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Economic indicators: There’s a positive tone underneath all the data noise

Anyone watching the economy these days can easily get overwhelmed by all the data.  Often, the challenge is trying to find an identifiable tone playing underneath all the noise.

We’ve got a nurses strike looming in the Twin Cities, continuing challenges in the housing and commercial real estate markets, a ballooning federal deficit, and an ecological and economic disaster unfolding in the Gulf of Mexico.

But in the face of those gloomy facts, several recent bits of economic news and financial indicators are sending decidedly positive notes as the economy, however tepid and weak, continues to recover.

At the top of the list, the U.S. Bureau of Labor Statistics has released three separate indicators this week:

• This morning’s jobs report shows employment growing by 431,000, mostly because of the addition of 411,000 temporary census workers in May. Private-sector employment added 41,000 jobs. Manufacturing, temporary-help services and mining all added jobs, while construction employment declined. The unemployment rate continued to decline, edging down to 9.7 percent from 9.9 percent in April and off from its peak of 10.1 percent last fall.

The Minnesota Department of Employment and Economic Development is scheduled to release the state’s May unemployment numbers on June 17.

Labor productivity numbers released Tuesday increased at a 2.8 percent annual rate during the first quarter of 2010, with output rising 4 percent and hours worked rising 1.1 percent in the overall economy. The numbers were even stronger in the manufacturing sector, with 1.5 percent productivity growth, 7.2 output growth and a 5.6 percent increase in hours worked.

• Earlier this week, the previously announced state jobless numbers were broken out by metropolitan statistical areas, showing improvement in the seasonally unadjusted unemployment rate across 371 metropolitan areas. All of Minnesota’s metro areas showed improvement, both month to month and year over year. Duluth showed the largest improvement from April 2009 to April 2010, a 1.9 percentage point drop in unemployment. Mankato posted the largest monthly improvement,1.6 percentage points, March to April.

* Not seasonally Adjusted/Source: U.S. Bureau of Labor Statistics

In addition,U.S. manufacturing grew at a faster pace in May than forecast, with factories adding workers to meet the greatest export demand in two decades, as well as a revival in domestic orders, according to the latest Manufacturing Institute for Supply Management Report On Business. The survey of corporate supply managers reportedgrowth in 16 of18 manufacturing industries in May, the 10th consecutive month of growth, and the 13th consecutive month the overall economy grew.

A subset of the survey focusing on nine Midwestern states, including Minnesota, shows advances for a sixth straight month, pointing to a growing regional economy. The measurement of Mid-America Business Conditions, released by Creighton University, also shows the regional employment index rising above neutral growth for a fifth straight month and reaching its highest level in nearly four years.

Nevertheless, these surveys also found cautious hiring behavior and concerns that economic turmoil in Europe and a strong dollar could dampen U.S. exports and the recovery.

So what do the data, coming out of the “real” economy, show, particularly for local companies?

Earlier this week, IBM projected 4 percent growth, or a $953 million increase in sales, from a year ago for electronics and appliances by U.S. retailers in June through August. That presumably is good news for Best Buy and, to a lesser extent, Target.

Despite the economic worries in Europe and a stronger dollar, some of Minnesota’s largest export-oriented manufacturers continue to report solid growth in revenue and earnings for their most recent quarterly results.

Two weeks ago, Bloomington-based Donaldson Co. cited “improving global economic conditions, new product introductions and emerging market growth, as it reported 20 percent year-over-year sales growth, 91 percent earnings growth and upped its outlook for the year.

At the same time, Medtronic pointed to international revenue growth of 20 percent as it reported a “record fourth quarter,” its first $4 billion sales quarter ever and 52 percent growth in earning per share. The Fridley-based company also issued a bullish outlook for revenue and earnings growth next year.

Earlier, St. Paul-based Ecolab credited its most recent 6 percent revenue growth to exports and upped its outlook for the year. Maplewood-based 3M Co. told a similar tale, crediting “improved market penetration and new product flow along with significant growth in important end markets” for its 25 percent revenue growth and 74 percent earnings growth.

We’ll continue to get more signals in coming days as the Federal Reserve Banks around the county, including the Minneapolis fed, release their quarterly beige book survey of business conditions on June 9.  We’ll see if the notes turn flat or continue to strike a positive tone.

