Minnesota Economic Indicators

by Dave Senf - david.senf@state.mn.us
March 2010

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 January 2010. 

The Minnesota Labor Market Index soared in January recording its largest monthly gain in the 40-year history of the index. January’s 3.5 percent hike was fueled by a robust increase in adjusted wage and salary employment and tumbling adjusted initial claims for unemployment benefits. The index has now advanced for three straight months. That hasn’t happened since early 2007. The U.S. index broke a four-month streak of increases in January falling 0.3 percent as a slight uptick in adjusted initial claims dragged the U.S. index down.

During the worst months of the recession, Minnesota’s index plunged with the national index but bottomed out earlier and dropped less than the national index. Based on the indices, the state’s economy seems to be emerging quicker and stronger than the nation’s. Unemployment in Minnesota has been 2 percent or more below the national rate for the last six months, which is consistent with Minnesota’s LMI running ahead of the national index. Minnesota’s index is down 2.4 percent from a year ago, while the U.S. index is 6 percent below last January’s level.

Minnesota’s seasonally adjusted Wage and Salary Employment grew by 17,200 jobs in January, the largest monthly increase since April 2006. Nine of the 11 supersectors added jobs. Payrolls rose in both the goods-producing and service-providing sectors for the first time since January 2008. Employment grew the most in professional and business services; trade, transportation, and utilities; manufacturing; and construction. The only sector to trim payrolls was financial activities.

Payroll numbers, however, continue to run red on a year-over-year basis with unadjusted employment down 2.8 percent from last January. The steep job loss during the current recession combined with job loss during the 2001 recession and relatively slow job growth during most of the last decade has set Minnesota’s employment level back 10 years.

Adjusted Business Incorporations inched up in January after three months of decline. Business incorporations, however, continue to lag far behind last year with January’s unadjusted level 47.6 percent below a year ago. Limited liability registration in January was down 51.3 percent from last year. The volume of new limited liability companies, however, was inflated last year by a new law requiring independent contractors to register with the state.

Minnesota’s Purchasing Managers’ Index (PMI) lost ground for the second month in a row sliding to 51.4. This suggests that while some of the state’s manufacturers are gaining traction, others are still facing lackluster conditions, especially for manufacturers heavily dependent on homebuilders.

Seasonally adjusted Residential Building Permits lost ground in January for the second straight month slipping 6 percent to 828. The level of home-building activity isn’t as bleak as a few months ago, but it remains stuck along the bottom. The housing market usually leads the way out of a recession, but this time around it is hampering the recovery.

The slow recovery pace showed up in declining adjusted weekly Manufacturing Hours in January when factory hours fell below 40, dropping to 39.8 per week. Manufacturers added workers for the first time in two years in January, but sustained monthly factory payroll gains shouldn’t be expected until the workweek stays consistently above 40 hours.

Factory paychecks slipped 1.7 percent to $746.82 in January — the first monthly decline in adjusted weekly Manufacturing Earnings in seven months.

Adjusted newspaper Help-Wanted Ads climbed for the second time in three months increasing 28.8 percent in January. Any increase in newspaper help-wanted ads is encouraging since newspapers have lost the majority of their help-wanted business to the Internet. A more promising development was the second largest monthly hike in online help-wanted ads for Minnesota. Minnesota’s seasonally adjusted online ads, as compiled by the Conference Board, Inc., were up 13.8 percent in January reaching 75,500. This was the highest volume since November 2008. Online help-wanted ads peaked in February 2008 at 104,600 before bottoming out in July 2008 at 58,200. Increasing help-wanted ads are usually a harbinger of accelerating job growth within a few months.

Adjusted Initial Claims for Unemployment Benefits plunged in January falling to its lowest level in 16 months. January’s 22.9 percent drop is more evidence that the job situation is improving. Job growth is a lagging indicator, but with the layoff rate waning as indicated by declining initial claims and the hiring pace stirring as indicated by climbing online help-wanted ads, job growth like January’s job spurt is likely to become more common over the next few months.

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