Minnesota Economic Indicators

by Dave Senf - david.senf@state.mn.us
July 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 May 2009.

Minnesota Labor Market Index

United States Labor Market Index

April’s promising uptick in the Minnesota Labor Market Index (LMI) was wiped out in May as the index plunged 4.9 percent, the second-worst monthly decline on record. All three components of the index drove the steep decline as seasonally adjusted wage and salary employment and adjusted weekly manufacturing hours fell and initial claims for unemployment climbed. The national index fell for the 18th-straight month dropping 1.4 percent. Minnesota’s economy appeared to be weathering the prolonged recession better than the U.S. economy in March and April, but Minnesota’s LMI decline in May indicates that Minnesota’s economy continues to be battered by the recession. Minnesota’s index was off 18.8 percent from a year ago in May while the U.S. index was down 20.2 percent.

Wage and Salary Employment

Minnesota’s seasonally adjusted Wage and Salary Employment declined for the ninth-straight month in May, but the job cutbacks were the smallest since last August. Employment slipped by 3,300 jobs with the bulk of job loss in trade, transportation, and utilities and in manufacturing. Hiring was unusually high in leisure and hospitality. Construction added the highest number of workers since April 2005. May’s over-the-year job loss on an unadjusted basis climbed to 3.5 percent, the worst over-the-year drop since December 1982. Over-the-year job loss nationwide reached 4 percent in May.

Help-Wanted Advertising

Adjusted Help-Wanted Ads in newspapers rose for the first time in 11 months jumping 15.7 percent. Seasonally adjusted online help-wanted listings also increased in Minnesota climbing 7.7 percent in May according to the Conference Board, Inc. The moderate uptick in help-wanted ads is encouraging as an increase in help-wanted volume usually precedes hiring rate increases by a few months. But help-wanted levels remain significantly below prerecession levels with unadjusted print ads running 68 percent below last May’s volume and adjusted online ads are off 38.6 percent from a year ago.

Purchasing Managers' Index

After recording a major spike in April, Minnesota’s Purchasing Managers’ Index (PMI) retreated slightly in May inching down to 42. Minnesota’s rate of economic contraction has slowed, but the road back to growth will be a winding hilly road with plenty of potholes. Job growth is unlikely to appear until the PMI edges above 50. Minnesota’s PMI will continue to trend upward through the rest of the year, but the climb will be slow.

Average Weekly Manufacturing Hours

The second-straight monthly drop in adjusted weekly Manufacturing Hours in May is one of the potholes in the recovery road. The factory workweek stumbled 0.5 percent in May to 38.4 hours per week. May’s workweek is the third lowest on record. Factory orders may have stopped sinking, but the expected production rebound from the inventory depletion over the last six months has yet to hit Minnesota’s manufacturers.

Manufacturing Earnings

Waning average-weekly-hours-worked pushed adjusted weekly Manufacturing Earnings down for the first time in three months. Average weekly paychecks declined to $706.42, a drop of 0.9 percent from the previous month.

Business Incorporations

Adjusted Business Incorporations continued to fall in May slipping for the fourth month in a row. May’s 2.7 percent slide sent business incorporations down to 708. Waning business incorporations during a recession is somewhat of a surprise since incorporations have climbed during past recessions when unemployed workers turn to self-employment to earn income. Limited liability company (LLC) registrations, however, continue to race ahead of last year’s pace with May’s LLC total 51.5 percent ahead of a year ago.

Residential Building Permits

Seasonally adjusted Residential Building Permits remained essentially flat for the third-straight month. Despite a pickup in home sales the home-building market remains mired at the bottom of the worst home-building slump in history. The near-record-low level of building permits reflects the feeble state of the housing market. There is little hope of any uptick in home-building until the job market stabilizes.

Initial UB Claimants

April’s most promising green shoot, falling adjusted Initial Claims for Unemployment Benefits (UB), withered in May as the number of average weekly initial claims spiked to a record high. Average weekly claims climbed 10 percent to 9,569 in May cutting short talk of an improving job market. Minnesota employers continue to cut their workforce as demand for their products and services remains weak during this sustained downturn.