Industrial Analysis

by Jerry Brown - jerry.brown@state.mn.us 
June 2009

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

Overview

Monthly employment results were a very mixed bag in May resulting in a loss of 1,600 jobs for the month. The monthly results showed five supersectors with growth, five with losses, and one that did not change. The major losses came in trade, transportation, and utilities with 7,000 fewer jobs and in manufacturing, down 2,100. Nearly all of the gains for the month came in leisure and hospitality, which showed an unusual surge of growth, adding 7,100 jobs. Compared to last year, employment was down 3.4 percent, equal to a loss of 95,900. Only educational and health services and government still showed growth. Most supersectors posted substantial losses particularly manufacturing; professional and business services; trade, transportation, and utilities; and construction.

Mining and Logging

Mining and logging employment fell by 600 for the month of May as substantial layoffs in mining took effect. Over the year the supersector was down 1,300 jobs with most of the loss taking place the last few months.

Construction

Employment levels in construction industries rose by 900 in May. This was the first measurable increase in two years. The monthly gains came in heavy and civil engineering construction and in specialty trade contractors, which both showed somewhat higher-than-usual seasonal gains for the month. Compared to last May, employment improved slightly from a loss of 15 percent in April to -14.3 percent in May. The annual rate of loss peaked in March at -19.9 percent and has declined the past two months.

Manufacturing

Manufacturing employment posted another loss in May, down 2,100. This was the seventh consecutive month of employment reductions greater than 2,000. Durable-goods manufacturing showed nearly all of the loss for the month, down 2,000 on a seasonally adjusted basis. Normally, there is a small gain in the unadjusted data for durable-goods manufacturing from April to May as manufacturers build inventory. In 2009 there was a loss of 0.1 percent. Most durable-goods-manufacturing industries showed weak results for the month, particularly computer and electronic product manufacturing and fabricated metal manufacturing. The annual rate of loss grew to 10.3 percent compared to a loss of 9.8 percent in April (revised). This is still somewhat better than the 11.8 percent rate of loss for the U.S. as a whole. At this point nearly every estimated industry shows a substantial annual loss.

Trade, Transportation, and Utilities (TTU)

The most significant monthly loss came in trade, transportation, and utilities, which saw employment decline 7,000. This was distributed across component industries with losses of 2,100 in wholesale trade, 2,500 in retail trade, and 2,400 in transportation, warehousing, and utilities. Transportation companies were generally weaker as companies reduce capacity. In retail trade, losses were particularly acute in food and beverage stores and in motor vehicle and parts dealers. The annual rate of loss for the supersector grew substantially in May, up 1.5 percentage points to -4.7 percent. A very strong reduction in demand for transportation services has resulted in a decline of 11.7 percent in transportation and warehousing employment over the past year. Wholesale trade was down 4 percent with losses posted in each component industry. Retail trade was down 3.3 percent in May with declines in all of the detailed industries estimated save general merchandise stores.

Information

Estimates showed an over-the-month loss of 700 jobs in the information supersector in May with most of the loss coming outside publishing and telecommunications industries. The over-the-year change was estimated at -1,800. About half of this annual loss was in publishing and telecommunications with the remainder in industries not estimated.

Financial Activities

There was a very small increase in financial activities. All of the increase came from real estate and rental and leasing where employment increased by 800, partly erasing a loss of 1,300 in April. This slightly outweighed a decline of 600 in finance and insurance where insurance carriers showed some improvement, but essentially all other industry groupings showed weaker-than-expected monthly growth. After largely escaping the worst of the downturn in the financial industry, finance and insurance experienced a fourth consecutive loss in May during which time employment fell by an estimated 2,200 jobs. The supersector posted an estimated loss of 1,700 over the past 12 months. About 1,300 of this loss was estimated in real estate and rental and leasing. The only industry grouping that showed an annual gain was insurance carriers, which increased by 700. Small annual losses were the rule in credit intermediation industries.

Professional and Business Services (PBS)

Professional and business services showed a 12th-straight month of employment loss posting a small decline of 300 in May. The loss is almost entirely from professional and technical services, which was down 2,200. Administrative and support services showed an increase for the first time in nearly a year, adding 2,300 jobs. The professional and business services supersector showed a 12-month loss of 30,600. Of this loss, over half was in administrative and support services, but there were major losses in professional, scientific, and technical services and in management of companies as well.

Educational and Health Services

There was essentially no change in educational and health services employment in May as an increase of 400 in private education was offset by a loss of 300 in healthcare and social assistance. Growth in the supersector has been fitful the past six months with sizeable increases in some months immediately followed by a month with essentially no change in employment. Employment at hospitals showed a second consecutive weak month. A number of hospitals have announced staff cuts in recent months and more cuts are likely in the future as well. Over the last 12 months the supersector added 19,700 jobs. A bit over 25 percent of the increase was in educational services with the rest spread over health and social assistance firms. The weakening of employment growth in hospitals has caused annual growth in that industry grouping to decline from 3.2 percent in March to 1.9 percent in May. Cutbacks in healthcare are a worry as the educational and health services supersector is the main contributor of what little job growth is occurring in Minnesota.

Leisure and Hospitality

Leisure and hospitality saw a monthly gain of 7,100 jobs. All of this growth came from accommodation and food services where the added 7,400 jobs were a new record. This large increase must be viewed with caution. By itself it cannot be interpreted as proof of a turnaround. It is, however, a welcome positive sign that there seems to be at least some slowing of employment decline for the state. On an annual basis the supersector showed a loss of 4,900 jobs, a significant improvement over recent months. The annual change in food services and drinking places went from an annual loss of about 6,600 in April to about -1,900 in May. There was no monthly change in employment in the seasonally adjusted estimates for other services. The annual change was -2,100 reflecting almost no change from last month. About half of the annual decline was in repair and maintenance.

Other Services

There was no monthly change in employment in the seasonally adjusted estimates for other services. The annual change was -2,100 reflecting almost no change from April. About half of the annual decline was in repair and maintenance.

Government

Estimates showed a gain of 800 jobs in government for May. All of the gain came from local government, which added 1,300 for the month and outweighed losses in federal and state government. Some of the local government increase may be caused by the usual fluctuation in the timing of seasonal changes. Government employment increased by 2,600 in the past 12 months. Local government added 3,700 jobs, including 2,500 in local government education. These gains negated losses in state government education and at post offices.

* 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.