Minnesota Economic Indicators

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

Note:  All data except for the PMI has been seasonally adjusted.  Residential building permits data are current through March while all other indicators are current through April. See the feature article in the Minnesota Employment Review, May 2010, for more information on the Minnesota Index.

The Minnesota Index makes its debut here in style climbing 0.4 percent for the second straight month. The index advanced seven consecutive months after bottoming out last September. It peaked in April 2008 before declining 17 months in a row as the nation’s worst recession in three generations drove the index down 5.4 percent. The U.S. index peaked a month earlier in March 2008 before falling for 19 straight months, reaching bottom in October 2008. The U.S. index’s peak-to-trough decline was 6.5 percent.

Since hitting bottom, the Minnesota Index is up 1.8 percent, and the national index is up 1.1 percent. (See the Feature article for more on the Minnesota Index.)

Minnesota’s labor market picked up momentum in April as seasonally adjusted Wage and Salary Employment jumped 10,200 jobs. Minnesota employers have added 24,800 jobs so far this year taking the first steps to regaining the 162,000 jobs lost between February 2008 and September 2009. Service-providing payrolls expanded the most. The goods-producing sector added jobs for the second straight month recording the largest two-month jump since April 2004. The increase in goods-producing jobs was concentrated at manufacturing plants. Manufacturing jobs rose for the fourth consecutive month in April, a streak last seen in mid-2005.

Job growth was also strong in trade, transportation, and utilities, government, and educational and health services. Layoffs occurred in four sectors with other services and financial activities trimming the most. The upbeat job growth in April pushed Minnesota’s over-the-year unadjusted employment loss down to 0.8 percent. This is the lowest over-the-year job loss since October 2008 and a huge improvement over the worst reading, the 5.2 percent drop in September 2009.

Adjusted Business Incorporations slipped 5.5 percent in April keeping numbers far below the volume averaged over the last five years. A large share of business startup has moved to the limited liability alternative. Limited liability numbers were down 23.9 percent from last April, but last year’s robust volume of limited liability registration was related to a new state law that sent independent contractors scurrying to register as businesses.

After roaring back in February, Minnesota’s Purchasing Managers’ Index (PMI) flattened out over the last two months with April’s 62.4 reading slightly below March’s 62.5. Despite the pause, the index continues to signal acceleration in Minnesota’s manufacturing rebound over the next few months. The employment component of the index has been above 50 since January suggesting that factory hiring will continue through the summer.

Seasonally adjusted Residential Building Permits slipped 19.4 percent in March. Home building activity in Minnesota peaked in 2004 and then plunged for four years before hitting bottom in 2009. Building activity has staged a weak comeback over the last six months. Both new and existing home sales increased modestly. The housing market will likely mend slowly as the labor market improves.

The strong PMI readings over the last few months showed up in adjusted weekly Manufacturing Hours in April as factory hours surged to 40.4 hours. The pickup in manufacturing hiring is consistent with longer factory workweeks. April’s factory hours were the highest since September 2008.

Longer hours sent adjusted weekly Manufacturing Earnings to a three-year high of $774.36. Inflation-adjusted factory paychecks are 8.7 percent fatter than a year ago on an unadjusted basis.

April marks the switch from reporting on print help-wanted ads to online help-wanted ads. April’s 13.2 percent jump in adjusted online Help-Wanted Ads is another indicator that Minnesota’s job picture is improving. The volume of help-wanted ads is the highest since November 2008 and suggests that the pace of hiring is likely to continue to gain steam over the next few months. Nationally, online help-wanted ads rose 5.7 percent in April. Minnesota’s volume of help-wanted ads has increased 42.7 percent since bottoming out in July 2009. Nationwide, online help-wanted ads bottomed out last April but have increased by only 31.2 percent since then.

  Adjusted Initial Claims for Unemployment Benefits fell for the second-straight month and seventh out of the last eight months. April’s 2.6 percent drop brought initial claims to its lowest level since December 2008. The pace of layoffs has eased significantly over the past nine months as Minnesota’s economy slowly rebounds from the recession. Unadjusted initial claims were down 30.7 percent from a year ago.

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