Minnesota Economic Indicators

by Dave Senf
April 2011

Note:  All data except for the Minnesota Index, U.S. Index, Minnesota Leading Index, and PMI have been seasonally adjusted.  Minnesota Leading Index data are current through February 2011 while all other indicators are current through March 2011. See the feature article in the Minnesota Employment Review, May 2010, for more information on the Minnesota Index.

The Minnesota Index, a monthly gauge of Minnesota’s economic activity, climbed in March for the16th time in the last 18 months. March’s 0.1 percent increase was down from the previous months’ gains suggesting that the state’s economy lost some speed in March. The U.S. index jumped 0.4 percent continuing a three-month uptick in the national economy. Minnesota’s index rose on the strength of payroll employment gains and declining unemployment, but falling manufacturing hours held down the index’s advance. Minnesota’s index is up 1.9 percent from a year ago while the U.S. index has jumped 2.9 percent since March 2010.

Adjusted Wage and Salary Employment jumped for the third straight month with 2,800 jobs added. Employment growth is off to a good start in 2011 averaging 2,400 jobs for the first three months versus the 900 average per month in 2010. March’s job growth was split evenly between the goods-producing sector and service-providing sector. The pace of hiring picked up in leisure and hospitality, educational and health services, and construction. Job cutbacks were heaviest in professional and business services, financial activities, and government.

Construction employment increased for the second month in a row, which is only the third time since 2006 that construction firms have added workers in two straight months. Job growth in the goods-producing sector has now increased over the last three months. This hasn’t happened since construction employment peaked in early 2006. Minnesota’s unadjusted wage and salary employment was up 0.8 percent from a year ago for the second consecutive month. Over-the-year job growth nationally was 1 percent.

The Minnesota Leading Index dropped in March falling to its lowest level since November 2009. The index is still indicating expansion for Minnesota’s economy over the summer but at a pace lagging national growth. The U.S. index climbed to 1.91 in March while Minnesota’s index dropped to 0.82. This is the biggest gap between Minnesota and the U.S. since May 2007. This indicator’s forecast for Minnesota’s economy over the next six months relative to national growth is less positive than the PMI’s speculation.

The Minnesota Purchasing Managers’ Index (PMI) soared to 67.9, the highest reading in five years. The strong reading points to Minnesota’s economy gaining momentum over the next three months. Minnesota’s index had lagged behind the national and the Mid-American index but roared ahead in March. The employment component for Minnesota’s index however remained below the other two indices suggesting that Minnesota’s job growth will continue to lag behind the national rate in coming months.

Adjusted  Residential Building Permits crashed in March dropping back down to the near bottom volume of 542. March’s 38.6 percent plunge reinforces the bleak state of Minnesota’s home building industry. Builders continue to face stiff competition from a glut of foreclosed properties, a high level of underwater mortgages and home prices that are once again creeping down. Housing continues to trend sideways, and along the bottom, in the state showing few signs of mending anytime soon. Construction employment will remain subdued as long as distressed sales continue to steal demand for new home sales.

Another red flag among March’s indicators is the drop in adjusted weekly Manufacturing Hours. Factory hours trailed off from 41.2 hours per week in February to 40.8 hours in March. Factory workers are working nearly one hour more each week compared to last year, but real paychecks have begun to decline.

Adjusted weekly Manufacturing Earnings dipped in March for the fourth time in the last five months as pay raises have started to fall behind inflation.

Adjusted online Help-Wanted Ads advanced for the sixth straight month inching up 1.2 percent in March. The upswing in online job postings points to a job market that is gradually improving. The pace of hiring in the near term will quicken based on the rising level of online help-wanted ads. Minnesota’s online job postings have increased 40.4 percent from a year ago, while nationwide the postings climbed 22 percent.

Adjusted Initial Claims for Unemployment Benefits (UB) inched down in March to 25,244. Unadjusted initial claims are down 17.6 percent from a year ago but are still above the 23,000 level averaged in 2005 and 2006, the last two years of solid job growth.

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