Industrial Analysis

by Jerry Brown - jerry.brown@state.mn.us 
October 2009

Monthly analysis is based on seasonally adjusted employment data.
Yearly analysis is based on unadjusted employment data.*

Overview

Minnesota employment estimates for September 2009 showed a loss of 7,900 with the losses largely in government, down 5,600 jobs, and leisure and hospitality, down 4,900. In all, six supersectors showed losses and five increased. Trade, transportation, and utilities added 2,600 jobs, and manufacturing was up 1,800. The rate of decline for the 12-month period was -4.5 percent, up from -4.2 percent in August. Much of the higher rate of loss comes from poor results from two highly seasonal supersectors, government, which went from +0.6 percent in August to -2.8 percent in September, and leisure and hospitality, where annual growth worsened from -1.9 to -3.4 percent.

Mining and Logging

After several months of reducing stockpiles, iron ore mines have recalled a number of laid-off workers. As a result employment in mining and logging increased by 400 in September. The impact of this can also be seen in the rate of over-the-year loss, which stood at 19.9 percent compared to 32.2 percent in July.

Construction

Employment in construction fell by 700 jobs over the month of September. In the past six months employment has fallen in only two months. Prior to this period, employment for the supersector experienced almost uninterrupted monthly losses for about two years. So a period of intermittent losses is positive by comparison. The monthly losses were spread among the components with none being notably weaker or stronger than the others. Compared to year-ago data, the supersector still showed the largest rate of decline outside of mining and logging at 12.6 percent. Residential building construction was the weakest industry group at -27.5 over the year. Heavy and civil engineering construction showed the least decline at 3.7 percent, helped by additional spending on publicly funded projects.

Manufacturing

The monthly increase of 1,800 in manufacturing employment helped to offset the loss of 1,500 jobs (revised) posted in August. The past three months broke a long period of large employment declines for the supersector. Employment grew two of the past three months for a net increase of 1,100 jobs, which compares positively to a loss of 12,400 during second quarter 2009. The majority of the monthly increase was in durable-goods manufacturing, where there was a notable increase in computer and electronic product manufacturing. Nondurable goods also showed a third consecutive month of gains, up 600. Compared to last September the supersector was down 10.9 percent overall and 14.3 percent in durable-goods manufacturing. Most of the detailed industries continue to show high rates of over-the-year loss. The recent improvement in manufacturing employment is in line with improved conditions for manufacturing as reported by the ISM Manufacturing Index, which has moved above 50 in recent months, indicating an expanding manufacturing economy. More specifically the Business Conditions Index for Minnesota produced at Creighton University moved to 58 in August, before retracting a bit to 55.4 in September, still above the growth neutral point.

Trade, Transportation, and Utilities (TTU)

Trade, transportation, and utilities added 2,600 jobs for the month mainly on the strength of gains in durable-goods wholesaling and in transportation, warehousing, and utilities. Retail trade showed only a slight increase. Of note were the rather weak results in general merchandise stores. Recent reports have indicated an expectation among retailers for a decline in holiday sales. This portends another year of below-normal seasonal hiring in retail trade. The weakness in general merchandise stores this month is likely an early indicator of the reduced hiring expected this year. Outside the spike in auto sales produced by the cash-for-clunkers program, retail sales are still soft with substantial losses compared to year-ago data. Compared to last year, employment in the supersector was down 23,300. About 9,500 of this loss was in transportation and warehousing. Retail was down 7,000 jobs, and wholesale trade fell by 6,800. The best description is to say there were no areas of strength to be found in any of the industry components in trade, transportation, and utilities when compared to year-ago data.

Information

The number of jobs in information industries increased by an estimated 500 in September after adding 300 last month. The improvements appear to be made of small dispersed gains in the supersector. This is the first period of back-to-back monthly growth since last October. The rate of annual loss improved to 4.8 percent but remains only a bit below the August peak loss of 5.2 percent. Publishing industries continued to account for a very large part of the supersector’s annual loss.

Financial Activities

There was a small gain in financial activities essentially from seasonal job cuts that were slightly below expectations in real estate and rental and leasing. The supersector has weakened to the point that every estimated industry except insurance carriers showed a loss compared to last September, with the supersector as a whole down by 1,700 annually. Insurance carriers showed an increase of only 1.7 percent annually, far short of the 6.2 percent average growth posted in 2008.

Professional and Business Services (PBS)

The loss of 600 jobs over the past month in business services industries reflects rather small losses in each of its three components. The largest decline was in management of companies with a loss of 300. In all, the change for the month was rather benign compared to the often large monthly losses commonly experienced since September last year. The rate of loss over the past 12 months measured 9.7 percent, equal to 32,000 jobs. Over half of these losses were in administrative support and waste management and remediation where employment services employment was down 15.8 percent compared to last year.

Educational and Health Services

Employment levels in educational and health services fell 1,300 in September as seasonal hiring in education industries, particularly private colleges and universities, was substantially below expectations. The losses in private education services erased a monthly gain of 900 in health care and social welfare services. Educational and health services was the only supersector that still showed annual growth in September, up 11,700 compared to last year. This 2.6 percent rate of growth is substantial, but below the average rate of growth experienced from 2005 to 2008. Educational services moved into negative territory, down 900 over the year, but we will have to wait until October to determine whether the loss is an artifact of variation in seasonal hiring. Employment at hospitals has gradually declined since last January.

Leisure and Hospitality

Leisure and hospitality saw a second consecutive month of very large losses, down 4,900 in September, following a drop of 3,000 in August. The decline represents weakness in arts, entertainment, and amusement and in accommodation and food services. Outside of accommodation, every industry grouping estimated showed seasonal declines well in excess of usual seasonal change. The monthly loss of 3,600 in accommodation and food services is the largest thus far in this recession. The losses of the last two months have caused the rate of annual loss to increase to -3.4 percent compared to -0.4 percent in July.

Other Services

The monthly loss of 400 in other services is the fifth loss in the past six months. The past year has been marked mainly by gradual monthly declines. This trend has led to a decline in employment of 3,000 over the past 12 months. Repair and maintenance was off 1,400 and religious, grantmaking, civic, professional, and similar organizations was down 900 since last year.

Government

The level of government employment fell by 5,600 in September. There were small losses in federal and state government, but 4,900 of the loss came in local government. Local government education experienced a seasonal increase that was well below the expected seasonal increase for the month. The over-the-year change for the supersector moved to -2.8 percent from 0.6 in August (revised). The largest part of this weakening was in local government, particularly local government education. However, it should be remembered that seasonal change expectations reflect the usual change for the month for an average year. The actual change in a given year is rarely “average.” We will not get a full sense of the state of public employment in either state or local government until the seasonal hiring process is completed in October.

* Over-the-year data are not seasonally adjusted because of small changes in seasonal adjustment factors from year to year. Also, there is no seasonality in over-the-year changes.