Quarterly economic snapshot – Minnesota’s economic performance through the third quarter of 2022

Minnesota’s economy continued to show mixed signals through the fall. Read more here, as we break down key economic indicators through the third quarter of 2022. 

Key findings:

• Minnesota’s real GDP fell by -1.3% in Q2 2022 (latest available data), declining for a second consecutive quarter. While Minnesota has largely followed U.S. trendlines, the state’s economy has grown more slowly than many states, ranking 37th overall in GDP growth since the pre-pandemic peak in Q4 2019. 
   

• Declining workforce participation and historically low unemployment rates continue to create severe hiring challenges for employers. Minnesota’s unemployment rate rose slightly to 2.1% in October, while the state’s labor force participation rate declined for the fourth consecutive month, falling to 68% in October. 
   

• Minnesota’s below-average economic growth rankings may be explained in part by labor availability challenges. Though Minnesota is not alone in workforce declines, the state has suffered the largest setbacks in total labor force availability of any state in the Midwest since early 2020 and stands in stark contrast to other states like Colorado and North Carolina that have grown their total labor supply this decade. 
   

• Despite a cooling economy and hiring challenges, Minnesota employers continued to add jobs in recent months. Total payroll employment increased by 21,700 jobs in August through October, with October seeing the strongest month of job growth in 2022. This puts Minnesota within 41,200 jobs of its pre-pandemic peak.
   

• U.S. inflation slowed slightly to 7.7% in October. The impact of inflation has produced mixed and unusual signals, with consumer and business sentiment plummeting while overall spending and demand has remained stable. 

Minnesota business expansion and investment trends in 2022

Grow Minnesota! collects insights on business expansion trends through one-on-one conversations with business leaders around the state. 

Our visits with business leaders this fall reflect the mixed signals that seem to define this moment in our economy. 

Workforce shortages and economic uncertainty have been a consistent theme in recent conversations. Some businesses described that broader economic uncertainty is leading them - or their customers - to push the pause button on new investments until there is more clarity on the near-term outlook. For example, one industrial distributor told us that after seeing surging sales last year from a strong warehouse construction market, they are now expecting flat growth over the next two years as customers moderate their investments in new buildings. 

Businesses also continue to report significant difficulty filling job openings. 

This may have implications for retention and expansion activities over time. One midsized food manufacturer in Greater Minnesota described that employment demand increased by 30-40% over the past year. However, finding workers has been so difficult - given their location in a small community - that it has caused them to consider relocating to a higher population area in the Twin Cities metro to increase workforce access. 

While these challenges impede growth, they have not stopped business investments altogether. Fifty-eight percent (58%) of businesses visited this year report that they are planning new capital investments, with projects ranging from new equipment purchases to large scale expansions. 

Below are some recent examples of new projects, innovations, and initiatives that will shape the economic landscape in our communities in the months and years to come.  

Cummins drives domestic green hydrogen economy forward with first U.S. electrolyzer manufacturing facility

BUSINESSWIRE: Cummins Inc. (NYSE: CMI) will begin producing electrolyzers in the United States, underscoring the company’s continued dedication to advancing the nation’s green hydrogen economy. Electrolyzer production will take place in Fridley, Minnesota, starting at 500 megawatts (MW) of manufacturing capacity annually, scalable to 1 gigawatt (GW) in the future.
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Minnesota joins three Midwest states to develop multistate hydrogen hub

STATE OF MINNESOTA: Under the MOU, the four states agree to develop a proposal for a Heartland Hydrogen Hub, with the goal of obtaining federal funding from the U.S. Department of Energy’s $7 billion program announced last week to create regional clean hydrogen (H2Hubs) across the country. The funding is part of a larger hydrogen hub program included in the Infrastructure Investment and Jobs Act, approved by Congress and signed into law by President Joe Biden.
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U. S. Steel Celebrates Advancement in Metallics Strategy with DR-Grade Pellet Capability at Keetac

