Minnesota Economic Indicators

by Dave Senf - david.senf@state.mn.us
October 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 August  2011 while all other indicators are current through September 2011. See the feature article in the Minnesota Employment Review, May 2010, for more information on the Minnesota Index.
 

The Minnesota Index recorded a solid 0.3 percent increase for the third consecutive month in September, advancing to its highest reading since October 2008. Minnesota’s index has been outpacing the U.S. index for the past five months.

The Minnesota index is up 3.1 percent from a year ago, the highest annual jump since March 2006. Minnesota’s over-the-year gain ranks eighth across the states, exceeding the 2.7 percent national increase. Minnesota’s seasonally adjusted unemployment rate dipped only 0.2 percentage points, however, compared to a 0.5 percent improvement in the national rate over the last year. The divergence can be explained by Minnesota’s labor force participation holding steady while the national labor force tailed off.

Minnesota’s adjusted Wage and Salary Employment zigzagged down in September, slipping 0.3 percent. Job loss was widespread as both the goods producing and service providing sectors cut payroll numbers. Job cutbacks were high in trade, transportation, and utilities, in leisure and hospitality, in manufacturing, in educational and health services, and in construction. The decrease in manufacturing, in trade, transportation, and utilities, and in educational and health services was surprising as these sectors had been adding workers.

September’s job loss would have been worse without employment gains in government, other services, and financial activities. The 7,000 jobs added to public sector payrolls in September were concentrated at Minnesota’s public schools. Over-the-year job growth dropped to 1.0 percent in September, just below the 1.1 percent national increase and just above the 0.9 percent projected annual average job growth rate from 2009 to 2019.

The Minnesota Leading Index took its second big jump in three months in August, soaring to 2.73, the highest level since November 1997. The robust August jump was generated in part by the return of state employees to monthly payroll numbers. The upward direction is encouraging, suggesting a pickup in Minnesota’s economy over the next six months.

The Minnesota’s Purchasing Managers’ Index (PMI) dipped for the second month in a row but remains safely above the growth neutral reading of 50. September’s 55.3 reading was again above both the national and Mid-America indices which is consistent with the view that Minnesota’s economy is healthier than the national economy. Minnesota’s higher PMI suggests that the state’s economy should continue to expand faster than the rest of the U.S. through the end of the year.

Adjusted Residential Building Permits bounced up in September but the 21.5 percent increase was just another bounce along the bottom.  Minnesota’s home-building industry is still hobbled by large inventories of foreclosed homes that discourage any near-term revival in home construction even as the job market gradually improves.

Adjusted weekly Manufacturing Hours climbed for the second straight month in September, pushing factory hours up to 41.1 hours, the longest workweek since last February. The increased factory workweek, however, is inconsistent with September’s 3,700 manufacturing job decline.

Adjusted weekly Manufacturing Earnings also increased in September but the increase was modest, climbing by 0.1 percent in real dollars. Real manufacturing earnings have been down when compared to a year ago in six out of the last seven months which is surprising as manufacturers have reported a growing shortage of skilled workers. A labor shortage is usually associated with rising real wages.

The Conference Board’s count of adjusted online Help-Wanted Ads in Minnesota declined for the third month in a row in September, sliding 1.7 percent. The last time online help-wanted advertising decreased for three straight months in Minnesota was at the end of 2008. The downward drift in help-wanted ads may be signaling a coming hiring slowdown, but advertising levels remain significantly above a year ago. Online help-wanted ads have declined more nationally than in Minnesota over the last few months, resulting in Minnesota’s share of online ads reaching about 2.5 percent compared to the state’s 2 percent share of employment. Labor demand in Minnesota remains stronger than at the national level based on the difference in online help-wanted ad levels.

Adjusted Initial Claims for Unemployment Benefits (UB) declined slightly in September, staying below 25,000 claims for two straight months for the first time since mid 2008. If initial claims remains below 25,000 each month, job growth will continue to run at or above 1.0 percent on a year-over-year basis.

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