Economist: Minnesota has strong economy amid international uncertainty

Uncertainty and unpredictability under President Donald Trump's administration, including unprecedented international tariffs, have left many Minnesotans worried about their financial futures.

On Friday, MPR News host Tom Crann spoke with economist Andrea Raffo about Minnesota’s economic picture, and how well-positioned the state is to weather chaos.

Raffo is senior vice president and director of research at the Federal Reserve Bank of Minneapolis, but he spoke to MPR News host Tom Crann in a personal capacity.

Below is a transcript of their conversation, edited for length and clarity. To hear the conversation, click on the player above.

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How strong is Minnesota’s economy right now? What’s the big picture?

I would say that we enter this phase of uncertainty on strong footing, both for the Minnesota economy and the U.S. economy overall. Labor market and inflation is making progress toward 2 percent, which is our target.

What economic indicators back up what you’re saying about the state’s economy?

Very low unemployment rate. The labor market is very solid. We kept adding jobs, both at the national level and at the local level. Decent growth in real wages, so a little bit of a catch up after some loss of purchasing power due to the high inflation. But finally, wage growth is actually picking up, so a sign of overall healthy labor market. Very good figures in terms of spending, retail sales, car sales early in the year feel pretty robust now.

JP Morgan has increased the probability of recession to 60 percent, Goldman Sachs has raised their recession probability to 45 percent. What do you make of that? And is Minnesota insulated in any way from that?

Well, those numbers actually vary from institution to institution. So I think that I would take them a little bit with the grain of salt, in a sense that obviously they are an indication that there is quite a bit of uncertainty about the outlook for the U.S. and the global economy, at the moment.

Are you seeing any economic indicators starting to blink either yellow for caution or red for alarm?

Definitely a few yellow, but nothing worrisome yet. Most of the data that we have is largely for the first quarter, so they do not really show the imprint of recent policy announcements.

Given that some of the economic indicators are lagging, what will you be looking for in the weeks and months to come?

This is when we do a lot of outreach. We are also trying to gage a little bit what is happening in the aggregate by using some what we call high-frequency indicators, such as credit card spending, car sales, other type of indicators that we can obtain with the higher frequency than the typical national data … to try to see signs of either slowing in terms of spending or increases in terms of layoffs, in terms of unemployment, and so on and so forth.