In the first quarter of 2024, Minnesota was one of ten states where the economy shrank

Last week, the Bureau of Economic Analysis (BEA) announced that while “Real gross domestic product [GDP] increased in 39 states and the District of Columbia in the first quarter of 2024,” Minnesota was one of the ten states where it shrank, as Figure 1 shows. While “real GDP for the nation grew at an annual rate of 1.4 percent,” the BEA writes, in Minnesota it fell by 0.8%.

Figure 1:

Figure 1 strongly suggests that there is some regional component to this, as the worst performing states were mostly found in the Midwest. The BEA notes that:

Agriculture, forestry, fishing, and hunting, which increased in 34 states, was the leading contributor to growth in 6 states…In contrast, this industry was the leading offset to growth in 9 states including South Dakota, North Dakota, Kansas, Iowa, Nebraska, and Illinois, the states with the largest decreases in real GDP.

This is also the case for Minnesota, where real GDP in the category “Agriculture, forestry, fishing and hunting” shrank by 19.1% from 2023:Q4 to 2024:Q1, compared to a decline of 0.4% nationally. The Star Tribune reports that:

Prices for key regional crops — including corn, soybeans and wheat — were down in the first quarter, according to the U.S. Department of Agriculture. Crop losses due to heavy rains and flooding this spring and summer could worsen the situation in coming quarters.

“These weather disasters certainly don’t help,” [BMO Capital Markets chief U.S. economist and managing director Scott] Anderson said. “Sometimes they can if it cuts supply enough that prices stabilize, but I’m not seeing any evidence of that. … The more we have to cope with climate change and these once-in-500-year floods, this is something we’re all going to have to learn how to navigate.”

This was the sixth consecutive quarter where the rate of growth of real GDP per capita in Minnesota lagged the United States generally, as Figure 2 shows.

Figure 2: Change in per capita GDP

As a result of this, Minnesota’s per capita GDP dropped below that of the United States generally for the first time in the second half of 2023, and ranked 17th for the last three quarters, down from 13th as recently as the second quarter of 2021. In 2024:Q1, per capita GDP in our state was $504 below that of the United States generally, the highest deficit on record, as Figure 3 shows.

Figure 3: Minnesota’s ‘premium’ in per capita GDP over the United States, $2017

This reflects the fact I pointed out last year, that per capita GDP has grown more slowly in Minnesota than nationally in every year since 2014. It continues to do so.