Minnesota Economic Indicators

by Dave Senf
March 2011

Note:  All data except for the Minnesota Index, U.S. Index, Minnesota Leading Index, and PMI have been seasonally adjusted.  Minnesota Leading Index data are current through January 2011 while all other indicators are current through February 2011. See the feature article in the Minnesota Employment Review, May 2010, for more information on the Minnesota Index.

The Minnesota Index, a proxy measure of Minnesota’s monthly economic activity, increased for the 13th consecutive month in February. February’s 0.1 percent advance, however, was the slowest since last September. The U.S. index in comparison accelerated in February climbing 0.3 percent. Minnesota’s economy grew faster than the nation’s from mid-2009 to mid-2010 but has since lagged slightly behind the national pace. Minnesota’s unemployment rate peaked in June 2009 at 8.5 percent and has been gradually improving to 6.7 percent in February. The U.S. rate peaked at 10.2 percent in October 2009 and remained close to 10 percent for over a year before dropping steeply over the last few months to 8.9 percent.

Adjusted Wage and Salary Employment expanded for the second month in a row but job growth was moderate. The goods-producing sector added its highest number of jobs since last April (3,500), but the service-providing sector cut jobs (2,200) leaving the state with 1,300 new jobs in February. Employment in educational and health services plunged by 2,900 jobs in February, the largest monthly decline on record going back to 1990. All of the job cutbacks were in private education, which reduced its payroll by 3,800 workers.

Manufacturing, professional and business services, and construction added the most jobs in February. The 2,400 positions added by manufacturers were the most since October 2004. Construction companies expanded their payrolls by the most since April 2010 adding 1,000 employees. Minnesota’s unadjusted wage and salary employment was up 0.8 percent from a year ago, a tad lower than the 1 percent over-the-year gain nationally. Minnesota’s 0.8 percent increase was the largest since August 2006.

The Minnesota Leading Index dropped for the second straight month suggesting that Minnesota’s economy will continue to expand into the third quarter of 2011 but at a slower rate. This is inconsistent with most of the other indicators. The U.S. Leading Index was 1.88 in January compared to Minnesota’s 0.99 reading. The gap indicates that Minnesota’s economy will continue to lag behind the national economy through the first six months of 2011.
 

The Minnesota’s Purchasing Managers’ Index (PMI) advanced for the second month in a row reaching its highest level since last August. Minnesota’s index has been below both the U.S. and Mid-American indices over the last four months, but the gap narrowed in February suggesting that Minnesota’s economic growth will likely come close to matching the national growth rate during the first six months of 2011.

Adjusted Residential Building Permits, after climbing during the previous two months, dropped in February as the home-building market remained depressed. Recent home price indices show home values in the metro area dipping again, which suggest that any modest home-building rebound is still not on the horizon.

Adjusted weekly Manufacturing Hours continued to rebound from last December’s steep drop-off. The second consecutive month of rising factory hours is another reason to expect more manufacturing expansion in the state over the next few months.

Adjusted weekly Manufacturing Earnings, however, slipped for the third time over the last four months decreasing to $772.12 in February. Manufacturing earnings were unchanged from February 2010 after adjusting for inflation. Real factory paychecks had been increasing compared to a year earlier since the middle of 2009.

Adjusted online Help-Wanted Ads climbed for the fifth straight month jumping to a series high of 97,000 ads (the series started in 2005). The volume of help-wanted ads is a leading indicator of both job growth and unemployment. Job growth usually accelerates and unemployment slips in the months following rising help-wanted levels. The sharp jump in Minnesota’s online help-wanted ads over the last few months is a promising sign for hiring to continue to pick up steam during the first half of 2011 and for unemployment to continue to decrease slowly.

The 11.8 percent decline in adjusted Initial Claims for Unemployment Benefits (UB) in February took some of the sting out of January’s 19.2 percent spike. Unadjusted initial claims are down 21.8 percent from February 2010 verifying that layoffs have dropped significantly over the past year. Lower layoff rates combined with an uptick in hiring as hinted at by climbing online help-wanted ads, add up to stronger job growth for Minnesota workers in 2011 if rising oil prices don’t sabotage the recovery.

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