Feature: Minnesota Job Outlook
By Dave Senf
November 2009
U.S. Economic Outlook
The U.S. economy is slowly emerging from the deepest and longest recession since the 1930s. The economic free-fall experienced during the fourth quarter of last year and through the first quarter of 2009 lost steam during the second quarter before turning the corner in the third quarter. Economic indicators during the fourth quarter have continued to be mixed, some data moving up while other data moves down, which is common when a turning point arrives. No rapid recovery is expected over the next 12 months, but economic growth is expected to be strong enough to stabilize the job market gradually with job losses progressively becoming smaller through the rest of the year. Sometime next year employment on a seasonally adjusted basis will start climbing for the first time since late 2007.
As of October the nation has lost 7.3 million wage-and-salary jobs since the recession started in December 2007. Job losses on a seasonally adjusted basis have occurred for 22 consecutive months with the heaviest job loss occurring between November and April. Job growth turned negative on a year-over-year basis during the third quarter last year with employment declining 0.4 percent over the year (see Figure 1). After the financial meltdown and the ensuing credit crunch in September, the economy nosedived, layoffs mounted, and hiring waned across most industries.
Over-the-year job loss swelled from a 1.6 percent decline in the fourth quarter last year to a 4.3 percent drop during the third quarter. The over-the-year job decline during the third quarter ranks as the second deepest since 1946 and is significantly higher than the worst quarter during the 1981- 82 recession when payrolls were thinned by 2.6 percent between the fourth quarters of 1981 and 1982.
The 7.3 million jobs lost over the last 22 months have been widespread with most sectors incurring job losses. The service-providing sector has shed nearly as many jobs as the goods-producing sector, but in percentage terms goods-producing jobs have plunged 16.8 percent compared to a 3.1 percent decline in service-providing employment. All of the job loss has been in the private sector with private employment down 6.4 percent over the 22 months. Government jobs have grown by 0.4 percent during this period but are likely to start to shrink as local and state governments deal with budget shortfalls over the next few years. The hardest hit sectors have been manufacturing, construction, retail trade, and administrative support services. The only private sectors to avoid job cutbacks have been educational services and health care and social assistance.
The bottom of this recession for the gross domestic product (GDP) occurred either in June or July, but the bottom for employment is still a ways off. Employment always lags during a recovery, so bad news on the jobs front can be expected over the next few months before job growth turns positive in early 2010. GDP recovery may end up looking like a V, but the job recovery will look a lot more like a U. The unemployment rate, now at 10.2 percent, is likely to creep upward in the coming months even if jobs rebound faster than expected. When job growth returns, the labor force is likely to jump as discouraged workers are drawn back into the workforce. Expansion of the labor force will hamper any rapid decline in the unemployment rate.
The U-shaped job recovery that will commence in 2010 translates into no change in employment between the third quarters of 2009 and 2010. Manufacturing and construction workers will continue to lose jobs over the next year, but job growth in service-providing industries will offset most of the job loss in the goods-producing industries. Over-the-year job loss will shrink from last year’s 4.3 percent drop to a 0.1 percent drop over the next 12 months.
Minnesota Job Outlook
Minnesota’s job growth lagged behind the nation in 2006 and 2007 before matching the nation in job loss during 2008 (see Figure 1). The state lost jobs at a slightly slower rate than the nation during the first nine months of 2009, but over-the-year job loss was still widespread and deep. Payroll numbers tumbled by 4.1 percent or 114,000 jobs between the third quarters of 2008 and 2009. The 4.1 percent over-the-year decline replaces the 3.7 percent decline experienced during the third quarter of 1982 as the state’s worst quarterly over-the-year wage-and-salary job decline.
While the nation has lost jobs for 22 straight months on a seasonally adjusted basis during the recession, Minnesota’s job loss string only reached 10 straight months before ending in July when the state unexpectedly added an estimated 7,700 jobs before losing jobs again in August and September and then adding 5,000 jobs in October. Minnesota has lost jobs in 16 of the 22 months of the recession on a seasonally adjusted basis. The recent job growth, which is subject to revision as more data become available, offers hope that the state’s economy will pull out of the recession quicker than the nation. Minnesota lost 124,000 wage and salary jobs between December 2007 and October 2009, a 4.5 percent decline compared to the national 5 percent drop-off.
