Minneapolis' Great Recession rebound

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November 7, 2013 // UPDATED 3:31 pm - November 13, 2013
By: Michelle Bruch
Northeast-based OATI hired 90 people in the last 18 months. The software service provider works with nearly all of the energy companies in the North American power grid.
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Michelle Bruch
Fast-growing firms like OATI helped boost the city

Editor's note: This story is part of our "End of the Rybak Era at City Hall" series. To read the first story in the series — an interview with Mayor R.T. Rybak about his agenda for his final weeks in office — click here.

R.T. Rybak watched the city lose more than 10,000 jobs during the Great Recession. Then he saw the city rebound to recover all of the jobs lost since 2007 and add about 5,000 more, according to the state Department of Employment and Economic Development.

The stats place Minneapolis in the top third of America's hundred-largest cities for its recovery, according to the Brookings Institution's Metropolitan Policy Program.

The Brookings analysis shows that Minneapolis' recovery performance from the trough of the recession to present day is on par with cities like Denver and San Diego. Cities with the strongest recoveries include Austin and San Jose. Other cities like Chicago and New York continue to lag behind other metros in terms of unemployment and depressed home prices. (Minneapolis also ranks below most other cities on home price recovery, with about 70 percent of home value restored since late 2006, according to Brookings.)

"Minneapolis has weathered the recession better than most places, and it's recovered earlier than most places," said Jeremy Hanson Willis, director of Minneapolis Community Planning and Economic Development. "A big reason we came out of the recession faster than most places is our diversified economy and highly-educated workforce."

Siddharth Kulkarni, a Brookings research assistant, said Minneapolis had a pretty standard recession that mirrored the U.S. experience as a whole. Even the dates of improvement are roughly aligned with the rest of the country, he said. Where Minneapolis stands out most is its low unemployment rate, which is now 5.1 percent.

"The unemployment rate at the peak of the recession was two-and-a-half percent less than the U.S. as a whole," Kulkarni said.

Regardless of rosy stats, many people haven't recovered from the recession. North Minneapolis lost a higher percentage of jobs than the city as a whole, and the area was hit with 6,000 foreclosures and thousands of lost residents. In this year's State of the City address, Rybak noted that the gap between white and black unemployment is the largest of America's top 50 cities.

"We didn’t just wake up to this problem," he said in the April speech. "Although most cities aren't actively involved in direct job training, we are, and you can expect my last budget to be just like every one of my budgets: we will continue to invest in putting people to work."

City funding helps adults with job placement, career planning and skills training.

"Since 2002, we have placed nearly 14,000 hard-to-employ and dislocated workers into good jobs," Rybak said in the State of the City speech. "And in 2012, the trainees in our adult program were 81 percent people of color."

A new city program called "Grow North" offers incentives for businesses to locate on the North side. Hanson Willis said the program doesn't have any takers yet, but some businesses are considering a move to North Minneapolis.

While Minneapolis' economic disparity has grabbed headlines in recent years, its success stories have also taken the spotlight.

The International Business Times, a New York-based online newspaper, recently called Minneapolis a "U.S. Economic Icon." The site said the 16-county Minneapolis/St. Paul region has a GDP slightly higher than the countries of Ireland and Portugal.

Minneapolis Regional Chamber of Commerce president Todd Klingel said the city's diverse industries helped prevent the city from sinking as much as other markets. Nineteen Fortune 500 companies are based in the metro. We have strong banking institutions, Klingel said, and a strong high-tech sector. (The Brookings Institution noted that high-tech workers helped drive growth in large cities after the recession.)

Local universities provide another boost.

"The University of Minnesota produces more patents than just about anywhere in the country or the globe," said Hanson Willis.

University of Minnesota technologies produced a record number of startups in fiscal year 2013. They include a smartphone-based breathalyzer and a consortium of Italian companies selling University-developed apples like SweeTango.

Hanson Willis noted that local development is picking up as well.

"Construction is coming back full force," Hanson Willis said. "You can see it by going just about anywhere around town. ... Minneapolis has led the region for several years in construction of new homes."

One of the city's fastest-growing companies is OATI in Northeast Minneapolis, which employs 397, hired 90 in the last 18 months, and plans to hire 500 more in a new Bloomington location.

The company's technology helps facilitate the "smart grid" for North American utility companies. The smart grid encompasses a range of energy sources like the nuclear plant in Monticello or hydroelectric power on the Mississippi River. The OATI system helps route unused power to areas that need it.

"My guess is that we're not a household name," said Mary Brown, executive vice president of OATI. "People are shocked that every time you touch a light from Mexico City, to the lower 48, to the upper provinces of Canada, that power has come through our data center."

About 90 percent of OATI's new hires come from Minnesota, Brown said, in part because homegrown workers are committed to staying here.

Rybak visited OATI last year to stage an announcement on the economic recovery. A press release at the time highlighted the city's work to promote small business development.

"It's where we see the most dramatic job growth," Hanson Willis said. "Small businesses collectively make up most of the jobs in the city." 

Statewide, small businesses were hit harder in terms of employment, said Oriane Casale, assistant director of labor market information for the state Department of Employment and Economic Development. And small businesses have seen lower job growth coming out of the recession, she said.

The city provides loans and technical assistance for small businesses. Hanson Willis said staff even cold-call small shops to see how they can be of help.

Nevertheless, Minnesota has the lowest entrepreneurial activity in the U.S., according to the 2013 Kauffman Index.

"One of the downsides of having so many Fortune 500 companies is its impact on entrepreneurialism, because more people end up working for one of those large companies rather than starting their own business," Hanson Willis said.

He said the metro is lukewarm on the availability of venture capital, which is more plentiful on the coasts.

Minneapolis' employment picture might look quite different in the future. By the year 2020, Hanson Willis said, the Minneapolis/St. Paul region will have 120,000 more jobs than people qualified to fill those jobs. Closing the achievement gap would help — the city only graduates half of its students of color in four years. But even if the city graduated 100 percent of its students and followed up with a couple years of technical skills training, it wouldn't be enough to meet future demand, Hanson Willis said.

"It's starting to paint a picture of a real important problem," Hanson Willis said.

He said it will be crucial for Minneapolis to draw young workers in the coming years. Minneapolis has plenty to offer, he said — bike trails, walkable neighborhoods, arts and culture. A new study by the Georgetown Center on Education and Workforce named Minneapolis/St. Paul the best large metro area for young job seekers, based on its 79.6 employment rate for people ages 21 to 30.

But Minneapolis has plenty of stiff competitors in destinations like Denver and Portland, Hanson Willis said.

"They have a clear strategic plan to go after the same demographics," he said. "We have many assets, but we have tough competition."