Industrial Analysis

by Jerry Brown - jerry.brown@state.mn.us 
July 2010

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

Overview

Employment growth proved to be relatively weak in June, posting a monthly loss of 3,700 jobs. Nine of 11 supersectors showed losses for the month. The largest decline came in trade, transportation, and utilities, which fell 3,200. Substantial losses were also present in other services and in professional and business services, down 2,800 and 2,600 respectively. Two supersectors posted gains for the month. Leisure and hospitality showed a massive 5,100 increase for the month with large gains in its two components. Financial activities also showed a large increase, up 2,300. The gains in these two supersectors went a long way to offset the losses in the other nine supersectors. Despite the monthly loss, the results for the month were strong enough compared to a year ago to push the annual rate of change into positive territory for the first time since March 2008, up 0.4 percent. The unadjusted change from May to June was 0.7 percent, just short of prerecession levels, compared to last June when the increase was a minuscule 0.1 percent, making for a very weak year-ago level in the comparison. Five supersectors posted annual increases with the largest annual increase in leisure and hospitality, up 9,100. Gains in excess of 8,000 came in professional and business services, up 8,700, and in government, up 8,300. The other major increase was the addition of 7,100 jobs in educational and health services. Construction showed the largest annual loss at 10,200 followed by other services where employment fell by 8,100. Financial activities showed substantial improvement with losses of only 2,200 after a strong June. Manufacturing and trade, transportation, and utilities both showed annual declines of approximately 1,000.

Mining and Logging

Mining and logging lost 100 jobs in June on a seasonally adjusted basis. There was an increase of about 10 percentage points to 11.5 percent in over-the-year growth in mining and logging. The reason for this increase lies in the 2009 data as last year iron mines were going through shutdowns to reduce inventory. With more nearly normal employment in June 2010 the rate of growth was inflated.

Construction

Construction employment declined for a fifth consecutive month in June, down 900 for the month. In the first half of 2010 employment fell by 4,300 as a slight improvement in home construction was easily overwhelmed by weakness in commercial construction. Census estimates during the first five months of 2010 were up 26.1 percent compared to 2009 with approximately 4,000 permits issued. This is still a very low level of activity compared to strong years like 2006 when permits for the same period totaled 11,000. Compared to last year the supersector lost 10,200 jobs. Heavy and civil engineering showed strong growth with a gain of 2,500, but this was overwhelmed by losses elsewhere.

Manufacturing

The loss of 900 in manufacturing employment came entirely in nondurable-goods manufacturing. Durable-goods manufacturing showed no change for the month. After adding jobs the first four months of the year, manufacturing has lost employment in both May and June. Both the national and Minnesota-specific purchasing manager indices are still at levels indicating conditions exist for growth in manufacturing. However, recent Census data showed declines in new orders for durable goods, and it appears that the rebuilding of inventories is largely over, making employment growth in manufacturing more uncertain. The over-the-year rate of growth improved once again as manufacturing employment continues to outperform the results from 2009, making for improvement in annual growth even when losses are present. Durable-goods manufacturing showed a loss of 1,200 with machinery and computer and electronic manufacturing registering large annual declines. Nondurable-goods manufacturing showed a slight annual gain with food manufacturing up substantially.

Trade, Transportation, and Utilities 

The largest employment loss in June was the 3,200-job decline experienced in trade, transportation, and utilities. Nearly all of the decline was in retail trade which posted a loss of 3,400 in June and has given back 4,400 of the 6,200 jobs added in April. Most of the estimated retail industries posted weaker results for the month particularly food and beverage stores. The slowdown comes as estimates of consumer confidence and retail sales tumbled. Compared to year-ago data, employment was down by 1,000. All of the annual loss came in transportation and warehousing, which was off by about 3,000 annually. This was partly offset by a gain of 1,700 in retail. General merchandise stores employment was up 2,200, but, in general, growth was spotty. Food and beverage stores showed the largest loss, down 2,300 annually.

Information

Information lost 200 jobs for the month of June after adding a net 700 jobs the previous two months. The decline came from publishing industries. Compared to last year, the supersector dropped slightly to 54,900, down 100. However, publishing industries still show a substantial decline.

Financial Activities

Monthly growth in financial activities was estimated at a very robust 2,300. There were widely dispersed gains in the supersector with the majority in finance and insurance where 1,800 jobs were added largely in credit intermediation and insurance-related industries. This gain comes after a weak period from November 2009 to May 2010 when 3,500 jobs were lost. The monthly gains contributed to an improvement in the rate of annual change from -2.6 percent in May to -1.3 percent in June. Insurance carriers showed an annual gain of 1.9 percent to mitigate losses in other areas. The weakest performance came in securities, commodity contracts, and related services where annual losses measured 7.2 percent.

Professional and Business Services

Employment fell by 2,600 in professional and business services in June. Nearly all of the loss came in administrative and support services. After some strong gains last fall and winter, the supersector has posted losses the past four months with professional and technical services and administrative and support services alternating as the locus of the monthly losses. This is further evidence of the tenuous nature of the employment growth. One would certainly expect more consistent additions in these bellweather industries if a robust recovery were under way. The growth that occurred last fall and winter combined with weak growth last June contributed to an annual growth rate of 2.8 percent or 8,700 jobs. All of this growth came in administrative and support services where 11,700 jobs were added. This gain was offset by losses in the remaining industries.

Educational and Health Services

The monthly loss of 200 jobs in educational and health services results from very different developments in its component industries. Private educational services declined by 1,900 for the month as non-college employment saw larger seasonal declines than usual. Offsetting this was an increase of 1,700 in health care and social assistance. The majority of the increase came in nursing and residential care facilities. The supersector continued to show modest growth compared to last year, up 1.6 percent. About 1,600 of this came in educational services, mainly private colleges and universities. Of the 5,600 jobs added in health care and social assistance all of the gains came from the nursing and residential care and the social assistance industries. Hospitals and ambulatory health care services showed an annual loss.

Leisure and Hospitality

Employment growth was rather remarkable in leisure and hospitality during June. The supersector added 5,100 jobs with strong growth in both of its major components. The addition of 2,300 jobs in arts, entertainment, and recreation came from a much larger seasonal expansion than usual. This largely offset the larger-than-usual losses posted last October. Accommodation and food services also posted robust growth for the month, up 2,800 jobs. This increase came entirely from food services and drinking places as accommodation posted fairly weak monthly results. The large increase for the month helped push the over-the-year gain to 3.6 percent, now the highest rate of growth of any supersector. Arts, entertainment, and recreation showed an increase of 5.7 percent, and food services and drinking places added 3 percent.

Other Services

A general weakness throughout other services industries caused employment to decline by 2,800 in June. This supersector has been on a downward trajectory since the recession started, interrupted only by an occasional monthly increase. The supersector is made up of services largely dependent on discretionary spending, including charitable giving, which have taken a severe hit. Compared to last year the supersector has lost 8,100 jobs.

Government

Government employment lost 200 jobs for the month as large losses in federal government were countered by additions in state and local government. Federal government employment fell by 3,700 as temporary Census workers were let go. This paring will continue for a few more months. The increase in state government is essentially from slower-than-expected declines in state education. It is very likely this will be balanced out in July estimates. Local government showed the addition of 1,000 with a mix of slower school layoffs and more rapid seasonal hiring at local government units. Over the past year the supersector showed an addition of 8,300 jobs compared to last year. More than half of this was caused by hiring temporary Census workers. Nearly all of the remainder was in local government.

* 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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