Minnesota’s job cutbacks across sectors have for the most part mirrored national cutbacks. Private-sector employment is down 5.4 percent in Minnesota through October compared to the national 6.4 percent drop. Government payrolls across Minnesota expanded at the same rate as nationally, 0.4 percent, since the recession set in. Minnesota’s manufacturing, construction, retail trade, and administrative support services sectors experienced, just like the nation, the most job destruction. Payroll numbers in Minnesota’s financial activities, accommodation, and health care and social assistance sectors fared relatively better than their national counterparts. The opposite is true for Minnesota’s transportation and warehousing and professional, scientific, and technical service sectors, which suffered deeper cuts than nationwide.
Another encouraging signpost that Minnesota’s job picture may have bottomed out before the nation is the recent decline in Minnesota’s unemployment rate over the last few months. After reaching a 26-year high of 8.4 percent in June, the state’s unemployment rate fell for three straight months, falling to 7.4 percent by September, before jumping up to 7.6 percent in October. When the economy was in free fall early in 2009, Minnesota’s unemployment rate appeared to be heading toward the record high of 9 percent set in November 1982 but, unlike the national rate, has been relatively flat since February. Minnesota’s unemployment rate historically averaged 1.4 percentage points below the national rate before spiking up to the national rate for all of 2007 and most of 2008. The state’s unemployment spike from the start of the recession through October 2009 was 2.8 percentage points, substantially below the 5.2 percentage point jump experienced nationwide.
Minnesota’s job market has fared better than the nation’s during some recessions and worse during others as shown in Figure 2. Payroll employment levels for Minnesota and the nation are indexed to 100 at the start of each recession (see Figure 2) and tracked monthly until job loss in both Minnesota’s and the nation’s employment totals rebound to the pre-recession levels. The length of each recession and number of months needed to recapture jobs lost are reported in the parentheses. Minnesota fared better than the nation during the 1973-75 and 1990-91 recessions while the state’s labor force endured harder hits than nationwide during the 1969-70, 1980 and 1981-82 recessions (the 1980 and 1981-82 recessions are treated as one long recession in Figure 2). During the double-dip recessions of the early 1980s, Minnesota’s wage-and-salary employment dropped 5.6 percent between December 1979 and November 1982. That decline, however, occurred over 36 months not 22 months like the current 4.6 percent fall off.
The road to recovery for Minnesota’s job market will be a long one, but the first steps are occurring. Initial claims for unemployment peaked in May and have trended downward since. Online help-wanted ads for Minnesota jobs recently flattened out, increasing slightly one month then decreasing slightly the next, after crashing from November through April. Minnesota’s Purchasing Manager Index (PMI), a leading index similar to the national PMI, soared to 58.0 in August before falling to 55.9 in October. The August reading was up from a record low of 28.4 in February and was the highest reading since June 2007. The upward trend in the index points toward Minnesota’s manufacturing sector expanding rather than contracting over the next six months.
Employment in Minnesota will continue to decline through the rest of 2009 on a year-over-year basis, but monthly losses will progressively lessen as the economic recovery gains traction during the first half of 2010. Layoff rates will gradually tail off while the rate of hiring will slowly pick up next year. Positive job growth later in 2010 will offset the job loss experienced during the last quarter of 2009 and early 2010, leaving employment in Minnesota virtually unchanged between the third quarters of 2009 and 2010. No change in employment over the next 12 months will be a vast improvement from the 114,000 jobs lost during the last 12 months.
Industry Outlook
Minnesota’s expected job loss over the next year will again be concentrated in manufacturing and construction. Most other sectors will also see another year of negative job growth, but the job loss in these sectors will be minimal as hiring picks up in late 2009 and early 2010. Ten out of the 23 sectors will expand their workforce by the third quarter of 2010 with most of the job growth occurring in the health care and social assistance, federal government, and administrative and support services sectors. The expanding sectors will add around 23,400 jobs, but that job growth will be offset by roughly 23,900 jobs shed in the sectors that are still trimming their payrolls. Manufacturing and construction cutbacks will account for 70 percent of the terminated jobs.
While job shedding will be smaller than last year in most sectors that are still downsizing, job expansion in sectors that added workers last year will slow over the next 12 months as health care and social assistance and private educational services payrolls will continue to climb but at a slower rate. Government jobs will jump again over the year but only because the federal government is ramping up hiring for the 2010 census. Both local and state government employment are expected to slip. Forecasts for job growth across 23 Minnesota sectors between third quarter 2009 and third quarter 2010 are displayed in Figure 3.
Natural Resources and Mining (excluding Agriculture)
Employment in natural resources and mining industries shrank by 30 percent last year with the majority of job loss occurring on the Iron Range as demand for taconite tumbled alongside slumping worldwide steel production. Worldwide steel demand is recovering as 2009 winds down, but employment in Minnesota’s mining industries will not fully recover in just a year. A small gain in logging-related jobs is expected next year as the industry begins to recover from its deep downturn.
