Shortly after Laura Kalambokidis became Minnesota state economist in 2013, she told a Star Tribune reporter that she was interested in the gap between what economic data says and how people perceive the economy.
Ramstad: After 11 years as Minnesota’s state economist, Kalambokidis leaves the post
She learned a lot by working with people who make big decisions about money.
The Minnesota Star Tribune
June 5, 2024 at 9:59AM
“Any time you look at averages of numbers, that can mask the differences within the group,” Kalambokidis said at the time.
A lot has changed in Minnesota’s economy since 2013. One thing that hasn’t, however, is that people don’t ever quite believe it when the economy is good.
On Monday, Minnesota Management and Budget announced Kalambokidis is stepping down from the economist job later this month and returning to her teaching roles at the University of Minnesota and its extension service. She will be succeeded by Anthony Becker, who has been an economics professor at St. Olaf College since 1987.
In an interview on Tuesday, Kalambokidis said she’s still fascinated by the difference between economic data and people’s perceptions about the economy.
“When we’re doing our analyses and constructing our forecasts, we’re very much in the weeds of our data and our models,” she said. “I like to come up out of the weeds and learn how other people are perceiving the economy, or are perceiving the budget or the forecast, and see how that helps me in my modeling.”
For one thing, economic data, though often portrayed as fresh and immediate, is the product of research that can happen weeks or months before the result is announced. For instance, Minnesota’s top-line economic growth figure, its GDP, is announced three months after the period it covers.
“When I’m talking to someone who, in earnest, tells me they’re seeing things differently than what I’m saying the data say, I want to know why. Is there something I’m missing?” Kalambokidis said.
“It’s possible because economic data show up with a lag. A business person or taxpayer or a legislator might be seeing something on the ground that I haven’t seen in the data. So I do want to figure out that disconnect,” she added. “Or it might be they’re missing something and I can help them see the bigger picture.”
The way people get information about the economy has also changed, Kalambokidis said, “because of the way all the media has changed.” She more frequently has to probe for where people are getting their information.
Kalambokidis began her career working on tax policy for the U.S. Treasury Department. She’s been explaining difficult concepts to people with little understanding of them ever since.
In the state economist job, Kalambokidis and her team at MMB twice a year developed a forecast for Minnesota’s economy. It shaped the budget office’s forecast of the state government’s finances, which held enormous sway over the agenda of the governor and legislators.
She routinely joined the MMB commissioner and the state’s controller in the announcement of that forecast, then fielded questions from reporters and, at later hearings, legislators.
To be embedded in a government agency where budgets are made and debt is managed, she said, was “a rare opportunity for an academic economist.”
She told me her “favorite assets” of Minnesota’s economy — its diverse employment base, highly educated workforce, high labor force participation and high number of corporate headquarters — have not changed over the past 11 years.
The biggest change is that labor has become tight, due chiefly to the aging and retirements of the baby boom generation. Kalambokidis recalled that she began mentioning the changing labor situation in speeches as far back as 2016. She routinely asked business owners and executives about hiring for years before the pandemic made the situation even more visible.
“Those conditions were in play, then we had this enormous disruption in 2020 and people continued to age,” Kalambokidis said.
“The pandemic was obviously the biggest thing over the last 11 years, and it happened along with this other big important change that started a while ago,” she added. “Labor supply will continue to be an important challenge for Minnesota going forward.”
It has not yet been a challenge to the finances of the state of Minnesota, a fact that, while I’ve come to understand it, is still surprising to me. Indeed, Minnesota’s state revenue experienced a jump in 2021 and 2022 that no one saw coming and that paved the way for the Legislature to boost spending in the current biennium by around 37%.
Kalambokidis a year ago helped me explain to Star Tribune readers what happened. On Tuesday, she said people who want to understand the state’s finances should watch the corporate tax figures and the capital gains-related collections in personal income tax.
“Look for the usual suspects,” she said. “Those are the sources of revenue that are most volatile.”
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