Local view: Heading into 2025, Northland economy is at a crossroads – Duluth News Tribune

At the end of 2024, the US economy has demonstrated remarkable resilience. The Federal Reserve’s key interest rate remained at 5.5% at the end of the year, reflecting its restrictive monetary policy. Inflation cooled to 2.6% year-on-year through October, while consumer spending rose steadily, rising 2.8% in the third quarter. Robust employment growth maintained momentum and the unemployment rate was 4.2% in November. Economic growth remained stable at an annual rate of 2.1% in the third quarter, evidence that the Federal Reserve has managed to guide the country into a “soft landing.”

As the national economy hums, the Northland region is at a crucial turning point and faces particular challenges and opportunities.

As an economist with a deep research focus in international economics, I have spent years analyzing how regional economies interact with broader national and global trends. The Northland’s unique location – anchored by industries with significant global connections, such as mining and maritime trade – highlights the importance of understanding the local strengths and international forces shaping our future.

The Port of Duluth-Superior, one of the largest ports in the Great Lakes of North America in terms of cargo volume (as of September, the port reported handling approximately 20.1 million short tons of cargo, 12.9 million short tons of iron ore shipments and approximately 426,606 short tons of grain shipments) remains an economic cornerstone. Modernization efforts reflected in investments in new intermodal facilities, improved port infrastructure and improved digital systems for real-time cargo tracking. The increasing demand for sustainable shipping signals a promising future. Projected growth in grain exports and stable iron ore shipments underscore the port’s critical role in regional trade.

However, global trade tensions and stricter environmental regulations present challenges that require strategic planning and adaptation. The port’s dependence on global markets highlights how international economic policies – from trade agreements to tariffs – can directly impact the region’s economy.

The region’s mining industry, which has contributed about $2.09 billion in real value to the state’s economy since 2023 (a significant increase from the $1.5 billion contribution in 2022), is facing a difficult one Year. Domestic steel demand remains strong, but transitioning to environmentally sustainable practices is no easy task. With the global push for green technologies, Northland has the opportunity to lead the production of key minerals such as copper, nickel and cobalt, which are critical to renewable energy solutions. The global nature of key mineral markets also places Northland at a crossroads where international demand and local sustainability must coexist.

Healthcare continues to emerge as a key regional economic driver, with investments in technology and infrastructure promising significant job growth. The sector is forecast to see a 12.6% increase in employment between 2020 and 2030, creating approximately 59,815 new jobs nationwide. In 2023 alone, Minnesota hospitals hired nearly 14,000 new healthcare workers – but over 45,000 job openings remained, highlighting the ongoing workforce shortage. The expansion of telehealth services is a bright spot, particularly for rural communities, as telemedicine now accounts for 19% of primary care visits and 26% of behavioral health visits. However, to sustain this growth and improve access to healthcare, it remains essential to address workforce challenges.

Tourism in the region continues to thrive, driven by interest in domestic travel and outdoor recreation. The North Shore remains a premier destination, attracting visitors year-round with its breathtaking natural beauty, from the dramatic Lake Superior shoreline to iconic parks like Gooseberry Falls and Split Rock Lighthouse. The region’s emphasis on eco-friendly accommodation and conservation-focused tourism appeals to eco-conscious travelers. At the same time, boutique experiences and curated itineraries address evolving preferences for personalized and memorable stays. But labor shortages (the state’s job opening rate was 5.9% in September, compared to the statewide rate of 4.5% in September) and changing visitor preferences require flexibility and innovation to sustain this growth.

The job market is more complex. While Minnesota has unemployment rates below the national average, 3.4% statewide in October compared to 4.1% nationally, Northland faces hurdles including an aging population and a shortage of skilled workers in emerging industries . Strengthening partnerships between educational institutions and employers is key to closing these gaps.

Housing construction also remains an urgent issue. High interest rates have dampened demand, but a shortage of affordable housing remains, complicating efforts to attract new residents and workers. At the same time, increasing remote working presents an opportunity to attract professionals who want to combine their careers with the natural beauty of the Northland – provided the region invests in digital infrastructure.

Minnesota’s stable financial position, including a projected surplus of $616 million for the 2026-2027 biennium, provides opportunities for strategic investments that could shape the future of the Northland. However, prudent planning will be essential as long-term forecasts predict a potential deficit of $5.1 billion by 2028-2029. Priorities for 2025 should therefore include developing the workforce, modernizing infrastructure, promoting innovation, ensuring environmental sustainability and improving housing affordability.

Finally, the transition to a new presidential administration in 2025 brings an additional layer of uncertainty. Potential changes in trade policy, particularly tariffs, could disrupt export-dependent industries vital to the Northland, including agriculture, mining and manufacturing, and impact operations at the Port of Duluth-Superior. Changes in immigration policy could impact labor availability in critical sectors such as healthcare, agriculture and hospitality, particularly where labor shortages are already a pressing issue. These uncertainties underscore the need for adaptability and strategic planning to ensure the region’s economic stability and growth.

Despite its challenges, the Northland’s future remains bright. The region’s economic potential is immense and is supported by a diverse industrial base and strategic assets. However, the trajectory of this growth will depend heavily on leaders’ commitment to collaboration. Their ability to prioritize common-sense solutions – with a focus on workforce development, infrastructure improvements and housing affordability – will profoundly shape the opportunities available to the average northerner and ensure the region’s prosperity.

Bedassa Tadesse

is a professor of economics in the Department of Economics at the Labovitz School of Business and Economics at the University of Minnesota Duluth. He wrote this at the invitation of the News Tribune opinion page.

OUTLOOK SERIES 2025

This year, the News Tribune opinion page again asked community leaders to look into their crystal balls and share what they expect in 2025. Her columns run from December 26th to January 5th.

TODAY – Economy

December 27th – Business

December 28 – City of Duluth

December 29 – St. Louis County

December 30 – Public Safety

December 31 – Duluth Public Schools

January 1 – Higher Education

January 2 – Minnesota House

January 3 – Minnesota Senate

January 4th – DC

January 5 – Downtown Duluth