State revenues continue to come in higher than expected and employment in Minnesota has returned to pre-recession levels, according to the April 2013 Economic Update from Minnesota Management and Budget. That's the good news.
During February and March, state revenues were $145 million higher than expected. This was primarily due to an increase in income and corporate tax collections. Most of these revenues might be one-time, and not due to increased economic activity.
Minnesota continues to do better than the national economy, and employment growth during January and February brought payroll employment in the state to 2.8 million. The state now has 8,000 more jobs than at the start of the recession in December 2007.
Now for the not-so-good news. Economic growth at the national level this year has been much stronger than anticipated, but this will be largely offset by federal sequestration and other concerns. The state's macro-economic consultant expects that sequestration will continue until the end of the federal fiscal year (September 30), and then a "Grand Bargain" will be reached that replaces the sequester with a package of revenue increases and more targeted spending cuts that provide a short-term boost to the economy. The state's consultant assigns a 60 percent probability to this forecast and 20 percent probabilities to more optimistic and pessimistic scenarios. In the more pessimistic scenario, the consultants predict that the country will narrowly avoid another recession.
Much is still unclear regarding the specific cuts that will take place under federal sequestration, and state agencies continue to be in contact with the federal government to ascertain exactly how Minnesota will be affected.