Construction
Construction employment has been tumbling for four years with job loss topping more than 16,000 last year. Construction payrolls will continue to shrink over the next year, but job loss will be 40 percent lower than last year. Home-building activity will show some improvement during the first half of 2010, but commercial and industrial construction is headed for a major slump.
Durable-Goods Manufacturing
Durable-goods manufacturing employment plunged by 32,000 jobs last year with job loss widespread as U.S. businesses cut capital investment, and export trade crashed. Job cuts between now and the third quarter of 2010 will be way below last year’s decline as layoffs wane and several manufacturing industries begin to rehire laid-off workers. Job losses, however, will still be heavy at fabricated metal product and machinery manufacturing firms.
Nondurable-Goods Manufacturing
Nondurable-goods manufacturing employment wasn’t hit as hard as durable-goods manufacturing during the recession, but job cutbacks still amounted to 7,500 jobs since the third quarter of 2008. Cutbacks are expected to continue through the first half of 2010, but job decline is expected to be roughly a fourth of last year’s reduction. Layoffs at printing plants and plastic and rubber products companies will continue.
Wholesale Trade
Wholesale trade employers sliced payroll numbers by 7,400 last year with the majority of job cutbacks occurring within the durable-goods wholesale trade industry. Wholesale trade jobs will drop again this year, but the decline is expected to be about 25 percent of last year’s decline. Job loss will continue at durable-goods and nondurable-goods wholesale trade companies, with small job gains expected at electronic-markets wholesale companies.
Retail Trade
Retail trade establishments chopped 5,100 jobs two years ago and another 6,900 jobs last year, but the bleeding is expected to stop over the next year. Job loss in retail is expected to be around 300 over the next 12 months with most of the employment decline occurring at automobile dealers. Consumer spending, which tanked last year as the economy deteriorated, is expected to stage a moderate rebound in 2010 as consumer confidence hit bottom a few months ago and will continue to advance in the coming months. As the job market improves in the first half of 2010 consumers will begin to open their wallets.
Utilities
Minnesota’s utilities added roughly 900 new positions over the last three years. Utilities will continue to add jobs over the next year, but the rate of hiring will be toned down from the last few years.
Transportation and Warehousing
The deep economic downturn drove transportation and warehousing payroll numbers down by 8,900 between the third quarter of 2008 and the third quarter of 2009. More job loss is expected in transportation and warehousing industries over the next year, but job loss will be minor this year. After losing 2,500 jobs last year, the trucking industry will slowly add jobs over the next year as freight volume begins to increase with the rebounding economy.
Information
Information jobs have been shrinking since 2001 as technological factors reshape the publishing and telecommunications industries. Job cutbacks accelerated last year as the recession took hold. Job loss is expected to lessen modestly over the next year with the annual job loss declining from 2,900 last year to around 1,800 this year.
Finance and Insurance
Employment at the national level in the finance and insurance industries has dropped by 4.6 percent since the third quarter of 2008 as a result of last fall’s financial meltdown. Minnesota’s finance and insurance workforce weathered the meltdown in much better shape, having slipped by only 0.8 percent last year. Finance and insurance jobs are expected to slide again this year, but the decline will be smaller with jobs sliding 0.2 percent.
Real Estate and Rental and Leasing
The deep and persistent slump in housing activity over the last few years added up to roughly 1,700 fewer real estate and rental and leasing jobs two years ago and 1,300 fewer jobs last year. The housing market may have hit bottom over the last few months, but more job loss will occur in real estate and rental and leasing over the next 12 months. The rate of real estate employment decline will, however, be lower than experienced over the last few years.
Professional, Scientific, and Technical Services
The job loss rate at professional, scientific, and technical services firms in Minnesota was nearly three times the national rate last year owing primarily to steeper job cutbacks in the state’s computer systems design services industry. A small job gain is expected this year as hiring accelerates during mid-2010.
Management of Companies
This sector is composed of employment at corporate, subsidiary and regional headquarters offices and holding companies. Payrolls increased by 2,800 positions in 2007 but tumbled by 4,200 in 2008. Payrolls are still expected to slide over the next 12 months, but the job cuts will be nominal.
Administration, Support, Waste Management and Remediation Services
Employment in the administration and support sector nosedived for the second consecutive year as employment numbers at temporary work agencies plummeted in response to the recession. Temporary employees work in nearly all industries and are among the first employees to be laid off when the economy tanks and the first to be hired back when the economy begins to improve. Unlike last year, when the administration, support, waste management and remediation services industry cut 18,600 jobs, job opportunities are predicted to expand by 8,100 jobs as the economy gradually regains its footing.
