Industrial Analysis

By Jerry Brown - jerry.brown@state.mn.us
February 2010

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

Overview

In addition to the normal monthly data, the release of January employment estimates included the results of the annual benchmarking process. The benchmark process affected unadjusted data from April 2008 forward. Employment data for the Mankato-N, Mankato metro area are now available with data beginning in 1990. Seasonally adjusted data for the state have been replaced from January 1990 forward as a result of extending the more detailed industries back to that date. For the Twin Cities the seasonally adjusted data have been updated for January 2005 forward.

January saw a seasonally adjusted increase of 15,600 jobs as a number of highly seasonal industries showed much reduced seasonal declines compared to past years. Tied for the largest gain were trade, transportation, and utilities, which added 4,000 jobs mainly in retail trade, and professional and business services, which also added 4,000 jobs with most growth occurring in administrative and support services. Other increases of note included 3,000 in manufacturing, 2,100 in construction, and 1,500 in leisure and hospitality. In line with this large monthly increase, the rate of annual decline improved to -2.8 percent buoyed by a combination of a very large decline posted for January 2009 and strong current growth. Nine of 11 supersectors showed declines over the past 12 months. Manufacturing showed the greatest numerical loss, down 31,200 since January 2009. On a percentage basis, losses ranged from 2.2 percent in professional and business services to 26.6 percent in mining and logging. The two supersectors showing over-the-year growth were educational and health services, up 2,700, and government, up 300.

Mining and Logging

There was no change in mining and logging employment over the month of January. Year-ago comparisons still show the effect of the cutbacks that occurred in the middle of last year with employment down 1,600 compared to last January.

Construction

Seasonal layoffs in construction industries proved smaller than usual in January leading to a seasonally adjusted gain of 2,100. This essentially countered a decline of 2,300 that occurred in December. Over the past year the supersector was down 8,200 jobs despite the addition of nearly 1,200 jobs in heavy and civil engineering construction. Specialty trade contractors and construction of buildings showed annual losses of 12.8 and 11.8 percent, respectively. The situation in construction is well known. Outside of heavy construction, which has been aided by stimulus spending and pipeline projects, commercial construction is weak and not likely to improve significantly in the short term. Housing construction continues at extremely low levels. Permits for housing units improved year-over-year the last three months of 2009 but were very, very weak in January with Census data indicating only 220 permits awarded in January, down from 798 last year.

Manufacturing

Robust increases in durable-goods manufacturing led to a gain of 3,000 in total manufacturing employment. The areas showing the most gain were computer and electronic product manufacturing, wood product manufacturing, and machinery manufacturing. In nondurable-goods manufacturing, paper manufacturing and printing and related support activities were down sharply for the month. The January increase should be interpreted as an anomaly at this point given the long period of decline. There has been improvement in the indicators for manufacturing. The national Purchasing Managers Index registered 58.4 and has been in the range showing manufacturing growth for six months. The Minnesota specific index produced at Creighton University has also been in positive territory but at a less robust 51.4 in January down from 53.5 in December. Losses remain quite high compared to last year, down 31,200. Durable goods accounted for 24,100 of these losses with every industry grouping showing losses.

Trade, Transportation, and Utilities (TTU)

Employment increased by an estimated 4,000 jobs over the month of January in trade, transportation, and utilities. The main cause was lower-than-expected seasonal layoffs in retail trade that resulted in a seasonally adjusted gain of 3,100. In the past five years there was an average employment decline of 4.9 percent from December to January on an unadjusted basis. This year that decline was 2.1 percent. No doubt part of the difference is accounted for by much reduced seasonal hiring during late 2009. Over the past year the supersector lost 14,300 jobs. About half of those losses came in retail trade with nearly every estimated industry grouping showing an over-the-year decline. The remainder of the supersector loss came mostly in transportation, warehousing, and utilities, which was down more than 5,600 jobs since last January.

Information

Information employment increased 500 in January, the first gain since October and only the second since September 2008. The increase came from outside publishing and telecommunications, which showed little change for the month. Over-the-year losses equaled nearly 1,900 with nearly 75 percent of the decline coming in publishing industries.

Financial Activities

There was a loss of 500 jobs in financial activities for the month of January following a decline of 800 in December. The decline resulted from small losses both in finance and insurance and in real estate and rental and leasing. Supersector employment fell 4,600 over the past 12 months of which 4,300 of the losses came from finance and insurance. The losses in finance and insurance were about equally split between credit intermediation and securities, commodity contracts, and other related.

Professional and Business Services (PBS)

The addition of 4,000 jobs in professional and business services is the fourth job increase in the last six months for the supersector, which has seen a net increase of 9,800 during this period. The main reason for this recent improvement was growth in administrative and support services, which added 3,200 jobs in January and was up a net 11,200 over the past six months as hiring in employment services has improved. The supersector showed a loss of 2.2 percent over the year, a substantial improvement from a loss of 8.4 percent posted in July. The employment services industry, where the annual rate of growth improved from -22.5 percent in July to 5.1 percent in January, was the main reason for this improvement. In the past two recessions employment growth in this industry grouping was a precursor to more general employment growth shortly after. There is some question if this pattern will hold for the current downturn. There is some support for the position that employers will make much greater use of temporary workers on an ongoing basis, and job growth in permanent positions will be more delayed than in past recessions.

Educational and Health Services

There was a monthly loss of 700 in educational and health services. All of the loss came in private educational services, which fell by 1,400. Health care and social assistance employment increased 700. Annual growth in the supersector has fallen steadily in recent months down from 3.5 percent in May 2009 to 0.6 percent in January. Educational services has certainly weakened substantially, but the most important factor is the much larger health care and social assistance industry where growth fell from 3 to 1.1 percent for the same period. There has been a dramatic weakening in ambulatory health care and hospitals, which now both show over-the-year losses of 0.4 and 1.6 percent, respectively. Both of these industry sectors had posted years of robust growth prior to this weakening.

Leisure and Hospitality

The January gain in leisure and hospitality came entirely from an increase of 1,500 in accommodation and food services. The growth came mainly in limited service eating places. Over the past year the supersector showed a loss of 6,000 jobs with nearly all of this in arts, entertainment, and recreation industries. Accommodation also showed a sizeable drop of 1,900 jobs. Food services and drinking places showed an increase of 1,600 to offset a part of these losses.

Other Services

Other services added 900 jobs for the month of January following three consecutive monthly losses. Most of the increase was in religious, grantmaking, civic, professional, and related. The supersector posted an annual loss of 3,400 with losses spread among the three major component industries.

Government

Government employment in January increased an estimated 800 jobs on a seasonally adjusted basis. About half of the monthly increase came from federal government. The supersector showed a gain of about 300 jobs over the past 12 months. State government showed an increase of 700 but was balanced by losses in federal and local government. Hiring for the 2010 census should begin to accelerate in coming months providing a short-term boost to employment in 2010.

* 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.

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