Minnesota Economic Indicators

by Dave Senf
May 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 March 2011 while all other indicators are current through April 2011. See the feature article in the Minnesota Employment Review, May 2010, for more information on the Minnesota Index.

The Minnesota Index advanced in April at its fastest pace in over a year, increasing 0.3 percent from the previous month. The index’s jump suggests that Minnesota’s economy accelerated in April. Minnesota’s economy has recorded growth in 17 of the 19 months since the recession ended in Minnesota in September 2009. The U.S. index continued to race ahead of Minnesota’s index, advancing 0.4 percent for the third month in a row. Minnesota’s index was boosted by a decline in the state’s unemployment rate despite an increase in unemployment claims and increasing real wage and salary disbursements. Declining payroll employment and falling manufacturing hours kept the index from showing stronger growth. Minnesota’s index is up 1.6 percent from a year ago while the U.S. has increased 2.8 percent since last April.

Despite the uptick in the Minnesota Index, adjusted Wage and Salary Employment dropped for the first time in 2011 with a net job loss of 5,200. Strong job growth in professional and business services and in leisure and hospitality could not offset elevated job losses in construction, in trade, transportation, and utilities, and in other services. Construction employment was down 5,700 from March falling to the lowest level since February 1994 as the home-building industry remains mired in a depression. Leisure and hospitality employment recorded robust growth for the second straight month with 5,600 jobs added since February. That is the highest two-month gain recorded since 1990, but leisure and hospitality employment remains 4.7 percent below its peak reached in March 2006.

Minnesota’s job rebound from the recession has been painfully slow with only 24,000 of the 158,000 jobs lost during the recession recovered so far. In percentage terms the state has regained only 15 percent of the jobs lost. The nation has recovered 20 percent of jobs lost during the recession. Minnesota’s over-the-year job growth based on unadjusted payroll numbers plunged to 0.1 percent in April from 0.9 percent in March. That is the lowest over-the-year rate since last July and well below the nation’s 1.1 percent increase.

The Minnesota Leading Index dropped for the second month in a row in April. April’s low reading, the lowest since November 2009, points toward a slowdown in Minnesota’s economic recovery over the next six months. If the index is correct about the direction of Minnesota's economy over the next six months, progress on the job front will continue to be mixed at best.

Minnesota’s Purchasing Managers’ Index (PMI) retreated in April dropping to 60.9. April’s reading is still strong, indicating that Minnesota’s manufacturing sector will continue to expand over the next few months. The index, after hitting bottom in February 2009, rose above 50 in August 2009 signaling that the state’s manufacturers started to rebound in the fall of 2009. The index has average 59.1 since then, but job gains in the sector have been moderate as only 8,100 of the 51,000 jobs lost, or 16 percent of the manufacturing jobs lost during the recession, have been recaptured.

The dismal state of the state’s home builders is one of the largest roadblocks to faster job growth. April’s 34.6 percent jump in adjusted Residential Building Permits is a move in the right direction, but the increase to 789 permits is still just a bounce along the bottom.

Adjusted weekly Manufacturing Hours were essentially unchanged in April remaining at 40.8 hours. The factory workweek is up from a year ago when the adjusted workweek averaged 40.3 hours but down from the previous six months.

Falling manufacturing hours have taken a bite out of adjusted weekly Manufacturing Earnings. Factory paychecks dipped for the fifth time over the last six months in April. Weekly manufacturing earnings adjusted for inflation but not for seasonality were 2.7 percent lower than a year ago implying that manufacturing workers are losing purchasing power.

Adjusted online Help-Wanted Ads dipped for the first time in seven months slipping 3.8 percent in April. Demand for labor as measured by online advertising, however, has increased from a year ago with online ads up 45 percent from last April. Online help-wanted ads were up 20 percent from a year ago nationally in April.
 

Adjusted Initial Claims for Unemployment Benefits (UB) ticked up in April by 4.7 percent. Climbing initial claims over the next few months would be solid evidence of a slowing Minnesota economy.

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