Increasing Uncertainty in a Resilient Economy

Before we dig into the economy, I want to celebrate the beautiful weather together in downtown Saint Paul this upcoming weekend, with the Ordway’s annual Flint Hills Family Festival weekend, which begins Friday, May 30 and Grand Old Day, coordinated by our partners at the Grand Avenue Business Association, on Sunday, June 1.  I hope to see you there!
 
Today’s title comes from a recent article by the Minneapolis Fed. At a “Fed Listens” event in Detroit Lakes, Chair Neel Kashkari heard directly from business owners and community leaders. The message? The economy remains resilient, but uncertainty is creeping in As Kashkari put it, there’s a “nervousness around the edges”.
 
That same theme emerged during our May Lunch with Leaders, presented by Wells Fargo, where I spoke with Ryan Nunn, research economist at the Minneapolis Fed. He offered an insightful distinction between “hard data” (backward-looking, quantitative) and “soft data” (forward-looking, qualitative). The hard data says we’re strong. The soft data? Less certain.  
 
Key data points – Strengths and Strains

• Unemployment remains low: 4.2% nationally, 3.2% in Minnesota – both below the natural rate, adding inflationary pressure.
• Labor force participation is recovering: 62.6% nationally, 67.7% in Minnesota – approaching pre-COVID levels.
• Housing costs remain high: the average rate on a 30-year mortgage in the U.S. increased again last week to 6.86%, with surging costs of homeowners insurance compounding the pressure. Homebuying remains sluggish, with the slowest April pace since 2009.  
• Construction slowdown is notable: Despite strong rental demand, pre-construction activity in the Twin Cities signals a looming downturn -  more so than in Greater Minnesota or neighboring states.
• Federal policy uncertainty: is creating unpredictability in economic forecasting and markets alike.  

 
The Upside: Business Momentum

• Minnesota saw billions of dollars of expansion projects in 2024.  Here is a detailed list of Business Expansions in Minnesota, including 3 specifically in Saint Paul.
• Ecolab proposes an expansion of its Eagan R&D campus, which represents 1,000 jobs.
• In Saint Paul, Dark Horse Bar & Eatery is coming back under new leadership from the Eclective Creative Collective (owners of Can Can Wonderland and Saint Paul Brewing).
• Also in Saint Paul, much work is underway around redevelopment opportunities. The Port Authority, City/Saint Paul Downtown Alliance/Downtown Development Corporation, as well as strongly capable private developers are working on some exciting projects that lay a foundation for a stronger downtown core.

 
My Take
The U.S. economy was impressively robust in 2024, and consumer confidence was strong. Inflation has dropped to 2.3% as of April 2025. But uncertainty, the “nervousness around the edges” – fueled by trade policy, monetary shifts, and softening consumer sentiment – is rising. In these moments, we must return to the basics: revenue diversification, reducing debt exposure, building cash reserves, and taking care of our people (both employees and clients).
 
We are standing at the intersection of economic potential and risk. Now is the time for clarity, discipline, and optimism grounded in action.

See you in the trenches,
B

Chamber Check-in 5/27/25