Minnesota Economic Indicators

by Dave Senf
August 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 June 2011 while all other indicators are current through July 2011. See the feature article in the Minnesota Employment Review, May 2010, for more information on the Minnesota Index.

The Minnesota Index climbed for the 13th straight month in July despite headwinds created by the state government shutdown. The 0.2 percent advance matched the U.S. increase but was down a notch from June’s 0.3 percent gain. Minnesota’s index is up 2.1 percent from a year ago, suggesting that Minnesota’s economic activity has expanded by 2.1 percent over the last 12 months. The 2.1 percent gain ranks 21st among states and lags slightly behind the 2.4 percent increase recorded by the U.S. index. North Dakota’s economic growth tops all states, jumping 8.3 percent over the last 12 months.

The state government shutdown produced a record-setting 19,800 job decline in adjusted Wage and Salary Employment in July, topping the 16,500 job loss recorded in March 2009. Job numbers should look a lot better in August as 22,700 of the 28,000 government job decline in July was a direct result of the shutdown. July’s drop was a reversal of the 18,600 jobs added in June.

July’s private sector job growth was solid for the third consecutive month with five private supersectors adding more than 1,000 jobs each.  Manufacturing employment spiked by 3,500 jobs, the largest monthly jump in more than 20 years. Job growth was also upbeat in professional and business services and in financial activities. Job cutbacks occurred in three private sectors with construction cutting payrolls the most.

Unadjusted job growth over the year fell to 0.5 percent but when adjusted to include the state government employees laid off during the shutdown, July’s growth jumps to 1.4 percent, matching June’s over-the-year job growth.  Minnesota hasn’t had two months of over-the-year job growth above one percent since mid-2006. Over-the-year job growth averaged 1.0 percent for the U.S. during the last two months.

The Minnesota Leading Index rose to .81 in June after four straight months of tailing off. July’s advance is encouraging as the index is designed to predict the health of Minnesota’s economy six months down the road. The upswing in June implies that Minnesota’s economy may accelerate a little over the next few months. The signals on the direction of Minnesota’s economy for the rest of the year are mixed.

The Minnesota’s Purchasing Managers’ Index (PMI) slipped to its lowest reading since last December in June before rallying a bit in July. The 57.5 reading in July points to continued growth for Minnesota manufacturers through the rest of the year, but expansion is likely to be slower than earlier in the year. Minnesota’s index was significantly above the U.S. and Mid-America indices suggesting that job growth in Minnesota may stay ahead of the national pace during the rest of the year.   

Minnesota’s home building industry continued to bounce along the bottom over the last two months even though adjusted Residential Building Permits climbed in both months. The upswing in building permits in June and July pushed building permits to 784, but the increase was from a record low in May. Minnesota’s home building industry hit bottom in early 2009 and has been stuck there ever since.

The downward trend in adjusted weekly Manufacturing Hours continued in July with the factory workweek sliding 0.7 percent in July. The fall off in manufacturing hours is inconsistent with the uptick in manufacturing hiring during the last few months. The drop off, however, is consistent with a slower expansion rate for manufacturing through the end of the year.

Adjusted weekly Manufacturing Earnings rose 0.8 percent in July, the largest hike since last October, but are still down from last year. July’s inflation-adjusted but seasonally unadjusted factory paycheck of $760.98 is 0.7 percent short of last July’s paycheck.

Adjusted online Help-Wanted Ads nose-dived in July, sinking 7.1 percent.  The drop was the largest since January 2009 when labor demand collapsed as businesses responded to the Great Recession by ramping up layoffs and curtailing hiring. Online help-wanted ads have declined for two straight months nationally including a 5.0 percent decline in July. Online job advertising is up 33.8 percent from a year ago in Minnesota compared to 12.1 percent nationwide.  

Adjusted Initial Claims for Unemployment Benefits (UB) skyrocketed in July as state government employees pushed initial claims to an all-time high of 47,773. Initial claims should head back down toward 25,000 in August which is right around the level associated with annual job growth above 1 percent.

Top