Minnesota Economic Indicators

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

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

The Minnesota Index climbed for the 13th straight month in October increasing 0.2 percent. October’s increase was slightly higher than recent months indicating that the Minnesota economy, after slowing during the summer, may be picking up speed. The U.S. index, after flattening out during the summer, also increased 0.2 percent in October pointing toward a national economy that is starting to gain some traction. Both indices were at 147.8 last October. Minnesota’s index climbed by 4.3 points compared to the national increase of 2.6 points. Minnesota’s economic recovery has been stronger than the nation’s.

 

Minnesota’s seasonally adjusted Wage and Salary Employment came roaring back in October as employers added 14,100 jobs, the best monthly showing since January. All of the job growth occurred in service-providing industries as manufacturing and construction job cutbacks added up to 4,400 fewer goods-producing positions. The 18,500 jobs added in the service-providing sector was the largest monthly gain since April 2005.

Service-providing job growth was powered by professional and business services and by trade, transportation and utilities. Employment also jumped significantly in other services; leisure and hospitality; and in educational and health services. Over-the-year job growth for unadjusted employment climbed to 1.6 percent, the highest yearly increase since March 2006, but the state’s job total is still way below pre-recession levels. The state added 42,100 payroll jobs between October 2009 and 2010 but lost 132,800 jobs between October 2008 and 2009.

The Minnesota Leading Index, which replaces the adjusted Business Incorporations this month, increased for the first time in six months in October. October’s 1.14 reading suggests that economic expansion in Minnesota will continue through the first quarter of 2011. A positive leading index projects economic growth over the next six months. Minnesota’s index along with that of the other states has been calculated back to January 1982. Minnesota’s leading index has varied from -1.48 in January 2009 to 3.73 in March 1984.

Minnesota’s Purchasing Managers’ Index (PMI) dropped for the fourth consecutive month indicating that Minnesota’s manufacturing rebound may lose some steam in the coming months. October’s 52.8 reading is the lowest since January 2010. January was also the last month prior to October that Minnesota’s index trailed the national index. Other manufacturing data, like average factory hours, however, are pointing toward a pickup in Minnesota’s manufacturing activity. The employment component of the PMI has been above 50 all year long, which is consistent with the job gains experienced so far in 2010.
 

Seasonally adjusted Residential Building Permits unexpectedly soared in October spiking 157.8 percent. That is the second-largest monthly jump recorded over the 40 years of building permit records. While any upward movement in home-building activity is a welcomed development, October’s spike only moved home-building permits back up to levels seen earlier in the year. Home-building activity in Minnesota isn’t likely to return to any sort of normal level for two or three years as foreclosure activity remains elevated and prices have yet to stabilize. The supply of housing inventory remains at historic highs.

Adjusted weekly Manufacturing Hours rose above 41 hours for the first time in more than two and a half years. The recent surge in factory hours runs contrary to the declining PMI index. If manufacturing hours continue to increase, hiring by manufacturers is likely to pick up as overtime piles up. 

Adjusted weekly Manufacturing Earnings ticked up for the second month in a row climbing 1.7 percent to $769.15. Factory paychecks, after slipping during the middle of the year, have rebounded over the last two months but are still running below pre-recession paychecks.

Adjusted online Help-Wanted Ads climbed for the fourth consecutive month reaching a two-year high in October. Hiring should continue to accelerate over the next few months with demand for workers increasing as evidenced by rising help-wanted ads. Minnesota’s job growth will likely continue to outpace the national rate as online help-wanted ads are up 51 percent from a year ago in Minnesota compared to 33 percent nationally.

Adjusted Initial Claims for Unemployment Benefits (UB) inched down for the second month in a row in October. October’s 0.9 percent drop is consistent with the view that the job market is showing moderate signs of improvement. Falling initial claim levels indicate decreasing layoffs that should show up as steadier job growth down the road.

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