Educational Services
Private educational services payrolls continued to expand last year despite the headwinds kicked up by the recession. More job growth is expected over the next year as unemployed workers look to upgrade their skills. Job growth, however, will be slower over the next 12 months than during the previous 12 months.
Health Care and Social Assistance
Employment growth in the huge health care and social assistance sector didn’t lose any steam over the last 12 months. The 12,700 jobs added in health care and social assistance between the third quarters of 2008 and 2009 in Minnesota accounted for the bulk of Minnesota’s new jobs last year. Health care and social assistance job growth, however, is likely to slow over the next year partly from state and local government budget cuts. Job expansion is expected to wane to 8,300 new positions this year.
Arts, Entertainment, and Recreation
Employment losses in the arts, entertainment, and recreation industries added up to 2,700 jobs last year, but job growth is expected to return to these industries this year as the economy turns around and income growth, albeit small, returns for Minnesota’s households. Job opportunities are anticipated to improve mainly in the amusement, gambling, and recreation industries.
Accommodation
After three straight years of payroll expansion, the accommodation industry slashed 1,300 jobs last year as the recession reduced business travel along with tourism. Employment in the state’s accommodation industry is expected to continue to decline over the next year as the industry adjusts to rock bottom occupancy rates. Since the travel and tourism industry historically rebounds slower than most of the rest of the economy, no uptick in hiring is expected until late 2010.
Food Services and Drinking Places
After averaging more than 2 percent annual job growth for 15 years, Minnesota’s food services and drinking places industry began to show signs of slowing down three years ago. Food services jobs were in decline even before last fall’s economic crash. The industry cut its workforce by 4,000 workers two years ago and 900 workers over the last four quarters. The job picture at restaurants is expected to improve significantly over the next 12 months with hiring accelerating as 1,600 jobs are added.
All Other Services
Jobs in the all other services sector climbed by nearly 1,200 two years ago but plunged by 4,100 jobs last year as consumers curbed personal service and repair and maintenance spending as the recession deepened. As the recession ends and GDP growth resumes, household incomes will eventually start to rise, and spending on other services will start to rebound, leading to an uptick in hiring. The uptick will add 600 jobs by the end of the third quarter of 2010.
Government
Government workers usually fare better than private-sector workers during recessions, and this held true during this recession as private employment crashed by 4.8 percent last year while public sector employment dropped by only 0.2 percent between the third quarters of 2008 and 2009. State and local government employment is predicted to drop by more over the next 12 months as budget shortfalls for both state and local governments lead to staff reductions. The federal government, however, will be ramping up hiring next year for the 2010 census. Between 4,000 and 5,000 workers will be hired in Minnesota to help with the census with some of the workforce still employed during the third quarter of 2010. The federal payroll will be roughly 2,000 higher in the third quarter of 2010 compared to the third quarter of 2009.
Occupational Outlook
Even though Minnesota’s employment level is expected to be roughly the same 12 months from today, there will still be plenty of churning among occupations as some occupations increase while others slip. Some occupations will decline since they are concentrated in industries that will continue to shed jobs over the year. Other occupations, especially those concentrated in industries that will be expanding their workforces, will increase in size over the next 12 months.
The number of workers employed in occupations such as registered nurses, medical assistants, pharmacy technicians, and home health aides will be increasing next year. Fourteen occupational groups are expected to add jobs over the next 12 months (see Figure 4) with six occupational groups expected to expand from 1.3 to 1.9 percent. Eight occupational groups will have fewer jobs by the third quarter of 2010. Employment in construction and extraction, production, and management occupations will see the largest declines.
Roughly half of Minnesota’s 788 occupations are expected to experience a drop in employment over the next 12 months. Most of the declining occupations, roughly 340, will see employment decline by fewer than 100 jobs. Job loss in some other occupations, however, will be significant. Carpenters, electricians, construction supervisors, and general and operations managers are expected to be hit the hardest.
Approximately 11 percent of occupations are expected to see little change in employment totals over the next year. Job losses in these occupations of shrinking industries will be offset by job gains in expanding industries. Approximately 40 percent of the state’s occupations will add workers over the next 12 months as the job market gradually recovers. These growing occupations will see combined employment growth of about 18,400 jobs, which will help offset the loss of 18,900 jobs in the shrinking occupations.
