Minnesota Economic Indicators

by Dave Senf - david.senf@state.mn.us
December 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 October  2011 while all other indicators are current through November 2011. See the feature article in the Minnesota Employment Review, May 2010, for more information on the Minnesota Index.
 

The Minnesota Index slipped for the second consecutive month as declining wage and salary employment and waning average weekly manufacturing hours offset the state’s falling unemployment rate. The 0.6 percent drop over the last two months is the largest two-month decline since May–July 2009.   Revisions to employment data that will occur in early 2012 may shrink the index’s decline, but until the revisions occur the downward direction of the index warrants attention. The recent decline indicates that Minnesota’s economy, after expanding in all but two months between September 2009 and September 2011, has suddenly contracted sharply over the last two months.

The state’s recovery from the Great Recession was running ahead of the national recovery until the last four months. The U.S. index climbed 0.2 percent in November while the Minnesota index tumbled 0.3 percent. Minnesota was one of only five states with a declining index in November.

Minnesota’s adjusted Wage and Salary Employment fell for the third straight month, declining 0.5 percent. The 13,700 job reduction in November was the largest since June 2009. The state hadn’t lost jobs in three consecutive months since July–September 2009. Job reduction was widespread with only educational and health services expanding payroll numbers. More than half of the job loss was in leisure and hospitality and in government. Job reduction was also strong in manufacturing, construction, and professional and business services.

Over-the-year job growth, using seasonally unadjusted employment numbers, continued to tail off, dipping down to 0.3 percent. That is the lowest annual rate since April. National over-the-year job growth was 1.2 percent in November.    

The Minnesota Leading Index was down slightly in November but remains securely at a level suggesting that Minnesota’s economy will accelerate over the next six months. The leading index fell between May and July, warning of the soft patch that Minnesota’s economy appears to be experiencing during the last few months. Hopefully, the index’s uptick over the last few months is correctly signaling a pickup early next year.

The Minnesota’s Purchasing Managers’ Index (PMI) dipped slightly in November, inching down to 54.7. November’s reading is the lowest since last December. The index has been drifting downward since reaching a five-year high in March but has remained well above the growth neutral level of 50. Minnesota’s Purchasing Managers’ Index’s above-50 reading over the last few months suggests that Minnesota’s economy is still expanding which is at odds with the Minnesota Index.  

  One positive indicator in November was a jump in adjusted Residential Building Permits to 931. This was the highest level since January, offering a sliver of hope that the home building industry will show some signs of life next year.

Adjusted weekly Manufacturing Hours plunged in November, tumbling by more than an hour to 39.5 hours a week. This is the shortest factory workweek since November 2009 and the first month with less than 40 hours a week since March. November’s plunge was the fifth steepest percent decline in the 41-year series. The plunge is definitely a red flag if factory hours don’t rebound quickly over the next few months.

Manufacturing Earnings also plunged in November to $760.22. Manufacturing paychecks are down 5.7 percent from a year ago in real terms which translates into waning household spending.

Minnesota’s adjusted online Help-Wanted Ads slid for the third month out of the last four months in November, dropping 6.1 percent. Online job ads nationwide fell for the sixth straight month, falling 1.9 percent. There is some inconsistency in the relationship between job growth and online help-wanted ads as reported by the Conference Board, Inc.  Minnesota’s level of online help-wanted ads has easily outpaced the U.S. level, yet national job growth has outpaced Minnesota job growth. U.S. online help-wanted levels have decreased for the last six months, but job growth has picked up.

Adjusted Initial Claims for Unemployment Benefits (UB) inched down in November falling to the second lowest monthly average in three and a half years. The lower level of initial claims indicates that layoffs have moderated and is a positive sign that job growth should rebound soon.

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