Minnesota Economic Indicators

by Dave Senf - david.senf@state.mn.us
February 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 December 2008. 

Minnesota Labor Market Index

United States Labor Market Index

Wage and Salary Employment

The Minnesota Labor Market Index continued its steep drop in December with all three components deteriorating for the third straight month. December’s 2.5 percent decline was an improvement over November’s 5.9 percent drop but was still the fifth steepest monthly decline dating back to 1970. The index’s 11.9 percent plunge from last December is the largest over-the-year decline on record, breaking the 11.7 percent decline experienced between July of 1981 and 1982. The U.S. index tumbled for the 13th straight month falling 2.3 percent. The national index was off 12.9 percent from December 2007. December’s over-the-year plunge ranks as the 10th steepest for the national index, surpassed only by a handful of months in 1975 and 1982.

Minnesota’s job loss in December was half of November’s record-setting job loss but still heavy with 11,100 jobs eliminated. Goods-producing employment was down for the 12th straight month while service-providing employment shrunk for the fourth straight month. Employment declined in nine of the 11 supersectors, stayed the same in Natural Resources and Mining, and increased in Educational and Health Services. Job loss was heaviest in Professional and Business Services, in Trade, Transportation, and Utilities, in Manufacturing, in Government, and in Construction.

December’s 2.3 percent unadjusted over-the-year job loss was the worst since February 1983. Minnesota’s four-year streak of annual average job growth ended in 2008 as the state’s annual average employment declined 0.5 percent in 2008. The state enjoyed 19 straight years of job growth from 1983 through 2001 before two years of job decline in 2002 and 2003. The 19-year streak of job growth produced the low unemployment rates and associated labor shortages enjoyed by the state from 1998 – 2000. The first decade of the 21st century is going to end in 2009 with Minnesota having six years of job growth and four years of job decline.

Help-Wanted Advertising

Adjusted Help-Wanted Ads in newspapers continued on their long-term downward track stumbling to another record low in December. December’s unadjusted 988 newspaper help-wanted ads were 71.8 percent below a year ago. Minnesota’s online seasonally adjusted help-wanted ads, as tallied by the Conference Board, Inc., were down 14.7 percent from November’s level. December’s index of online help-wanted ads for the Twin Cities area, produced by Monster Worldwide, Inc., was down 30.3 percent from last December. The recently released Minnesota Job Vacancy Survey (JVS) showed a similar collapse in labor demand with job vacancies for fourth quarter 2008 down 39.6 percent statewide from fourth quarter 2007.

Purchasing Managers' Index

Minnesota’s Purchasing Managers’ Index (PMI) declined for the fifth consecutive month retreating to 32.2. The ongoing decline of the PMI points to a state economy that will continue to contract through at least the first half of 2009. No relief from rising unemployment rates should be expected until the PMI turns around and heads for the growth neutral level of 50.

Average Weekly Manufacturing Hours

Adjusted weekly Manufacturing Hours tumbled for the fifth straight month in December declining to 39.2 hours. Factory hours have dropped steeply over the last few months zeroing in on the sub-39-hour workweek typically seen during past recessions.

Manufacturing Earnings

Manufacturing Earnings inched up to $704.79 but are likely to fall as the recession persists. Factory paychecks averaged $675.47 per week during the previous recession in 2001.

Business Incorporations

Adjusted Business Incorporations jumped 21.1 percent in December to 877, the highest monthly level since May 2007. December’s limited liability registrations recorded a much larger jump, increasing from 1,547 in December 2007 to 3,277 in December 2008. The sudden surge in business incorporations and formation of limited liability companies stems from a rush by independent construction contractors to form corporations, LLCs, or partnerships in response to a new independent contractor certification law which became effective in January 2009. The law is aimed at reducing the misclassification of workers as independent contractors by Minnesota’s construction firms.

Residential Building Permits

Seasonally adjusted Residential Building Permits ended 2008 on the same sour note as heard throughout 2008. Home-building permits were down 1.3 percent from November keeping building-permit levels near record lows. Annual residential building permits peaked in 2004 at 40,674 and have plunged each year since hitting an all-time-annual low of 10,636 in 2008. The previous low was 16,896 permits back in 1981.

Initial UB Claimants

Seasonally adjusted Initial Claims for Unemployment Benefits (UB) continued to mount in December but at a much slower rate than November’s hyper pace. December’s 4.4 percent increase pushed average initial claims over 9,000 for the first time ever. There is little reason to expect the level of initial claims to subside any time soon given the grim near-term outlook for the state and national economies.