The Fundamentals: How Minnesota Measures Up Presented by: Steven G. Cochrane, Managing Director Presented by: Steven G. Cochrane, Managing Director January 14, 2009

2 The Fundamentals: How Minnesota Measures Up Today’s economy in recession Global linkages Driving industries; outlook for job growth Comparative advantages and risks – Diversity of economy – Workforce quality – Productivity and wealth – Cost of doing business – Cost of living

3 Expansion Recovery At Risk In Recession Based on employment and industrial production, November 2008 Recession Status – Metro Areas

4 All Regions are Linked to Global Economy Exports, % of gross state product Sources: ITA, BEA Minnesota South West Midwest Northeast

5 Minneapolis Would Gain From Global Rebound Exports of goods and commodities, % of gross product, 2006 Source: ITA Near average < 3.1% > 10.4%

6 A Diversified Export Pattern for Minnesota % of Minnesota’s total exports of commodities and goods By commodity By destination

7 State’s Driving Industries Go Beyond Exports Wood products – with rebound in housing Medical equipment/technology – requires continued R&D investment Medical services – demand by aging population Banking – must hurdle consolidation Insurance – must get through financial crisis Corporate headquarters – near-term cost cutting 1) High job concentration, 2) Significant size 3) Strong historical growth, 4) Good future prospects

8 Minnesota Long-Term Outlook Close to U.S. Employment, % change year ago Source: Moody’s Economy.com

9 Structural Differences Are Narrowing Diversity index: U.S. = 1.0 Source: Moody’s Economy.com, based on employment by industry CA MN MA AZ SC NC WI

10 Minnesota’s High-Quality Workforce… % of adults over 25 with a college degree, 2000 Source: Census > 26.5% Average < 21.7% U.S. = 24% Minn. = 27%

11 …Faces Persistent and Relentless Competition % of adults over 25 with a college degree Source: Census

12 Minnesota Productivity Near Average Gross product per worker, 2008, $ Sources: BEA, BLS, Moody’s Economy.com >105,000 Average < 89,000 U.S. = 103,000 Minn. = 96,000

13 Minnesota Productivity Growth Just Average Real gross product per worker, annualized % change 1988 to 2008 Sources: BEA, BLS, Moody’s Economy.com >1.7% Average < 1.0% U.S. = 1.6% Minn. = 1.5%

14 Putting Relative Wealth at Risk Over Long Term Net worth per household, 2008, $ Source: Moody’s Economy.com >511,000 Average < 392,000 U.S. = 463,000 Minn. = 466,000

15 Business Costs in Middle of the Pack… Cost of Doing Business Index, Minn. = 98 U.S.=100

16 …As Are Living Costs Living Cost by Metro Area, 2006 Very High, above 120 High, Average, U.S.=100 Minneapolis=100 Low, below 92