If there is a silver lining in the unemployment numbers that continue to show swelling ranks of jobless in Minnesota, it has to do with a slowing growth rate for jobless numbers.
The rate of change — the “second derivative,” as statisticians call it — is an important indicator of whether the economy is getting worse or experiencing the necessary bottoming-out before it starts growing.
Toby Madden, regional economist at the Federal Reserve Bank of Minneapolis, cautioned observers of unemployment numbers when he was discussing the 2010 regional forecast not to get “overly fixated” on one-month snapshots.
Month-to-month trending over time is a more important indicator of positive or negative momentum in the midst of a recession. By that measure, things might be looking up for Minnesota’s economy.
The most recent “Beige Book,” issued in January by the Fed, reported “overall economic activity in the Ninth District grew tepidly” and that “labor markets remained weak, but the pace of job losses has slowed.”
December numbers for metropolitan area unemployment from the Bureau of Labor Statistics reported that 371 of 372 major metropolitan areas showed higher unemployment rates (not seasonally adjusted) compared with December 2008. The major metro areas of Fargo-Moorhead and Grand Forks-East Grand Forks, straddling the Minnesota-North Dakota border, continue to enjoy the nation’s lowest overall unemployment rates at 4.0 percent and 4.1 percent, respectively.
While unemployment is up from a year ago in all five of Minnesota’s major metropolitan areas, a closer look shows the month-to-month rate of change in unemployment has definitely slowed.
Duluth-Superior has the highest metro-area unemployment in Minnesota at 8.2 percent, up half a percentage point from a year ago, However, the month-to-month change tells a more encouraging story. In the fourth quarter of 2008, Duluth’s unemployment rate rose about 1 percentage point a month, In the last three months of 2009, however, the rate was “only” up three-tenths of 1 percent each month.
St. Cloud’s unemployment rate, the second-highest statewide at 7.4 percent in December, was up six-tenths of 1 percent from November. Last year, in December 2008, St. Cloud’s unemployment rate shot up 1.2 percentage points. In statisticians’ parlance, the second derivative is positive.
While Duluth and St. Cloud numbers show the most consistent pattern of declining month-to-month unemployment growth, each of Minnesota’s metro areas shows a similar pattern.
A research paper (PDF) titled “A slow recovery is under way” was recently released by Fed economist Madden and associate economist Rob Grunewald. In it, they cautioned that the Upper Midwest region should expect “unemployment rates will remain at relatively high levels during 2010.”
But they also give some hopeful signs, noting that “relatively high unemployment rates during a recovery reflect more than low employment.”
They said: “Increases in the unemployment rate are caused not only by net job losses, but also by gains in the labor force as workers who previously gave up looking for work begin to look for jobs again as prospects for employment improve. When the pace of layoffs slows, an increase in unemployment is a likely sign that workers who had given up looking for a job are now re-entering the workforce.”