Minnesota Economic Indicators

Note:  All data except for Minnesota’s PMI have been seasonally adjusted. All data is updated through January 2011 except for the Minnesota Leading Index which is updated through December 2010. 

See the feature article in the Minnesota Employment Review, May 2010, for more information on the Minnesota Index.

The Minnesota Index, a proxy measure of the state’s monthly economic activity, increased for the 12th straight month in January. The pace of recovery slowed during the second half of 2010 after accelerating during the first half. The index was revised in January to account for the annual benchmark of wage and salary employment. The revised index indicates that Minnesota’s economic recovery began a few months before the U.S. recovery and remained slightly ahead of the U.S. recovery until the last few months. The Minnesota Index hit bottom in September 2009 and has since rebounded by 2.1 percent. The U.S. index turned around in December 2009 and has increased 2.6 percent through January 2011.

Benchmark revisions to Minnesota’s seasonally adjusted Wage and Salary Employment showed that job growth in Minnesota last year was significantly slower than originally estimated. Revisions cut the state’s seasonally adjusted job gains from 29,500 to 10,500 between December 2009 and December 2010. The state’s job growth, which was thought to be almost three times faster than the national rate, actually fell behind the national pace in late 2010. Minnesota’s seasonally adjusted wage and salary employment expanded only 0.4 percent from December 2009 to December 2010 while the nation’s job base grew 0.7 percent over the same time period.

The job news was a little brighter in January as wage and salary employment increased 0.1 percent from December. Eight of the supersectors added jobs in January led by increased hiring in educational and health services, leisure and hospitality, and professional and business services. Steep job cuts in trade, transportation, and utilities limited net job growth. Minnesota’s over-the-year job growth in January matches the U.S. gain of 0.7 percent.

The Minnesota Leading Index slipped in December for the eighth time in the last 10 months but remains above the growth neutral reading of zero. The 0.75 reading in December points toward moderate economic growth for the state through at least June.

The Minnesota Purchasing Managers’ Index (PMI) zigzagged up in January rising to 55.2. Minnesota’s reading is below both the U.S. and Mid-America indices indicating that Minnesota manufacturing firms are less optimistic about the next six months than the manufacturers in other regions. The above-50 reading, however, suggests that Minnesota’s manufacturing sector will continue to expand through the first half of 2011 with export growth paving the way.

Adjusted Residential Building Permits climbed for the second consecutive month in January. The 13.9 percent increase pushed adjusted home building permits to 950, which is less than half the 41-year monthly average of 2,200. January’s unadjusted permit level of 246 is up a tad from a year ago but that isn’t much of an improvement, since last January’s 220 permits was the lowest January level dating back to 1970. The home-building industry remains in critical condition.

After reaching a three-year high in October before tumbling in December, adjusted weekly Manufacturing Hours, inched up in January. Increased manufacturing hiring is unlikely until average weekly factory hours advance past 41.

Adjusted weekly Manufacturing Earnings inched up in January after plunging the previous two months. January’s $778.49 factory paycheck was 2.2 percent higher than a year ago after adjusting for inflation.

Adjusted online Help-Wanted Ads also underwent major revisions leading to lower help-wanted levels for all months in the series. Revised numbers report a 12.4 percent jump in January, the largest monthly spike since December 2009. Minnesota help-wanted ads are up 87.6 percent from their lowest point during the recession, which is significantly higher than the 50 percent increase nationally. The more robust increase in online help-wanted ads in Minnesota seems to be inconsistent with Minnesota’s job growth lagging slightly behind national job growth.

Adjusted Initial Claims for Unemployment Benefits (UB), after a promising plunge in December, reversed directions in January. January’s 19.2 spike erased most of December’s decline. Initial claims need to drop below 25,000 before job growth picks up. Minnesota’s economy continued to improve in 2010, but the improvement was moderate at best. The U.S. economy is expected to gather strength in 2011, but Minnesota indicators are hinting that Minnesota is likely to lag behind the nation.

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