Minnesota Economic Indicators

by Dave Senf - david.senf@state.mn.us
December 2009

Note: Except for the Minnesota Labor Market Index, the U.S. Labor Market Index, and the PMI, all over-the-year data are seasonally unadjusted. The most recent data available are for October 2009.

 The Minnesota Labor Market Index took a step backward in October sliding 2.2 percent to 113.5. A sharp jump in seasonally adjusted initial claims sent the index tumbling even though adjusted wage and salary employment and adjusted weekly manufacturing hours advanced. Adjusted initial claims nationally continued to decline, pushing the U.S. index up for the second straight month despite adjusted wage and salary employment declining for the 22nd straight month. The U.S. index climbed 0.3 percent in October.

Both indexes appeared to have turned a corner in June, but neither index has managed to generate much upward momentum. The worst is over, but Minnesota’s recovery, like the U.S. recovery, will not be quick or smooth, with setbacks likely over the next few months. Minnesota’s index is down 17.3 percent since December 2007 while the U.S. index is down 21.1 percent.

Seasonally adjusted Wage and Salary Employment in October rose for the second time in four months as Minnesota’s employment expanded by 5,000 jobs. October’s 0.2 percent job increase was concentrated on the service-providing side as goods-producing payrolls were cut by 3,400 workers while 8,400 service-providing workers gained employment. The biggest cuts were in trade, transportation, and utilities, in manufacturing and in other services. Hiring was strongest in professional and business services, leisure and hospitality, educational and health services, and government.

Over-the-year job decline in Minnesota using unadjusted employment data was 3.9 percent or 108,000 jobs in October. The national over-the-year job drop was also 3.9 percent or 5.4 million. The 108,000 jobs lost in Minnesota between October 2008 and 2009 are about 2 percent of national job loss, which matches Minnesota’s share of the nation’s population and employment.

Adjusted Business Incorporations in October dropped 9.1 percent to 610, a 27-year low. Formations of limited liability companies, which aren’t counted in the business incorporations number, have become the most popular method of business organization. October’s limited liability registrations were up 24.3 percent from a year ago.

Minnesota’s Purchasing Managers’ Index (PMI) inched up in October to 55.9 indicating that the state’s manufacturing activity is continuing to rebound and is likely to continue to increase into 2010. The employment component of the index has improved since the summer but is still stuck in the mid-40s suggesting that no sustained acceleration in manufacturing hiring is around the corner. Companies will increase the hours worked by current employees before adding new employees.

Seasonally adjusted Residential Building Permits spiked 46.1 percent to 811 in October, but home-building activity remains stalled at near record lows. Low mortgage rates and the federal homebuyer tax credit have helped boost home sales, but the inventory of unsold homes remains high hampering demand for new-home building. The home-building recovery, after hitting bottom during the summer, is remaining near the bottom far longer than after past recessions.

Adjusted weekly Manufacturing Hours jumped to 39.8 hours in October as manufacturers responded to rising orders by increasing output via longer work days. The state’s manufacturing resurgence is in its early stages with weekly factory hours still significantly below the historic non-recession weekly average of 40.7 hours.

Adjusted weekly Manufacturing Earnings have been surging for five months including October’s 1.5 percent jump. Wage cuts instituted during the worst of the recession are being restored and, along with longer hours, are creating fatter paychecks. Unadjusted manufacturing earnings are up 6.5 percent from a year ago, the highest annual hike since June 2006.

Adjusted newspaper Help-Wanted Ads slipped again in October retreating for the fifth straight month. Almost all help-wanted activity has moved to the Internet. Online help-wanted ads in Minnesota, as reported by the Conference Board, Inc., jumped 4.5 percent in October while declining 2.5 percent nationwide. Online help-wanted ads in Minnesota and nationally have been relatively flat over the last six months as employers remain reluctant to increase hiring until the recovery gains some strength.

Adjusted Initial Claims for Unemployment Benefits spiked unexpectedly 12.3 percent to 9,124 in October. Part of the rise is related to some data oddity, but the uptick underlines how the labor market is lagging behind other measures of the economy. The layoff rate remains elevated as evidenced by the 45.5 percent jump in unadjusted initial claims from a year ago.

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