Industrial Analysis

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

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

Overview

April estimates showed the eighth consecutive monthly decline in Minnesota employment with a seasonally adjusted monthly loss of 9,500. This loss was about half the 18,900 decline posted for March. In April, losses occurred in nine of 11 supersectors with the largest losses in professional and business services; manufacturing; trade, transportation and utilities; and financial activities. Increases occurred in educational and health services and in leisure and hospitality. The annual decline was estimated at 90,000 — equal to a loss of 3.3 percent. By comparison, the U.S. as a whole showed an annual loss of 3.8 percent. The only supersectors showing growth were educational and health services, and government. The largest losses were in professional and business services (down 33,500 jobs), and manufacturing, (off 30,800).

Mining and Logging

Mining and logging fell by 400 compared to the previous month as weakness in iron ore mining affected employment. Iron ore mines announced recently that substantial layoffs would occur to reduce capacity and stockpiles of taconite. Over the year the supersector was off 500 jobs.

Construction

Construction employment decreased by 900 from March to April. The supersector has not posted a monthly increase in nearly two years, resulting in employment levels similar to the middle of 1997. On an annual basis a decline of 15.9 percent was estimated, the highest rate of decline among supersectors and equal to 16,200 jobs. Losses continued to mount in specialty trade contracting (down 18 percent), and residential construction (down 20.2 percent). Census data showed continued decline in permitting for single family homes. Anecdotal reports and other indicators predict further weakening of commercial construction in future months as well.

Manufacturing

The manufacturing supersector has not posted a monthly gain since February 2008. The loss in April was 2,400 with the entire loss coming from durable-goods manufacturing. No areas in durable goods showed strength, with machinery manufacturing and computer- and electronic-product manufacturing posting particularly weak results for the month. Nondurable goods employment was essentially flat for the month adding only 100 jobs on a seasonally adjusted basis. Nonetheless, this was the first monthly gain since February 2008. Compared to last year, employment for manufacturing was down 30,800 jobs. Outside of electrical equipment and appliance manufacturing, every estimated industry showed a loss over the past year. Fabricated metal products, computer and electronic products, machinery manufacturing, printing and related, and transportation equipment manufacturing all showed large losses. Economic indicators point to continued weakness.

Trade, Transportation, and Utilities (TTU)

Employment growth was a mixed bag in trade, transportation and utilities in April. Wholesale trade experienced substantially lower seasonal hiring in durable- and nondurable-goods wholesaling resulting in a monthly loss of 2,300. Transportation, warehousing and utilities also showed growth below normal expectations losing 1,800 jobs for the month from reduced demand for shipping and travel. A large part was offset by a gain of 2,100 in retail trade. Employment growth in retail trade was unexpected as the indicators for retail continue to be weak. Compared to April 2008, supersector employment was off 18,000 with nearly universal decline present in the estimated industries. Transportation, warehousing and utilities showed the most rapid decline at -6.2 percent, but wholesale and retail trade fell substantially as well at -3.1 and -2.7 percent respectively.

Information

Information posted a monthly loss of 700, with much of the loss coming from non-estimated industries. Annually, the supersector showed a decline of 3 percent. The rate of annual loss has increased steadily during 2009.

Financial Activities

Financial activities posted the first monthly loss in excess of 1,000 during this downturn with an estimated decline of 2,000 in April. Since late 2007 there has been a preponderance of months with small losses. This allowed Minnesota to avoid the large job losses occurring in other areas of the country. In some ways Minnesota was perhaps overdue for a substantial decline. Nonetheless, the annual decline for the supersector still measured only 1.2 percent, much better than the loss of 4.8 percent for the U.S. as a whole.

Professional and Business Services (PBS)

By far the largest decline in April was in professional and business services with a decline of 5,900 jobs. All three of the major component industries showed monthly losses but there were acute losses in management of companies and in administrative and support services. Employment services continued to drive employment losses with another weak month. This industry group is now down 18.9 percent compared to last year, equaling the highest rate of loss during the 2001 recession. For the supersector as a whole, there was an annual loss of 33,500 with 20,600 of this loss in administrative and support services.

Educational and Health Services

Educational and health services added a surprising 4,700 jobs with two-thirds of the gain in private educational services. The gain in educational services was mainly in companies providing services to schools and in private colleges and universities. Some of these gains are related to some seasonal growth coming later in the spring than in recent years. About 1,600 of the gain came in health and social assistance particularly among nursing and residential care and social assistance firms. This is the only supersector that still showed a large annual increase in employment with a gain of 19,800 for the year.

Leisure and Hospitality

The second area of monthly growth was leisure and hospitality where 1,200 jobs were added for April. The monthly gain is completely caused by an increase of 2,700 in arts, entertainment and recreation, which outweighed a loss of 1,500 in accommodation and food services. The seasonal pattern for arts, entertainment and recreation has been somewhat unusual since November with large seasonal declines last fall. The significant increase this month may be the counterbalance. The monthly loss in accommodation and food services was the fourth in a row. Compared to last year the supersector improved from a loss of -4.6 percent in March (revised) to -2.9 percent in April with the improvement in arts, entertainment and recreation, which now shows an annual loss of only 300. It seems unlikely similar gains in arts, entertainment and recreation will continue in coming months.

Other Services

After two months of growth, other services lost 600 jobs in April nearly erasing the gains made in those two months. The loss was evenly distributed across industries. The supersector showed a loss of 2,400 compared to April 2008.

Government

Government posted a small loss in April, down 500 from March. All of the loss came in local government, which fell by 1,000, mainly caused by reductions in local government education. This loss erased a gain of 500 in federal government. The gain in federal government employment resulted in part from hiring for the upcoming national census. Government added 2,200 jobs over the past year with all of the growth in local government.

* 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.