In normal years when the state’s overall job growth is humming along at an annual rate of between 1 and 1.5 percent, the fastest-growing occupations add jobs at a 4 or 5 percent annual rate. There are a few occupations that will grow this fast next year but not as many as during a more nearly normal year. One occupation will easily outpace all other occupations. Federal government hiring of part-time census workers, classified as interviewers, will produce a 58 percent jump in the number of people working as interviewers during the third quarter of 2010 (see Table1).
A good number of the occupations expected to add the most jobs over the next year are familiar, having made top-20 rankings in past forecasts (see Table 2). The big exception is again interviewer jobs related to census hiring. Occupations that are expected to add the most jobs are either in demand by the fast-growing health care and social assistance sector or are large-sized occupations that will be adding workers as the economy begins to rebound. Roughly two-thirds of all new jobs created between third quarter 2009 and third quarter 2010 will be in one of the 20 occupations listed in Table 2.
Job openings related to employment growth, while an important component of the job market, account for a fairly small slice of all job openings available to job seekers. Most job openings are created by employee turnover, which occurs for a variety of reasons. A carpenter working at Construction Company A job hops over to Construction Company B for better pay. An engineer switches careers, becoming a high school math teacher. A 20-something waitress leaves her job at a restaurant for a database administrator job after completing her computer science degree. Or a 60-year-old machinist retires from his manufacturing firm after working there for 30 years.
While data limitations preclude reliable estimates of job openings arising from workers switching employers but still working in the same occupation, census data on occupational changes by workers can be used to estimate “replacement” openings. Replacement openings arise as workers leave occupations, not just change employers. Some workers switch occupations, other workers retire, return to school, or quit a job for health reasons or to assume household responsibilities.
While individuals already in the workforce will fill many of the replacement openings, some job openings will remain vacant since some workers will leave the workforce. The openings not filled by workers already in the workforce are “net replacement openings.” New workforce entrants and individuals reentering the workforce are more likely to land jobs in occupations where employment is growing or with high-net-replacement needs.
An estimated 59,000 job openings will be generated by replacement needs over the next 12 months. Total job openings will top 77,000 when job openings from replacement needs are added to job openings arising from employment growth. The 77,000 total job openings, while down by 25 percent from a more nearly normal year of job growth, are about four times the number of jobs expected to be lost over the next year.
Almost all occupations will have some job openings from replacement needs, including the occupations expected to decline over the year. For example, the number of workers employed as automotive service technicians is expected to shrink by just 310 between the third quarters of 2009 and 2010. But 380 net replacement openings are anticipated next year in this occupation. Table 3 lists the top-20 occupations when ranked by total job openings. The occupations expected to have the most total job openings over the next year tend to be occupations that already employ a large number of workers and have high turnover rates.
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NOTES
The Minnesota Department of Employment and Economic Development (DEED) produces two sets of employment projections or forecasts. One set, long-term employment projections, looks 10 years into the future and is aimed at young adults planning a career or at older workers considering a career change.
Other job seekers, such as dislocated workers or labor force re-entrants, need information on what the job market will look like next month or nine months down the road. Short-term forecasts strive to fill that need. This report provides a forecast for the state’s job market for the second quarter of 2009 to the second quarter of 2010. Short-term forecasts are updated each quarter to account for recent economic developments. These short-term job forecasts, combined with DEED’s Job Vacancy Survey and Occupations in Demand (OID), help job seekers identify occupations that are currently in demand as well as occupations that will be in demand over the next year.
Short-term forecasts of industry-based employment are based on monthly employment data from January 1990 through September 2009. Employment data are estimated from the Quarterly Census of Employment and Wages (QCEW) and the Current Employment Statistics (CES) programs. QCEW and CES data cover only wage and salary employment or about 92 percent of total jobs in Minnesota. Estimates and forecasts of agricultural jobs, self-employed farmers, and self-employed nonagricultural workers are not included.
Employment forecasts are carried out for 70 industries, mostly at the two-digit North American Industry Classification System (NAICS) level, using five alternative statistical methodologies. National and Minnesota leading indicators are incorporated into the models. Projected industrial employment is converted to occupational employment forecasts using occupational staffing data from the Occupational Employment Statistics (OES) survey.
Net replacement and total-replacement-opening estimates are based on national rates of job separation and net movement of new and experienced workers into and out of occupations. The replacement rates are developed by the Bureau of Labor Statistics using Current Population Survey data.
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1Minnesota’s PMI index is produced at Creighton University and is available at www.creighton.edu/business/economicoutlook/regional/midamericanstates/
minnesota/index.php
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