the DFL.

Posted by Mitch at June 15, 2006 06:53 AM | TrackBack
Comments

The Sour Grapes Gang forgot one other factor. How many people are now self employed? Is it possible that a favorable tax environment might just encourage entreprenuerial activity?
You gotta love some one who can't write a paragraph without inserting a "but" into it. They're so easy to understand.

Posted by: Kermit at June 15, 2006 08:16 AM

Kermit, assuming the "now self employed" that you are refering to are legitimately self employed, they would be paying social security, medicare, income tax and would be contributing to State and Federal unemployment funds and wouldn't be accidently overlooked as you seem to be implying.

As the article illustrated, "The unemployment rate went down chiefly because some 9,000 Minnesotans simply stopped looking for work and weren't counted as jobless."

If you want some evidence of that, pick up the newspaper and look at the number of homes for sale on the market and compare with the increase in forclosures and bankruptcy claims.

Granted, it's not proof but it is an indicator.

And I know Mitch hates anecdotal (sp?) information but I know 3 families who lost jobs, looked for 1 year + to find comparable jobs, couldn't find one, settled for jobs making A LOT less, can't afford their house payments (filter doesn't like m-o-r-t-g-a-g-e... Hmmm) and are trying to downsize their homes but are having no luck selling.

If you had a way to look at he under-employment rate in Minnesota, I think you'd find the Pawlenty tax cuts haven't done a whole heckuva lot to deliver the type of economic growth he promised.

Posted by: Doug at June 15, 2006 09:33 AM

Doug said:

Kermit, assuming the "now self employed" that you are refering to are legitimately self employed, they would be paying social security, medicare, income tax and would be contributing to State and Federal unemployment funds and wouldn't be accidently overlooked as you seem to be implying.

Doug, I don't see the connection. Unless I'm missing something, UE rates come from household or business surveys. Someone could be self-employed and be very easily not counted in the business survey, the most historically cited one.

I work for a small company. If you think small business owners don't take in to account tha tax rates when calculating ROI for expansion your mistaken. This might be hard to prove on the macro-state level, but it has been proven, IMO, at the national one with the 2003 tax cuts.

Posted by: JonM in MN at June 15, 2006 10:14 AM

You are correct Jon. There are two surveys, and they almost never cite the Household Survey.

Posted by: Kermit at June 15, 2006 10:23 AM

..."assuming the "now self employed" that you are refering to are legitimately self employed, they would be paying social security, medicare, income tax and would be contributing to State and Federal unemployment funds and wouldn't be accidently overlooked as you seem to be implying."
----------
Simply not true, Doug, for the solely self-employed -- depending on how their business is structured. They pay income tax, that's all. All the rest are payroll taxes. No payroll, no taxes. It is the income tax cuts that have provided the opportunity for the truly self-employed to either expand their business or retain more of their earnings.

Not everyone relies on government for help with their retirement and medical expenses because in both cases, it's a negative return on investment and a collosal waste of money. By contrast, the expansion in self-employment is a net gain for the entreprenuer, income tax revenues, investment, and consumption. A successful business does more for the owner and the economy than the government ever will or ever could, which, in the case of Minnesota, is simply using its tax authority to transfer wealth from the people who earn it independently to the people who do not, but rather depend entirely on the State for services and income.

It's this parasitical relationship that explains the rise in self-employment. You might be confusing the truly self-employed with small business owners, most of which have employees and an entirely different tax structure.

Posted by: Eracus at June 15, 2006 10:35 AM

Eracus, I believe you're wrong.

If you are self-employed and earn anything over $400.00, you are required to pay self-employment tax,

Self-employment tax is a contribution to Social Security and Medicare.

If you are an employee in Minnesota, your employer usually takes care of paying this and yes, it's called payroll tax but if you are self employed, you pay it yourself.

That aside, I think Kermit was suggesting that the people mentioned in the article - people who simply stopped looking for work and weren't counted as jobless - were now actually self-empoyed.

If that were the case, we would see it reflected in tax receipts, new business applications etc. I simply don't see that happening. Instead, it looks like the only thing carrying the burden of funding our State are smokers.

Now, if you want to categorize guys cooking Meth in their grandparents polebarn as self-employed entrepreneurs, sure, there's been a HUGE increase but I don't think they contribute a whole lot to the tax base for the state.

Posted by: Doug at June 16, 2006 08:08 AM

more rain, from the city pages this week:

Now along comes the U.S. Bureau of Economic Analysis to spoil the party. In a report released this week, the Bureau found that Minnesota ranked 44th among the states in economic growth between 2004 and 2005. Nationally, there was a 3.5 percent increase in real gross product over that period; in Minnesota, that figure was a paltry 1.3 percent.

This dispiriting news follows on the heels of a March report from the Bureau that found per capita income growth was increasing more slowly in Minnesota than in all but four other states--Washington, Michigan, Mississippi and Louisiana.

Posted by: Fulcrum at June 16, 2006 09:50 AM

I have been self emplyed for 9 years, some times I have put myself on payroll, other times I just throw the S-corp profits over to my personal income taxes at the ned of the year.

Paying quarterly taxes doesn't help you show up as employed.

It very easy to miss people with small S-Corps like mine.

Posted by: Tracy at June 16, 2006 11:28 AM

In another world, a million parents quit their jobs to take care of their children.

The labor force participation rate falls.

The StarTribune calls this bad news.

Posted by: kb at June 16, 2006 05:43 PM

Tracy, then we would have seen a substantial increase in S-Corps over the last five years.

Posted by: Doug at June 17, 2006 09:50 PM
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