Industrial Analysis

by Jerry Brown - jerry.brown@state.mn.us
April 2009

Monthly analysis is based on seasonally adjusted employment data.
Yearly analysis is based on unadjusted employment data.*

Overview

March brought unwelcome news of substantial additional job losses for Minnesota. On a seasonally adjusted basis the state showed a decline of 22,300 for the month with only one supersector adding jobs for the month, that being an increase of 200 in other services. Three supersectors posted very large declines — 6,700 in manufacturing, 6,200 in professional and business services, and 3,700 in construction. These industry groups have been key to the major declines over recent months. Leisure and hospitality; and trade, transportation, and utilities experienced relatively large declines of 2,000 and 1,900 respectively. March has produced an unadjusted monthly gain of between 0.2 to 0.5 percent in recent years on an unadjusted basis, but the current month showed an estimated loss of 0.4 percent. The level of over-the-year employment decline was up substantially to 98,100 in March. Nine of 11 supersectors showed an annual loss with only educational and health services and government employment showing gains. The largest numeric loss was in professional and business services, down 32,500 jobs in the past 12 months. After five months of very strong reductions, manufacturing posted a year-over-year decline of 30,200. Construction employment was down 20,600, continuing to register the highest rate of 12-month loss on record.

Mining and Logging

A loss of 200 was estimated in mining and logging for March. The loss reflects the start of cutbacks in iron ore mining. Additional losses are expected in the next couple of months. Compared to March 2008, employment fell by 300, a decline of 5.6 percent.

Construction

Construction employment has not experienced a month with seasonally adjusted growth since May 2007. The March loss of 3,700 jobs was the second largest registered during this period, eclipsed only by the massive loss in November. Specialty trade contractors bore the brunt of the declines but construction of buildings was also substantially weaker. Employment is now back to the levels posted in mid-1997. Over the last 12 months employment fell by 21 percent, the highest rate of loss on record. Specialty trade contractors showed a loss of 22.2 percent to produce most of the declines, but all of the component industries were strongly down from a year ago. We are still searching for the bottom of the construction recession. Housing permits for the first two months of 2009 are above last year on the strength of additional permits for multifamily units, and, hopefully, permitting has stopped its steady decline although the number of permits is at this point very low.

Manufacturing

Manufacturing industries posted another very large decline in March marking the 13th consecutive decline and 21st in the last two years. The loss of 6,700 was the second largest experienced during this recession and the third-consecutive decline in excess of 3,000. Durable-goods manufacturing fell by 5,400 as fabricated metal manufacturing and machinery manufacturing were both down very sharply for the month. Nondurable-goods manufacturing lost 1,300 jobs with about a quarter of these in food manufacturing. On a year-over-year basis estimates showed a loss of 30,200 for the supersector with 20,800 of this coming in durable-goods manufacturing. Nearly all of the estimated industries showed large losses including a decline of 2,400 in fabricated metal product, 2,000 in transportation equipment, 1,800 in computer and electronic-product manufacturing, and 1,600 in machinery manufacturing. Nondurable-goods manufacturing experienced somewhat slower losses but still posted a decline of 9,400 with over 25 percent of the loss in printing and related manufacturing.

Trade, Transportation, and Utilities (TTU)

Losses in wholesale and retail trade led to a decline of 1,900 in trade, transportation, and utilities. This was the sixth loss in the past seven months for the supersector as consumers reduce spending in reaction to poor economic times. Wholesale trade was down about 1,200 for the month, the largest monthly loss in recent years. Most of the loss was in durable-goods wholesaling. Retail trade fell by 1,100 for the month with grocery stores substantially weaker for the month. Compared to March 2008 the supersector’s employment was down 17,700, equal to -3.4 percent. All three of the major component industry groupings showed substantial losses. Retail trade showed a loss of 9,200 with declines in every estimated industry except general merchandise stores. Transportation and warehousing lost 6,200 jobs as travel and shipping continued to slump.

Information

Information employment fell by 700 for the month with much of the loss in publishing industries. Over the past 12 months the supersector lost 1,300 jobs. About half of the losses came in publishing industries.

Financial Activities

Weak job growth in insurance carriers — long a key source of job growth — was the largest cause of the over-the-month decline in financial activities. Essentially all the other financial industry groupings showed slightly weaker results as well. The result was a loss of 1,000 for the supersector on a seasonally adjusted basis. Over the last 12 months the supersector was down 1,100 jobs. Large declines in real estate and nondepository credit intermediation were the main cause of the reduction. There were still gains in insurance carriers and depository credit intermediation, but the gains were much reduced compared to previous months.

Professional and Business Services (PBS)

Professional and business services employment showed the second-largest decline over the past month. The main cause of the loss was yet another drop in administrative and support services, which showed a loss of 3,800 from continued decline in employment services. Professional and technical services showed a substantial loss of 1,900 jobs for the month and has not registered a monthly gain since January 2008. On an annual basis the supersector was down 10 percent. Very strong losses were present in administrative and support services with a decline of 18.1 percent, largely caused by employment services. On top of this was a loss of 9,400 in professional, scientific, and technical services including a decline of 3,400 in computer systems design and related.

Educational and Health Services

Seasonally adjusted data showed a loss of 700 in educational and health services with small losses in each of the two major components. The slight loss in private education was the first since July 2008. The loss in health and social assistance was only the second decline since October 2006 for the industry grouping, which has been the source of the strongest and most consistent employment growth for many years. This fact is clearly present in the measure of annual growth. Educational and health services is the only private industry supersector that still shows growth compared to a year ago. The supersector posted an increase of 16,000 compared to year-ago data, the result of strong gains in both educational services and in health care and social assistance, with growth rates of 4.4 percent and 3.6 percent respectively. Ambulatory health care services was the area with the strongest growth, adding 5,100 over the past 12 months.

Leisure and Hospitality

A March decline of 2,000 in leisure and hospitality was largely reflected in a loss of 1,300 in arts, entertainment, and amusement, although accommodation and food services also posted a loss of 700. The supersector was down 11,400 jobs compared to last year —equal to -4.8 percent. The supersector has continued to weaken since taking a nose dive in November. The major cause for the increased loss has been arts, entertainment, and recreation, which was down 12.6 percent over the year. April, May, and June are the critical months for seasonal summer hiring in arts, entertainment, and recreation. We will soon know whether summer hiring will also be below usual levels or if it will gain back some of the losses experienced over the winter.

Other Services

There was very little change in other services employment for the month as estimates showed a seasonally adjusted monthly increase of 200. On an annual basis the supersector posted a loss of 1,300.

Government

Employment fell by 300 for the month in government following two tumultuous months. Employment is at approximately the levels of early fall 2008, indicating that the large changes in recent months were essentially caused by somewhat altered seasonal employment changes. Compared to last March, government employment is up 0.5 percent with all of the growth coming in local government. State government showed an annual loss of 500 with all the loss in state government education.

* Over-the-year data are not seasonally adjusted because of small changes in seasonal adjustment factors from year to year. Also, there is no seasonality in over-the-year changes.