Industrial Analysis

by Jerry Brown - jerry.brown@state.mn.us
February 2009

Monthly analysis is based on seasonally adjusted employment data.
Yearly analysis is based on unadjusted employment data.*

Overview

Employment took yet another nose dive in January, down 20,700 jobs for the month. In the past three months employment is off 53,200 jobs, an average monthly loss of 17,700. The most serious losses came in Manufacturing, which was down 9,600 jobs. Substantial declines were also present in Professional and Business Services (5,900) and Government (3,900). Educational and Health Services added 1,400 jobs. For all industries there was an annual loss of 74,900. The largest annual declines were in Professional and Business Services (25,600), Manufacturing (21,500), and Construction (17,600). The Minnesota Business Conditions Index fell to a record low of 30.1, well below 50, the indicator of growth neutral. The release of January 2009 estimates coincides with the completion of our annual benchmark process during which time a number of months of estimated data are replaced with administrative data collected as part of the Quarterly Census of Employment and Wages, and the remaining months are re-estimated from this new level. Data from April 2007 forward was affected by this process.

Mining and Logging

There was no change to Mining and Logging employment in January. Over the past year employment is down by 200 with the loss occurring in mining industries. Employment will drop further in coming months as U.S. Steel announced February 19 that it would lay off about 600 employees at its Minntac mine in Mountain Iron.

Construction

Construction employment fell by 1,600 for the month. The losses were mainly from specialty trade contractors. Supersector employment has fallen eight months in a row. Construction showed by far the highest rate of annual loss among the supersectors, down 18.5 percent over the past 12 months. All of the component industries are down substantially over the year. Housing permits were down sharply again in 2008 with permits issued for 10,616 units, down from 17,529 in 2007 and down drastically from 2004 when more than 40,000 permits were issued.

Manufacturing

The dramatic drop of 9,600 jobs in Manufacturing employment was fairly evenly distributed between durable- and nondurable-goods manufacturing with monthly losses measuring 3 and 2.8 percent respectively. This massive loss occurs simultaneously with a large spike in initial unemployment claims in Manufacturing for December and January. There were no real bright spots in January as nearly every component industry for which estimates are produced showed weaker results for the month. Compared to January 2008, Manufacturing employment was down 21,500 or 6.5 percent. The percentage decline in durable goods was 6.2. Nondurable goods had a 6.9 percent decline. Notable losses included 2,000 in wood product manufacturing, 1,300 in computer and electronic product manufacturing, 2,100 in transportation equipment, 1,200 in furniture and related, 1,100 in miscellaneous manufacturing, and 2,700 in printing and related support activities. New orders for manufactured goods for the nation as a whole decreased 3.9 percent for December, marking the fifth consecutive month of decline.

Trade, Transportation, and Utilities (TTU)

After four weak months during which employment fell by 12,600, employment increased by 300 in Trade, Transportation, and Utilities in January. The growth was entirely in retail trade where 900 jobs were added. In large part this could be expected since the lack of seasonal buildup was likely to contribute to a smaller-than-usual seasonal decline in January. With job losses in eight of the past 12 months on a seasonally adjusted basis, the annual decline of 2.8 percent registered in January was no surprise. This is still substantially better than the 3.8 percent decline registered for the nation as a whole. The three major component industry groups all showed losses. However, retail, with a loss of 3.4 percent, and transportation, warehousing, and utilities, with a loss of 3.6 percent, created most of the losses. Retail trade motor vehicle and parts dealers, food and beverage stores, and department stores showed particular weakness. Retail sales continue to be weak with Census advance-retail-sales estimates for January 2009 down 11 percent from the previous year.

Information

There was no change in employment for the Information supersector for the month. Annually, the supersector lost 700 jobs with small losses in all the estimated component industries.

Financial Activities

Financial Activities estimates showed a seasonally adjusted increase of 800 in January. The gain came mainly from depository credit intermediation. Benchmarking led to data that were significantly reduced from the original 2008 estimates. As a result, the supersector now shows a loss of 600 over the past 12 months. Insurance carriers and depository credit intermediation still showed substantial gains over the year. Non-depository intermediation lost 11.9 percent; securities, commodity contracts, and other related fell 3.5 percent; and real estate and rental and leasing was off 2.3 percent.

Professional and Business Services (PBS)

Outside Manufacturing, the weakest results for the month were in Professional and Business Services with a loss of 5,900 for the month, the eighth consecutive monthly loss. All three major components lost employment with large declines in administrative and support services and in professional and technical services. Within professional and technical services, computer systems design and related services was particularly weak in January. The string of losses pushed the annual decline to 25,600, the largest numeric decline of any supersector. Of this, 7,800 came from professional, scientific, and technical services, including 3,700 cuts in computer systems design and related services. The rest of the loss came from administrative and support services, down 14.8 percent, with employment services showing a similar 14.6 percent drop since last January. The decline in employment services is still well short of the peak annual decline of 21.5 that occurred in January 2002 during the previous recession.

Educational and Health Services

Educational and Health Services added 1,400 jobs in January, mainly from the impact of smaller-than-usual seasonal cuts in private colleges and universities. Educational and Health Services was the only supersector to post over-the-year growth in January, adding an estimated 17,600 over 12 months. Annual growth was widely spread throughout the supersector. Educational services was up 2,700 jobs, ambulatory health care added 4,300, hospitals 3,500, nursing and residential care 3,600, and social assistance 3,600.

Leisure and Hospitality

There was a loss of 500 jobs in Leisure and Hospitality. All of this loss came from accommodation and food services, which was down 1,800, outweighing a gain of 1,300 in arts, entertainment, and amusement. The partial rebound in arts, entertainment, and amusement followed larger-than-usual seasonal declines in late 2008. Over the year the supersector was down 6,800 with 3,100 of this loss coming in arts, entertainment, and recreation. The remainder came mainly from food services and drinking places, which was down 3,500. The universality of the declines in the supersector reflects a pullback in discretionary spending in recent months.

Other Services

There was a substantial loss of 1,700 jobs in Other Services for the month. This was mainly in religious, grantmaking, civic, professional, and related and seems related to somewhat altered seasonality. It is expected that employment will see some rebound in the February data. On an annual basis the supersector is down 2,500.

Government

The decline of 3,900 in Government came from state and local government. The majority of the loss came in local government, down 2,400 mainly caused by losses in local government education. It is likely some of the loss in local government is accounted for by the usual uncertainties related to adjusting for seasonality of school holidays. The monthly loss of 1,900 in state government is mainly from a large decline occurring at a reporting entity that was at an unusually high employment level in December. Over-the-year employment was down 1,400 for the supersector.

* Over-the-year data are not seasonally adjusted because of small changes in seasonal adjustment factors from year to year. Also, there is no seasonality in over-the-year changes.