Brainerd: When is a recovery a recovery?

Lake home
This $2 million lake home is being built on Pelican Lake near Nisswa, Minn., about 15 miles from Brainerd. Unlike other construction projects, the budget for this one actually went up. The homeowners requested a number of expensive upgrades, such an exterior made of real ledgerstone.
MPR Photo/Annie Baxter

In Brainerd, Minn. the unemployment rate catapulted to 21 percent earlier this year -- the highest spike among Minnesota's large cities.

If you're familiar with the Brainerd area, you probably know it as a destination for tourists. The scores of nearby lakes are teeming with resorts, each vying for guests.

And Twin Citians have flocked here to buy second homes from eager builders and real estate agents.

Commercial and residential construction projects tied to the lake culture here once fueled a robust building industry.

It used to be that the roar of power tools competed with the sound of waves lapping against the shorelines of area lakes. But lately, you mostly just hear the waves.

For one of the major homebuilders in this area, Kuepers Inc. Architects and Builders, demand for lake homes, as well as commercial projects, started to tilt downward a couple years ago.

Electricians
Toby Wooden, left, a journeyman for Evergreen Electric and A.J. Ysen put the finishing touches on an expensive lake home bathroom in Nisswa, Minn. on Pelican Lake. The electricians say once the house is completed, they're worried about their workflow. They have very few projects on the docket this winter.
MPR Photo/Annie Baxter

Steve Kuepers is the executive vice president of the family-owned business. He says by the fall of 2008, it was clear that there was serious trouble in the company -- and the industry as a whole.

"That's when you started seeing the layoffs, you started seeing suppliers close up. So there was a lot of turmoil and stuff that way," said Kuepers.

At the peak of the market, the Kuepers had 170 workers pounding nails and pouring concrete. But once customers became skittish about the future and backed out of projects, the Kuepers had to lay off nearly half their workforce.

The Kuepers and other builders were at the epicenter of the downturn in the Brainerd area.

"If we're focusing on job losses, I think construction is where we've lost the most," said Nate Dorr, a regional labor market analyst with the Minnesota Department of Employment and Economic Development.

New construction
Kuepers Inc. Architects and Builders executive vice president Steve Kuepers and marketing director Leah Heggerston at a construction site in the town of Baxter, a town neighboring Brainerd. Behind them, forklifts claw at the earth, breaking ground on new townhomes.
MPR Photo/Annie Baxter

According to DEED statistics, construction jobs are some of the most economically important in the Brainerd region in terms of the number of people employed and the wages they're paid.

So that means when a worker's drill goes silent due to a layoff, the stakes are higher in these parts than for the state as a whole. As recently as September, those devastating construction layoffs continued at a brisk pace.

"Specialty construction trades like tiling, roofing, siding, that's sort of the same as residential. They're not getting back to work as fast as they want to," said Dorr.

But the picture is changing for Steve Kuepers. He says after a bruising couple of years, business is starting to pick up.

"Starting in probably July or August of this year, we started to see kind of a stabilizing effect," said Kuepers. "People starting to move forward on projects, both commercial and residential."

Resorts
Billboards along Highway 371 in Baxter, Minn., advertise for some nearby resorts.
MPR Photo/Annie Baxter

The Kuepers are getting enough new business to ramp up their staffing. They've rehired 14 crew members temporarily. Steve Kuepers hopes to make them permanent, but first, he also wants to be sure that the worst times are fully behind the company.

When asked if he thinks the economy is in recovery mode now, Kuepers laughed and said he's not sure.

"Come ask me for this interview in the spring. We'll see how it's going. If it's going the way it's been going for the last four months, I'll have a huge smile on my face, and I'll tell you, 'No problem. We definitely were at the bottom,'" said Kuepers.

Kuepers is cheered by the fact that some clients are moving ahead with plans for lake homes, after slamming on the brakes last year. And in one encouraging case, the client has been adding to the construction budget rather than scaling it back.

Workers are putting the final touches on that project -- an expensive home on Pelican Lake, about 15 miles northwest of Brainerd. The homeowner initially asked for a $1.5 million home and then spent another $500,000 on upgrades, including pavers lining the driveway.

Downtown Brainerd
Downtown Brainerd, Minn. The city relies in part on tourism to drive its local economy.
MPR Photo/Annie Baxter

Kuepers feels reasonably confident he'll build more homes like this as the economy improves.

But some of the independent contractors on this project are not as upbeat. Toby Wooden, an electrician, doubts that tomorrow will be a better day.

"So far we've been getting by, but that has been coming to a brunt. The winter's going to be slow," said Wooden.

Slower than last year even, says his colleague Mike Nolan. And things were already bad then.

"What we have on our workboard at this time compared to last year is a lot less," said Nolan.

Not only is there less work, but the jobs they can find tend to be hours away from home.

Experts say the construction industry's woes definitely account for a lot of job losses in the Brainerd Lakes region, and quite likely in the town of Brainerd itself.

But construction alone probably doesn't explain Brainerd's huge spike in unemployment. The city's jobless rate swelled to 21 percent in January 2009, the biggest spike of Minnesota's largest cities. By contrast, the jobless rate of the area surrounding Brainerd peaked at 13 percent.

Labor market analyst Nate Dorr says Brainerd's rate might have climbed higher because of demographics and the largely rental-based housing stock of the town.

"You have lower-income housing, you have people with less skills and maybe lower-wage jobs that are more likely to be laid off," said Dorr. "So the people that reside in Brainerd, and this is my theory, are more likely to be unemployed."

Brainerd's jobless rate has since dropped considerably. But it's still more than 12 percent, which is a lot higher than what's normal for this time of year.

Experts say regardless of the specific causes of Brainerd's own peculiarly high rate, the area as a whole won't recover until construction bounces back.

That's also the view of carpenter Mike Shanks. On a Friday afternoon at a bar in Brainerd, he delivers his assessment of the area's economy from his perch on a barstool.

"Until the housing market comes back, there's going to be a lot of people that aren't going to be able to make freaking anything. I'm serious," said Shanks.

Among those who won't make ends meet without a housing recovery, Shanks includes himself.

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