Survey results prompts review of development progress

Mark Schill

A recent study of the region’s mining and tourism sectors produced an unexpected finding: While much of the nation rebounded quickly from the Great Recession, the Duluth-Arrowhead region has lagged.

In terms of jobs, for example, this area added positions at the rate of approximately 2 percent annually from 2005 through 2008 then lost them until 2012. Since then, there has only been a slight rebound. That compares with job growth of 34 percent in Fargo, 30 percent in Sioux Falls and 13 percent in St. Cloud during the same period.

The information is contained in a study called “Forging the Economic Future of the Duluth-Arrowhead Region.” It was prepared for Mining Minnesota, an area association that promotes the development of copper-nickel deposits. Findings confirm the Duluth-Arrowhead region depends heavily on success in both mining and tourism, with mining providing the high-paying industrial jobs and tourism creating an appealing quality of life for visitors and residents. Some of the additional findings, however, challenge existing beliefs.

“Economic growth and creating good jobs is an area of need for the region. Looking at some of the peer comparisons we did in the study, the situation isn’t dire, but it could be better,” said Mark Schill, vice president for research at the Praxis Strategy Group, which prepared the study. He presented a synopsis of the findings April 19 at the Society for Mining, Metallurgy and Exploration conference.

His study found the region’s economy has not kept pace with regional peers such as Fargo and Sioux Falls, despite the lack of outdoor opportunities available in those other cities.

Regional economic developers said they haven’t yet had an opportunity to dig deep into the study’s methodology or its findings. But they noted they intend to examine them further.

“I don’t think we would have looked at this data in the same way that Praxis Group did,” said Nancy Norr, a Duluth Economic Development Authority commissioner and director of regional development at Minnesota Power Co. She added, however, “We’d all be wise to consider questions that arise because of this report.”

Cyclical economy

One challenge in the Arrowhead – said economic developer Brian Hanson, president and CEO of APEX – is that positive local job growth in some industry sectors has been offset by large employment cuts in others. He cited the closure of Georgia Pacific in Duluth as one example. And regionally, several oriented strandboard manufacturers also shuttered plants when new home construction ground to a halt during the Great Recession.

But even industries viewed as growth sectors produced some surprises in the report. Tourism sector growth, for example, was flat in the Duluth-Arrowhead region and has trailed the Great Lakes average of 5 percent in recent years. Nationwide, tourism growth was 14 percent during the study period, which began in 2001.

“Seen by some as a savior of the economy, the tourism sector employs 31 percent more workers in the local region than the national average, but growth in the sector has trailed the Great Lakes average in recent years,” said the report by Praxis, which has offices in Fargo and Grand Forks.

Its data originated from the Quarterly Census of Employment and Wages, current employment statistics, the American Community Survey, Railroad Retirement Board and other sources. The surveyed region includes seven counties – St. Louis, Carlton, Lake, Itasca, Cook and Koochiching, all in Minnesota, and Douglas, in Wisconsin. From 2001 to 2016, overall job growth was almost imperceptible at 1 percent. Only the Great Lakes “rust belt” states of Wisconsin, Illinois, Indiana, Michigan and Ohio performed worse, with no job growth. That compares with 10 percent nationwide.

It’s possible the data tilts toward mediocre Duluth results because some of it was derived from the entire Arrowhead, which includes many rural areas, said Karl Schuettler of The Northspan Group. In a May 2017 report of his own, however, he noted Duluth produces a large number of college graduates having science, technology, engineering and math (STEM) degrees, but the region doesn’t have terribly high employment in those high-paying fields.

“Only two major local industry sectors – construction and private education services – have kept pace with national growth” since the Great Recession, the Praxis report found.

GRP also lags

Among the nation’s metropolitan statistical areas, Duluth is among those having the lowest gross regional product (GRP) growth. At 16.1 percent between 2001 and 2015, it ranked 231 out of 382 MSAs, falling behind metros including Bismarck, Fargo, Sioux Falls, Madison, Eau Claire, Mankato, Grand Forks, Rochester, Wausau, St. Cloud and Appleton.

The report said robust job growth is possible in small metropolitan areas, and that Duluth and the Arrowhead have a strong quality of life, but more good jobs are needed.

“The Duluth-Arrowhead region must improve its economic competitiveness and create more high-paying jobs,” it said, noting that mining jobs pay $81,483.

Hanson said many communities that fared better than Duluth in the survey made a substantial economic development plays in past decades.

“South Dakota made a big move 20 to 25 years go. They made the state an extremely attractive place for the financial services industry. It worked. Sioux Falls is at the top of the list,” he said. Similarly, Fargo benefitted when Microsoft purchased Great Plains Software, a local company, then kept it there, Hanson added.

“Hats off to them,” he said.

It’s important to note that North Dakota has also has benefitted from the petroleum boom, a welcome gift of Mother Nature that can’t be duplicated by economic developers.

Hanson stressed, however, that the Arrowhead region is heading in the right direction, pointing to the aviation sector, which didn’t exist three decades ago.

“These things take time,” he said.

Many developers are anxious to learn more from the survey and examine how to move forward, Norr said.

“I think Recharge the Range is one opportunity to begin a new dialog. That’s hard work and it has to be sustained. There are many players who want to sit at that table,” she said.