Minnesota Economic Indicators
by Dave Senf - david.senf@state.mn.us
June 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 April 2009.
Minnesota Labor Market Index
United States Labor Market Index
The Minnesota Labor Market Index (LMI) headed upward for the first time in nine months. April’s 1.7 percent jump to 116.5 was propelled by a significant drop in initial claims for unemployment. The other two components of the index, adjusted weekly manufacturing hours and seasonally adjusted wage and salary employment, declined dampening the index’s advance. An uptick in Minnesota’s LMI during the six previous recessions, after extended months of decline, occurred within one to three months of the bottom of past recessions. The national index declined for the 17th straight month but the drop was the smallest since the onset of the recession. The Minnesota index is down 14.5 percent from a year ago while the U.S. index is down 19.4 percent.
Wage and Salary Employment
Minnesota’s seasonally adjusted Wage and Salary Employment declined for the eighth straight month in April with only educational and health services expanding payrolls. Employment was down 8,300 from the previous month with over half of the job cutbacks occurring in manufacturing. Job loss was also heavy in professional and business services and financial activities. Construction employment was flat in April breaking a 12-month streak of falling employment. April’s over-the-year job loss inched down to 3.2 percent, an improvement over March’s 3.4 percent, but the decline translates into roughly 90,000 jobs over the year. Minnesota’s job market continues to deteriorate but the pace seems to have let up.
Business Incorporations
Adjusted Business Incorporations continued to tail off in April slipping 10 percent to 723. Registrations for limited liability companies (LLC), however, continue to be solid totaling 3,172 in April. The surge in new limited liability companies is related in part to a new law requiring independent contractors to register with the Minnesota Department of Labor and Industry. Many contractors are choosing instead to turn their business into a limited liability company. New LLCs in April were up 82.1 percent from a year ago.
Purchasing Managers' Index
Minnesota’s Purchasing Managers’ Index (PMI) advanced for the second month in a row soaring to 42.6, the highest reading since September 2008. April’s PMI spike is a strong indicator that the worst is over for the state’s economy and that economic growth is likely sometime during the summer. Job growth, however, is unlikely to kick in anytime soon as employers will boost employee hours before adding new employees.
Residential Building Permits
Seasonally adjusted Residential Building Permits inched up in April but remain stuck at near-record lows. Home sales have increased over the last few months but the inventory of unsold houses remains extremely high. Home-building activity is unlikely to show any sustainable upswing until the inventory of unsold homes is whittled down.
Average Weekly Manufacturing Hours
The recovery road is likely to be a bumpy ride as evidenced by April’s small drop in adjusted weekly Manufacturing Hours. The factory workweek slipped 0.6 percent in April after March’s strong 2.7 percent jump. Minnesota manufacturers have been hit by the double whammy, as first domestic and then foreign demand faded. Weekly manufacturing hours need to rise above 40 hours a week before any real recovery can be declared.
Manufacturing Earnings
Adjusted weekly Manufacturing Earnings rose for the second straight month to $713.04. Unadjusted factory paychecks drew even with last year’s pay level in April.
Help-Wanted Advertising
Adjusted Help-Wanted Ads in newspapers continued to drift downward in April sliding to another all-time low of 778. Unadjusted printed help-wanted ads are down 74.9 percent from a year ago as most employers have moved to the Internet to attract workers. Adjusted online help-wanted ads in Minnesota, as reported by the Conference Board, Inc., tumbled in April falling 14.2 percent compared to the 4 percent drop nationally. The online tally of Twin Cities unadjusted help-wanted ads by Monster Worldwide, Inc. was down by 45 percent from a year ago. The corresponding national total was off 31 percent from last April. While the rate of layoffs has slowed, the hiring rate has not picked up.
Initial UB Claimants
The most promising April indicator was the drop in adjusted Initial Claims for Unemployment Benefits. April’s 6.8 percent decline in initial claims was the third monthly decline in four months, which suggests a deceleration in the pace of layoffs. Initial claims are still well above prerecession levels but appear to have peaked. Unemployment will continue to increase gradually in the state through most of 2009. Even as layoffs ease, businesses will be reluctant to ramp up production and employment until the recovery gains steam.