Minnesota Economic Indictors

by Dave Senf - david.senf@state.mn.us
January 2011
 

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

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

The Minnesota Index, after advancing steadily earlier in the year, downshifted over the last few months. After climbing 3 points from January to August, the index advanced by only 0.2 percent over the last four months with December’s reading essentially unchanged from November. Minnesota’s economy appears to have slowed a couple of months later than the national economy and in recent months has been lagging national growth after racing ahead during the first 12 months of the recovery. The U.S. index climbed for a fifth straight month, increasing 0.2 percent in December. Minnesota’s index is up 2.4 percent from a year ago while the U.S. index increased 2.2 percent over the last 12 months.

Minnesota’s seasonally adjusted Wage and Salary Employment unexpectedly plunged in December plummeting by 22,400 jobs. December’s 0.8 percent decline, until revisions hopefully show otherwise, was a record setter in both absolute and percentage terms. December’s huge decline replaced January 1982 as the worst percent decline and June 2009 as the worst absolute decline reported over the 41 years of monthly seasonally adjusted employment estimates.

The Minnesota Leading Index reversed a five-month slide in December increasing for the first time since May. The uptick in the Minnesota Leading Index points toward Minnesota’s economy gaining speed over the next six months, which is counter to the direction hinted at by the state’s declining PMI index. December’s economic indicators are highly mixed with some indicators pointing toward an economy that will be gaining strength in 2011 while other indicators lean toward slower economic growth.
 

The Minnesota’s Purchasing Managers’ Index (PMI) slipped for the third time over the last four months suggesting that Minnesota’s economy will be slowing even more over the next few months. December’s 52 reading is the lowest since last January’s 51.4 index. Minnesota’s PMI dipped below the national index over the last few months after outpacing the national level for most of 2010. The implication from this indicator is that Minnesota’s economic growth will trail national growth in the coming months.
 

Adjusted Residential Building Permits partially rebounded from the 37.6 percent drop in November by climbing 21.2 percent in December, but the bounce was just along the bottom. Home-building permit levels along with residential construction activity remain far below normal levels. The housing slump, which started back in 2005, reached bottom in 2009 and stayed there in 2010.
 

Adjusted weekly Manufacturing Hours tumbled 0.5 hours in December, the biggest monthly drop since February 2009. December’s steep drop was unexpected as the factory workweek headed upward for most of the year, reaching its 30-month high in November.
 

Adjusted weekly Manufacturing Earnings tailed off for the second straight month retreating to $767.09 in December. Inflation-adjusted factory paychecks were up only 0.5 percent from a year ago. Earlier in the year manufacturing earnings were 5 to 6 percent higher than the prior year.
 

Adjusted online Help-Wanted Ads climbed for the sixth consecutive month accelerating in December to a 30-month high. The upward trend in online help wanted ads is inconsistent with December’s huge job loss. Minnesota’s online help-wanted level was 40 percent higher than last December compared to the 22.2 percent over-the-year jump nationally. Minnesota’s job growth should still be running ahead of national job growth if online help-wanted ads are a reliable indicator of labor demand.
 

The most promising December indicator was the 18.5 percent plunge in adjusted Initial Claims for Unemployment Benefits (UB). The decline was the 12th largest monthly percent drop over 41 years of seasonally adjusted initial claim data. December’s 5,547 initial claims decline was the fifth largest absolute drop. December’s big initial claims decline was an unexpected development and clearly inconsistent with the unexpected big job loss for the month.

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