UNITED STATES STEEL: United States Steel Corporation (NYSE: X) (“U. S. Steel”) leadership and employees were joined by Minnesota Governor Tim Walz, other elected officials, and key partners to celebrate the Company’s investment in direct reduced (DR)-grade pellet capabilities at its Minnesota Ore Operations Keetac plant today. The investment marks a step forward in U. S. Steel’s metallics strategy by supplying the increasingly tight DR-grade pellet market and provides the company with the flexibility to feed a potential future direct reduced iron (DRI) or hot briquetted iron (HBI) facility. DRI and HBI are important electric arc furnace metallics inputs.
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Winnebago Industries to Establish Dedicated Research and Development Facility 

GLOBAL NEWSWIRE: Winnebago Industries, Inc. (NYSE: WGO), a leading outdoor lifestyle product manufacturer, today announced the development of a new facility and expanded resources dedicated to innovating next-generation technologies for the recreational vehicle and marine industries. The Winnebago Industries Advanced Technology Innovation Center will focus on incubating and prototyping new technology applications across a wide range of technical and product-feature categories, including alternative energy management and autonomy. The facility will be well-equipped with leading-edge technology and sized to meet the needs of the Company’s outdoor product portfolio.

Development of the Advanced Technology Innovation Center, which will be located in the Twin Cities, will begin in early 2023.
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Mystery Fortune 100 company planning $700M data center in Minnesota

BRING ME THE NEWS: Xcel Energy has put forward another data center project involving a mystery company for construction in Minnesota.

In a letter to the Minnesota Public Utilities Commission, Minnesota's largest electricity provider says it has "several agreements ... to provide electric service to a Fortune 100 Company's enterprise data centers" within Xcel's territory….

Bring Me The News reported in August that CloudHQ has proposed building a $1 billion data center in Chaska, Minnesota.
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Cybersecurity company Arctic Wolf raises $401 million in debt for acquisitions, global growth

MINNE INNO: Arctic Wolf, an Eden Prairie-based cybersecurity firm, announced Thursday that it has raised $401 million in convertible debt…

It's the second $400 million funding deal by a Twin Cities cybersecurity company to be announced this week. On Wednesday, Minneapolis-based NetSPI said it had raised $410 million in growth funding from investment firm KKR.
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Grow Minnesota! – Tools and resources for Minnesota businesses

Below is a round-up of articles and reports to understand economic trends and access key resources to grow and expand in Minnesota. 

Resource spotlight

DEED Webinars and articles on new programs: US Treasury Announces $97 million in additional Small Business Financing: At the end of October, the US Department of Treasury announced that Minnesota had been approved for up to $97 million for small business financing support. The State Small Business Credit Initiative (SSBCI) is a part of the American Rescue Act (ARPA) of 2021 and will include six programs designed to support Minnesota businesses. To enroll in any program, the company must meet the SBA definitions of a small business. Generally, this means less than 500 employees and $7.5 million in annual revenue. 

The SSBCI programs are launching over the course of the next few months, beginning with the Minnesota Loan Guarantee Program. This program will guarantee loans up to $800,000 with a .25% guarantee fee when enrolled by approved lenders. Interested businesses will apply through approved lenders, and the lender application process is in progress. This month, the Growth Loan launched, providing direct loans to eligible seed and early-stage businesses, prioritizing technological innovation. The company must be planning on raising equity to qualify, as the loan amount will be based on 20% of the total amount raised and will range from $100,000 to $400,000. Applications for the Growth Loan Fund will be processed by DEED. 

The new SSBCI will also contain two other loan programs administered by DEED, the Small Business Loan Participation Program and Automation Loan Participation Program. Additionally, there will be two venture capital investment programs, Direct Investment Venture Capital and Multi-Fund Venture Capital, and the University of Minnesota will administer both. Please contact the Grow Minnesota! team at serickson@mnchamber.com to learn more about how you can access these programs.

Other Tools and Resources for Minnesota businesses: