Minnesota Job Outlook

by Dave Senf - david.senf@state.mn.us
December 2011

U.S. Economic Outlook

The frustratingly slow recovery from the Great Recession will continue to stagger on through 2012 if Eurozone’s sovereign debt crisis is contained. If Europe’s banking crisis grows, the fallout is likely to drag the U.S. economy into a recession. The job forecast presented here assumes that Europe manages to minimize the damage, with Europe falling into a mild recession that only modestly impacts U.S. growth. 

The U.S. economy, after losing speed during the first half of 2011, picked up moderately during the second half. The modest uptick is expected to continue through the rest of the year with annual GDP growth for 2011 coming in around 1.8 percent, a downshift from 3.0 percent in 2010. The economy slowed in 2011 as households continued to deleverage, the federal stimulus faded, and state and local governments reduced spending. Businesses ramped up spending on equipment and software but remain reluctant to increase hiring as consumer spending growth remains lackluster.

Consumer spending growth is expected to remain subdued next year as the job picture, while slowly improving, is still weak, preventing any rebound in wages. Receding commodity prices will aid consumers in early 2012, but modest income growth will limit spending. The housing market, no longer a drag on the economy, may even start to aid economic growth, but the bump from home-building will be minimal.

Export growth will slip next year as U.S. exporters face reduced demand from Europe and slower-growing emerging markets. Federal spending will continue to retreat in 2012 as will state and local government spending. State and local government spending will continue to dip as federal aid to state and local government tails off. State and local government payroll numbers will continue to shrink but at a slower rate.

GDP growth is likely to remain in the 2 percent neighborhood in 2012 which will do little to lift the job market. Improvement in the job picture will again be sluggish. Half of the GDP growth will come from increased productivity, leaving job growth for the year below 1 percent. Little if any improvement in the unemployment rate is expected next year as the economy will struggle to grow fast enough to absorb labor force growth. 

Minnesota Job Outlook

Minnesota employers added nearly 38,000 jobs between the third quarters of 2010 and 2011.[1] The 1.4 percent year-over-year increase was the strongest annual gain since the second quarter of 2006 and slightly ahead of the national pace (see Figure 1).  Job growth gradually broadened over the year with only six major industries cutting payrolls. Federal, state, and local government payrolls are lower as are construction, real estate, and utilities payrolls. 

Minnesota’s private sector payroll increased 1.8 percent during the 12-month span, compared to the national 1.7 percent gain. Hiring last year was robust in healthcare and social assistance, food services and drinking places, accommodation, transportation and warehousing, and wholesale trade.

The strongest job market in more than five years pushed Minnesota’s seasonally adjusted unemployment rate down to 6.4 percent in October, the lowest level since November 2008. The national rate has been above 9 percent since June. Minnesota’s unemployment rate, except for the spike from the state government shutdown, has been at least two percentage points lower than the national rate for more than two years now. The number of Minnesota’s employed, as measured by the household survey, has climbed to its pre-recession level whereas nationally household employment remains 4 percent below pre-recession level. The household employed estimate, unlike wage and salary employment estimates, includes self-employed and agricultural employment. Minnesota’s recovery is sustainably ahead of the nation’s recovery when judged by household employed numbers.      

Minnesota’s job rebound will continue over the next 12 months, but the pace is expected to slow. Wage and salary employment will increase 0.8 percent between the third quarters of 2011 and 2012, expanding employment by 22,500 jobs. Job growth in the state is expected to continue to outpace national growth, but nationwide growth is also expected to slip.  Online help-wanted ads for Minnesota jobs have dipped slightly over the last few months but continue to run ahead of national ad levels. Minnesota’s Purchasing Manager Index (PMI), a leading index similar to the national PMI, has flattened out since June but, unlike the U.S. index, has remained safely above recessionary territory. The Philadelphia Fed’s leading index for Minnesota has been running ahead of its national counterpart since June suggesting that Minnesota’s economy will continue to expand faster than the U.S. economy during the first half of 2012.

Unemployment is unlikely to fall significantly over the next 12 months given the expected deceleration in job growth. A year from now the state will have regained roughly 80,000 jobs lost during the Great Recession or right around half of the 158,000 job plunge from the peak in February 2008 to the bottom in September 2009.

Industry Outlook

Most industries are expected to add workers over the next year, but job growth in more than half of the industries will be very modest (see Figure 2). Five industries will cut employment with most job cuts occurring in federal government, retail trade, and information. Job reductions in those industries, however, will be small. The continual downsizing of the U.S. Postal Service will account for more than half of the federal payroll decline.

Employment growth will be concentrated in:

• Healthcare and social assistance
• Food services and drinking places
• Durable-goods manufacturing
• Transportation and warehousing

Construction employment will finally come alive with jobs increasing for the first time in six years. Local government employment is expected to jump despite budget problems since public school enrollment will be increasing modestly reflecting a peak in Minnesota births in 2006 and 2007. Fabricated metal product and machinery manufacturing workforces will expand over the next 12 months helping to offset jobs lost in transportation equipment and furniture manufacturing.

Expanding sectors will add about 24,100 jobs over the next 12 months, but job reductions of 1,600 in the shrinking sectors will leave the state with roughly 22,500 more payroll jobs a year from now.

Occupational Outlook

Even with slower job expansion next year there will still be plenty of churning among occupations as employers adjust their occupational mix, hiring new workers to fill specific occupational needs while at the same time laying off workers in other occupations.  Another key factor in occupational churning is the concentration of some occupations in either expanding industries or shrinking industries. Postal service mail carrier and sorter jobs will be cut next year as the postal service shrinks. Other occupations, like personal and home care aides and registered nurses, will see an increase in jobs since these occupations are concentrated in the expanding healthcare and social assistance sector.

All 22 major occupational groups will add jobs next year (see Figure 3), but four of the groups will add less than 50 positions. Roughly 72 percent of Minnesota’s 783 occupations will add employment but most of the expanding occupations will experience modest growth. Five hundred occupations will add fewer than 100 jobs, and 270 of these occupations will add less than 10 jobs. Job gains will be concentrated in about 60 occupations which, combined, will account for nearly two-thirds of job growth over the next 12 months. A third of all new jobs will be created in just 15 occupations (see Table 1). Job gain is expected to be strongest in:

• Personal and home care aides
• Combined food preparation and serving workers
• Home health aides
• Registered nurses

Approximately 12 percent of occupations are expected to see no change in employment levels. Job losses in these occupations occurring in shrinking industries will be offset by job gains in expanding industries. Job losses will occur in approximately 16 percent of occupations over the year. The 126 occupations expected to shrink in 2012 will lose a combined 3,200 jobs. The combined employment gain of expanding occupations is roughly 25,700 leaving a net gain of 22,500 jobs.

The fastest-growing occupations will increase four to eight times faster than the 0.8 percent rate of growth expected for all employment. The top 15 fastest-growing occupations (see Table 1) will add around 1,500 new positions over the next year which works out to be roughly six percent of all jobs expected to be added during the year.  

None of the fastest-growing occupations are expected to be ranked among the occupations adding the most jobs. Most of the occupations that are expected to add large numbers of workers next year are familiar, having already been identified as occupations that will add the most jobs in long-term projections. Occupations that are expected to add the most jobs are spread across the economy and will increase in numbers as moderate job growth continues to occur across most sectors. 

Job openings related to new job creation, while an important component of the job market, account for a fairly small slice of all job openings available to job seekers. Most job openings are created by employee turnover, which occurs for a variety of reasons. A computer software engineer working at Software Company XYZ takes a job at Software Company ABC for a bigger paycheck. A carpenter switches careers, becoming a middle school industrial arts teacher. Or a 20-something counter attendant leaves a job at a fast-food restaurant for an accounting position after completing a business degree. 

While data limitations preclude reliable estimates of job openings arising from workers switching employers but still working in the same occupation, census data on occupational changes by workers can be used to estimate “replacement” openings. Replacement openings occur as workers leave occupations, not just switch employers. Replacement openings are openings created when workers retire, return to school, or quit a job for health reasons or to assume household responsibilities.

While individuals already in the workforce will fill many of the replacement openings, some job openings will be filled by new entrants to the workforce. The openings not filled by workers already in the workforce are “net replacement openings.” New workforce entrants and individuals reentering the workforce are more likely to land jobs in occupations where employment is growing or with high net replacement needs.

An estimated 61,000 job openings will be generated by net replacement needs over the next 12 months. Total job openings will top 87,000 when job openings from replacement needs are combined with job openings arising from employment growth. Almost all occupations will have some job openings from replacement, including occupations expected to decline over the year. For example, the number of workers employed as telemarketers in Minnesota is expected to shrink by 180 between the third quarters of 2010 and 2011. But 140 net replacement telemarketer openings are anticipated next year.  Occupations expected to have the most total job openings over the next year tend to be occupations that already employ a large number of workers and have high turnover rates (see Table 1).

Detailed occupational and industrial forecasts covering the third quarter 2011 to third quarter 2012 period are available at: www.PositivelyMinnesota.com/apps/lmi/projections/.

For more information on how the forecasts are done including data sources, see the Notes section at: www.PositivelyMinnesota.com/Data_Publications/
Employment_Review_Magazine/November_2009/Feature_Minnesota_Job_Outlook.aspx .

[1]Published CES employment data exclude 22,700 state employees laid off during the state government shutdown in July 2011.
Those jobs are included in the job data used in this analysis.

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