Life in the economic middle

Among Minnesota’s five metro regions, St. Cloud is the middle child in many ways. Most obviously, it’s centrally located—an hour northwest of the Twin Cities, where it often labors in the shadows of the larger metropolitan area. Its economy is healthy and growing without having the flash or reputation of being a global health care hub like its sibling Rochester.

But St. Cloud’s economy is doing a lot of the little things well. Since the end of the Great Recession, the St. Cloud economy has seen steady and balanced growth, running in the middle among Minnesota metros. It has also experienced less volatility than Duluth and Mankato, which have faced challenges from changing conditions in the mining and farming sectors, respectively.

Business and community leaders in St. Cloud expressed confidence in the economy and their outlook during an early October trip to the region by Minneapolis Fed President Neel Kashkari. In a live poll during a town hall forum, hosted by Kashkari, two-thirds of respondents described job growth as somewhat or very strong, while only 9 percent described job growth as weak. A quarterly business conditions report in the region also shows that business activity, capital spending, and hiring expectations have been stable and positive for some time, and future sentiment has also been persistently positive.

The drivers of that optimism appear to stem in part from self-reinforcing economic stability. St. Cloud has seen a moderate rebound in housing during the economic recovery. Though single-family permits through September were down modestly compared with last year, building contacts in the region nonetheless report that local firms were very busy.

Job growth in the region has been positive but fairly modest, particularly of late. But that’s not for lack of jobs; hiring demand appears to be strong overall, according to many local employers as well as state data. A major health care provider noted that it had hundreds of openings at its regional facilities. A regular survey by the Minnesota Department of Employment and Economic Development shows that job vacancies have risen steadily since the end of the Great Recession (Chart 1). Despite a small decline in job vacancies this past summer, the region is still near record levels.

One reason for the high vacancies is an unemployment rate that has followed the state trend very closely, falling steadily after the Great Recession and briefly dipping below 3 percent before a small uptick more recently, which was also seen at the state level.

The region is home to significant manufacturing, anchored by firms like New Flyer, a Canadian-based maker of buses with a major, long-tenured production facility in St. Cloud. While New Flyer has been seeing growth, thanks to rising demand for natural gas, hydrogen, and electric buses, the manufacturing industry overall has seen a slowdown statewide and nationwide, which has also touched St. Cloud. This month, appliance maker Electrolux, the fifth-largest employer in St. Cloud, shut down a local plant and laid off more than 800 workers.

Despite events like the Electrolux layoffs, St. Cloud employment would be growing faster were it not for slow labor force growth. The good news is that, since 2000, the St. Cloud labor force has outpaced most of Minnesota’s other metros, with the exception of Mankato. But labor force growth has flattened of late (Chart 2).

There are multiple reasons behind this trend, including an aging workforce and slow population growth—factors seen across Minnesota and the Upper Midwest. Less obvious, however, is an apparent slowdown recently in foreign-born immigration to the region. From 2000 to 2017, the foreign-born population in the St. Cloud metro rose by about 70 percent. Though immigrants represent a still-small proportion of the overall population, they account for a significant share of new growth. Much of the recent immigrant growth is from Somalia and other African countries, with numbers rising from about 1,300 in 2010 to almost 5,000 in 2017, according to state figures.

A significant number of foreign-born residents in St. Cloud—and particularly those from Somalia and other African counties—are refugees, though the exact number or percentage is unknown. Recently, there has been a notable decline in the number of refugees coming to St. Cloud, a phenomenon also seen at the state and national levels. Refugee intake in Minnesota was consistently above 2,000 annually after the Great Recession and trended higher during this period until 2017, when there was a steep drop-off (Chart 3). The same trend has occurred in St. Cloud. In 2016, Benton and Stearns counties took in almost 300 refugees, according to state data, a level that local officials said was a consistent trend. But in 2017 (the most recent data available), refugees to the region numbered less than 100.

The local impact of immigration comes into better focus when discussing future growth of St. Cloud. While the region’s population is still naturally growing (more births than deaths), the growth rate is expected to steadily decline (similar to the state trend) as the region’s population ages. As it does, net migration will be increasingly critical to population and labor force growth. St. Cloud currently sees net outmigration domestically (state to state), according to state figures. This is most likely the loss of baby boomers looking for warmer climates. But that domestic loss is more than covered by net international migration to the region (Chart 4).

Many Somalis and other foreign-born residents work at food processing plants, including a Pilgrim’s Pride poultry plant in nearby Cold Springs. But there is also growing entrepreneurship among the foreign-born population, with grocery, retail, and service businesses.

Local sources noted that there are unique challenges to getting refugees connected to gainful employment, including language and education barriers. Many have lived for years in refugee camps, unable to work or build skills through education. But an extensive array of local services are reportedly available to help refugees make the transition to work, and labor force participation rates among the foreign-born are in line with the overall population. Some local firms, including health care provider CentraCare, have made special efforts to employ new residents to help overcome persistent labor shortages.

The St. Cloud community has come under scrutiny for a reported backlash to the influx of immigrants. But Mayor Dave Kleis, along with others, pointed out that change is always difficult and rarely new. In St. Cloud’s early days, Kleis noted, the community saw significant conflict between its German and Polish populations.

Kashkari met with a handful of foreign-born residents while in town, who acknowledged cultural challenges, but were positive about their overall experience in St. Cloud. One participant taught local ESL (English as a second language) classes, and one of her students said she heard about St. Cloud while in a refugee camp. “People said to go to St. Cloud. People here really feel welcomed.”

Another foreign-born resident noted his experience at a recent community meeting. Planned as a discussion about hate crimes and other equality issues, the meeting was canceled after a group of protesters arrived and safety concerns were raised. This particular Somalia-born resident struck up a conversation with a protestor. “We chatted for an hour,” exchanged phone numbers, and became friends, he said. “We realized we have so much more in common than we do differences. Every day we learn from each other.” As a community, “we can do better, but we’re moving in the right direction.”