Signs of Recovery in Southwest Minnesota

by Cameron Macht - cameron.macht@state.mn.us
November 2011

Signs, Signs, Everywhere a Sign

Judging by the increasing number of “Help Wanted” signs now seen in the windows and advertisements of local employers, there are an increasing number of signs of an economic recovery, especially in Southwest and South Central Minnesota. While unemployment rates have dropped below 6 percent in the state — which is nearly 3 percent lower than the national rate — rates in the southwest corner of the state remain about 1 percent lower than the state.

According to data from DEED’s Local Area Unemployment Statistics program, the 23-county planning region added nearly 2,500 employed workers from September 2010 to September 2011, a steady 1.2 percent gain. That was twice as fast as the national increase in employment over the last 12 months. In contrast, the number of unemployed workers in the region dropped 11 percent in the last year, twice as fast as the nationwide decline in unemployment. In other words, regional hiring activity appears to be picking up, while layoff activity appears to be slowing down.

Another good indicator of the region’s economic recovery can be found in DEED’s most recent Job Vacancy Survey, the semi-annual survey of employers to estimate hiring demand and job vacancy characteristics by industry, occupation, and firm size in Minnesota. The information is gathered through a survey of about 13,000 firms stratified by 13 regions of the state, as well as 20 industry sectors and four size classes.

Statewide Recovery Starts at a Local Level

During the second quarter of 2011 employers reported a total of 54,670 vacancies, up 32.1 percent from the second quarter of 2010. Statewide,there were 3.6 unemployed people for each vacancy during the second quarter of 2011, while a year earlier, there were 4.8 unemployed people for each vacancy. This over-the-year decrease in the number of unemployed persons per vacancy was driven both by a slight decrease in the total number of unemployed and an increase in the number of job vacancies. Although the labor market is still challenging, this was encouraging news for job seekers.

But in Southwest and South Central Minnesota, job vacancies jumped 52.6 percent over the last year. Employers in the region reported nearly 1,500 more vacancies in the second quarter of 2011, making the region the first in the state to surpass the number of job vacancies reported in the second quarter of 2007. Southwest Minnesota was one of just two regions that had more vacancies in the second quarter of 2011, whereas employers in Minnesota are still reporting about 13 percent fewer openings than before the recession (see Figure 1).

Both the state and the region watched job vacancies fall by 50 percent from the second quarter of 2007 to the second quarter of 2009. At that time there were eight unemployed people for every job vacancy in the region. While the state has recovered about 75 percent of that decline, employers in the southwest region doubled the number of vacancies reported over the last two years. The region’s recovery means there are now about 3.2 unemployed people for every job vacancy.

Good Things Come in Small Businesses

By size, firms with 50 or more employees account for 56.9 percent of total job vacancies in the state, while firms with 10 to 49 employees account for 30.9 percent of total job vacancies. Very small firms, those with less than 10 employees, have the fewest reported job vacancies representing 12.1 percent of the total.

But in southwest and south central, small businesses are leading the recovery. Nearly half (48.5 percent) of all job vacancies were listed by employers with fewer than 50 employees, compared to just 15 percent of vacancies listed at businesses with 250 or more employees.

Perhaps more important, the number of vacancies listed was growing much faster for the smallest employers. In the southwest region the number of job vacancies for businesses with one to nine employees nearly tripled (+172.7 percent) from the second quarter of 2009 to the second quarter of 2011, compared to a 90 percent increase for firms with 250 or more employees (see Table 1).

The jump in small business hiring in the region is even more impressive in comparison to the state as a whole, where the number of job vacancies at firms with less than 10 employees increased just 12 percent over the last two years. Both the region and the state saw similar 75 percent increases in job vacancies at businesses with 10 to 49 employees.

Nursing the Region Back to Health

Nearly one in every four job vacancies (23.9 percent) in the southwest region was in the health care and social assistance industry, compared to about 18 percent statewide. After increasing 70.5 percent from the second quarter of 2010 to the second quarter of 2011, health care had nearly twice as many job vacancies as the next largest industry in the region. In the midst of widespread declines it was the only industry in the region to increase its share of job vacancies each year during the recession (see Table 2).

Back in the second quarter of 2007, manufacturing had the largest number of job vacancies in the region, narrowly edging out health care and social assistance. That remained the case in 2008, then manufacturing hiring activity fell off the table in 2009 as the recession set in. But from 2009 to 2011 the number of manufacturing job vacancies jumped up 255 percent, showing strong signs of recovery in the region.

Likewise, after nearly flat-lining during the recession, the construction industry was also resuscitated in the second quarter of 2011. Construction job vacancies dropped as low as 60 in the second quarter of 2010, then built back up to 460 job vacancies in the second quarter of 2011. That was more than 10 times as fast as the increase in construction job vacancies reported in the state over the last year.

All but three industries in the region saw increases in the number of job vacancies in the last year, led by huge gains in wholesale trade, construction, transportation and warehousing, management of companies, agriculture, other services, and administrative and support services. Employers in these seven industries at least doubled the number of job vacancies from 2010 to 2011, providing new opportunities to job seekers in the region.

Back to the Future

DEED’s Job Vacancy Survey also asks employers to report their plans to maintain or change current employment levels over the next six months, which included more encouraging signs of recovery. Statewide, about 10 percent of businesses expect to increase employment levels, while less than 3.5 percent planned to decrease their current employment levels. The other 87 percent expect their current employment levels to remain the same.

Despite recent trends, fewer firms in Southwest and South Central Minnesota were expecting to increase employment compared to the state, although a larger percentage were planning to keep employment constant. Upon closer examination, the difference can be attributed to the region’s higher reliance on small and very small businesses, which were the least likely to report plans for increasing employment but the most likely to keep employment constant (see Table 3).

Because the region had a higher percentage of jobs available at these smaller employers, they may be most focused on hiring for current needs rather than future needs. In contrast, the region had fewer large businesses which were more likely to be both adding and cutting jobs (see Table 3).

Identifying Occupations in Demand

Job Vacancy Survey data are valuable in helping job seekers and employers understand who is hiring and for what fields of work. But job vacancy counts alone are not a complete picture of labor market demand, since larger occupations tend to have higher numbers of vacancies. To that end, DEED uses Job Vacancy Survey data to produce the Occupations in Demand (OID) tool.

The OID tool provides a ranked list of occupations currently in demand, along with links to occupational descriptions, wages, and programs of study. In addition to Job Vacancy Survey statistics, these lists also use other sources of data including Unemployment Insurance claimants and Occupational Employment Statistics. For more information on OID go to: www.PositivelyMinnesota.com/OID.

Using these data, job seekers can get a better handle on the occupations showing hiring demand within their region. The information also helps employment, training, and education providers understand current labor market conditions in their region so they can tailor services to meet customer and employer needs.

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