Minnesota Economic Indicators
by Dave Senf - david.senf@state.mn.us
June 2010
Note: All data except for the PMI has been seasonally adjusted. Residential building permits data are current through April while all other indicators are current through May. See the feature article in the Minnesota Employment Review, May 2010, for more information on the Minnesota Index.
The Minnesota Index rose for the eighth straight month advancing 0.5 percent in May, lifting the index to 158.5. A dip in the unemployment rate and increases in wage and salary employment and disbursements boosted the index. The fourth component, average weekly manufacturing hours, slipped slightly, limiting the index’s climb.
The index, a monthly coincident measure of the state’s economy, bottomed out last September and rebounded 2.3 percent over the last eight months after dropping 5.4 percent during the recession. The U.S. index also advanced in May for the fifth consecutive month. The U.S. index rose 1.6 percent since turning around in October after plunging 6.5 percent over the course of the recession.
Minnesota’s seasonally adjusted Wage and Salary Employment rose in May for the second straight month thanks mainly to Census hiring. Minnesota gained 5,600 jobs as the private sector added 2,600 jobs, state and local governments cut 2,300 jobs and the federal government added 5,300 jobs. Job growth was robust in educational and health services, professional and business services, and retail, transportation, and utilities. Payroll totals declined in state and local government, construction, and financial activities.
Census hiring provides only a temporary boost to the Minnesota job market, so the increase in private-sector employment for the second straight month is an encouraging sign. A two-month payroll expansion for Minnesota’s private employers last occurred in early 2008. Another positive job picture is the fifth consecutive gain in manufacturing employment. Minnesota’s over-the-year unadjusted employment was down only 0.2 percent in May. Minnesota’s employment has been down over the year for a record setting 25 straight months. The longest streak before this recession was the 22-month string of over-the-year job losses during the 1982-83 recession.
Adjusted Business Incorporations rose 6.3 percent in May. Limited liability numbers were down 14 percent from last year using unadjusted numbers.
Minnesota’s Purchasing Managers’ Index (PMI) increased 2.7 percent in May elevating the index to a four-year high. May’s 64.1 reading points to continued expansion in Minnesota’s manufacturing sector. The high 63.1 percent employment component of the index also points toward manufacturers' adding to their workforce through at least the rest of the summer.
Seasonally adjusted Residential Building Permits sputtered for the second month in a row dropping 9.6 percent in April. Permit levels are running significantly ahead of last year’s record lows but far below the level needed to create even a modest rebound in home-building activity. Home sales are likely to slump over the next few months as a result of the end of the government’s home-buyer tax credits. The inventory of unsold homes remains high, which means that home-building permit numbers are unlikely to climb anytime soon. Building permit activity leads home-building construction activity, so little improvement is expected in coming months in new home construction.
Adjusted weekly Manufacturing Hours slipped in May to 40.2 hours. Factory hours will likely resume an upward drift during the summer given the robust PMI.
The factory hours dragged adjusted weekly Manufacturing Earnings down 1.3 percent to $761.42. Unadjusted manufacturing hours are up 4.4 percent compared to last May while factory paychecks are 6.8 percent higher than a year ago.
Adjusted online Help-Wanted Ads increased in May for the fifth time over the last six months. The online help-wanted volume for Minnesota increased 2.3 percent in May while staying steady nationally. Online advertising for Minnesota jobs has increased 27.4 percent since last December compared to 13.9 percent nationwide. This gap is consistent with Minnesota’s job growth outpacing the nation, 1.2 to 0.8 percent, over the first five months of 2010.
Adjusted Initial Claims for Unemployment Benefits rose in May for only the second time since September. May’s 4.6 percent bump is a reminder that while the job market has improved from a year ago, there is still a long way to go to get back to pre-recession conditions. The unemployment rate will continue to inch down, but any rapid reduction in the rate is unlikely given the moderate job growth expected through the rest of the year and the likely increase in discouraged workers returning to the labor force. Discouraged workers (unemployed workers who dropped out of the labor force and are not counted as unemployed until they start looking for work again) will resume their job search as the job picture improves, initially increasing the pool of unemployed workers.
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