Minnesota Economic Indicators

by Dave Senf - david.senf@state.mn.us
January 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 November 2008.  

Minnesota Labor Market Index

United States Labor Market Index

The Minnesota Labor Market Index (LMI) plummeted in November dropping a record-setting 5.6 percent. Free-falling seasonally adjusted wage and salary employment, mounting adjusted initial claims for unemployment, and waning adjusted average weekly manufacturing hours pushed the index off the cliff. The U.S. index declined for the 14th consecutive month in November as the recession intensified. Minnesota’s index was down 9.3 percent from last November while the U.S. index was off 10.5 percent over the year. November’s over-the-year decline was the fifth steepest in the 38-year history of the Minnesota LMI, exceeded only by annual declines recorded during the summer of 1982. Minnesota’s unemployment rate spiked 3.3 percentage points, from 5.5 to 8.8, between August 1981 and 1982.

The unemployment rate spike this time around has reached 1.9, climbing to 6.4 in November from 4.5 percent a year ago. The spike will continue to climb through the first half of 2009 as job layoffs will persist, pushing the unemployment rate higher.

Wage and Salary Employment

The biggest factor in November’s LMI plunge was the record-setting 23,800 jobs slashed during the month. November’s job loss, both in percent and absolute terms, was the largest monthly decline over the 38 years of adjusted Wage and Salary Employment data. Job losses were broadly spread from goods-producing sectors to service-providing sectors. Service-providing sectors shed a record number of employees in November with the heaviest layoffs occurring in the supersectors of Leisure and Hospitality, Professional and Business Services, and Trade, Transportation, and Utilities. Construction and Manufacturing payrolls also continued to bleed. November’s 1.6 percent unadjusted over-the-year job loss was more than double October’s loss reflecting the state’s rapidly deteriorating job situation and was the worst since March 2002.

Help-Wanted Advertising

Adjusted Help-Wanted Ads in newspapers recorded a rare uptick in November, increasing 6.1 percent over October, but remain historically low. Online seasonally adjusted help-wanted ads, as compiled by the Conference Board, Inc., were off 1.6 percent across the country and 12.8 percent in Minnesota during November. Online unadjusted help-wanted indexes from Monster Worldwide, Inc. show a 21.9 and 23 percent decline from a year ago for the nation and Minnesota respectively.

Purchasing Managers' Index

Minnesota’s Purchasing Managers’ Index (PMI) four-month decline accelerated in November dropping to 33.5, the third lowest reading since the index was first published in 1994. The lowest reading, 32.0, was recorded in March 2001 and may be in jeopardy over the next few months. The PMI is billed as a leading economic index so any turnaround in the index may be a harbinger of the bottom of this recession.

Average Weekly Manufacturing Hours

Adjusted weekly Manufacturing Hours fell for the fourth straight month, sliding 1.2 percent in November but remain high when compared to previous recessions. Factory hours have skidded below 39 hours in four of five previous recessions, which suggests that manufacturing hours will continue to fall over the near term.

Manufacturing Earnings

Despite the drop in manufacturing hours, Manufacturing Earnings inched up in November to $720.99. Factory paychecks, like factory hours, have remained relatively strong during this recession when compared to recent recessions.

Business Incorporations

Adjusted Business Incorporations rose for the third straight month jumping 6 percent in November. Business incorporations on an unadjusted basis, however, continue to run below last year’s level, with November’s level down 14.9 percent from a year ago. Limited liability registrations, the preferred method of business formation these days, were up 1.7 percent in November from a year ago on an unadjusted basis.

Residential Building Permits

Seasonally adjusted Residential Building Permits jumped 15.2 percent in November but remain at near record low levels. Minnesota’s four-year housing bust continues to drag on as tighter credit standards combined with mounting job losses offset any sales momentum generated from improved affordability. Home builders have for the time being almost completely closed up shop.

Initial UB Claimants

Seasonally adjusted Initial Claims for Unemployment Benefits (UB) exploded in November soaring 32.1 percent to the highest average weekly total ever. November’s 8,645 weekly average level topped the 8,598 weekly average suffered during July 1982. Minnesota’s employment base, however, is 60 percent larger today than in 1982 so initial claims will continue to swell as businesses continue to downsize their workforces in response to the deepening economic turmoil.