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Comments (8)

  1. Submitted by Ron Gotzman on 06/04/2010 - 09:44 am.

    Great Spin…

  2. Submitted by Richard Schulze on 06/04/2010 - 11:53 am.

    I think it’s really hard to guess how this is going to play out in detail. The drop in employment was far more rapid and sustained than in any post-WW2 recession. Really, we are in a depression that was kept from going all the way down by unprecedented government action, so the comparisons may be worth nothing. Maybe employment will snap back at some point as sharply as it fell. Productivity increases suggest that workforces are pulled taut. Any increase in demand as fear of losing jobs decreases could feed directly into new jobs.

    Hell if I know. But I do know that not so many years from now, the fear and gloom will be as forgotten as the euphoria and confidence of not so many years ago.

  3. Submitted by Glenn Mesaros on 06/04/2010 - 01:43 pm.

    “Prosperity is just around the corner ….” The problem is this guy does not know what prosperity is. He thinks hedge funds = prosperity. The dirty secret is that America does not need Wall Street. It no longer has any useful function. They are just a bunch a pirates. Shut them down, and force these parasites to get a real job.

    Read the Vanity Fair feature article on the Pecora Commission to see what a real Congress should do with these bandits.

  4. Submitted by William Pappas on 06/04/2010 - 09:39 pm.

    Mr. Schulze, one thing is for sure is that “not so many years from now” the middle class will not be participating in this recovery in any significant way. Incomes have fallen too far, retirement accounts have been too diminished, college debt is leaving both graduates and helpful parents unable to purchase anything, health insurance costs will not be brought under control, home equity has all but disappeared and too many middle class families have borrowed too much in achieving the American Dream. This will take decades to reverse or even reduce its impact on our consumer economy. The continued pursuit of neoliberal trade policy will also contribute to the downward spiral of wages. No, Mr. Schulze, this recession is much different and exposes the structural deficiencies inherent in this economy that, in effect, seek to remove one middle class benefit after another while institutionalizing corporate advantage and privlage.

  5. Submitted by Richard Schulze on 06/05/2010 - 06:51 am.

    Don’t feel sorry for the unskilled US factory worker. They need to go out and get retrained for the modern economy. The decline in US factory employment is actually a symptom of otherwise healthy business activity of trying to keep costs low by raising output per employee. Or in other words getting more done with less people.

    Regarding manufacturing jobs. The US’s percentage of global manufacturing output has hovered around 20% from 1982 to 1995. From 1995 to the present this share has been about 22%. From 1987 to 2005 real value added manufacturing output has increased from $820BN to $1.550TR…or almost doubled. Yet manufacturing jobs continue to disappear due to automation and offshoring.

    Greater output with less workers is a good thing for the economy has a whole, but is bad for the workers that rely on factory employment. The lesson here is that the workers need to see the writing on the wall and get out of factory work and get retrained or educated. Modern factory workers often need backgrounds in computers or engineering to operate the automated equipment required to make value added products such as steel.

    In short manufacturing in the US is quite healthy. However, for unskilled factory workers it is a miserable way to make a living.

  6. Submitted by Richard Schulze on 06/05/2010 - 07:22 am.

    Mr. Pappas, I should have added that I agree with you. The issues that are affecting the middle class are not new and as you point out, a troubling sign of things to come.

    Middle-skill jobs have declined as a share of occupations across Europe as well, and inequality has increased, though not as much as in America. America’s labor market may be unique in the extent of its middle-class troubles, but not in their existence. How to maintain a stable middle class amid sweeping technological change is a problem the developed world is only beginning to appreciate. Governments will be sorely tempted to protect workers, but a flexible, well-educated labor force is likely to fare best in the transition. That message is less politically galvanizing than bank-bashing.

  7. Submitted by William Pappas on 06/05/2010 - 11:59 am.

    Mr. Schultze, you can manipulate statistics all you want but the decision to advocate free trade at the expense of domestic manufacturing has led to the decline and export of our manufacturing jobs. Don’t forget that when wages fall productivity also rises. Our company used to make a living on building local manufacturing. That sector simply does not exist any longer. That’s a fact. Many small (with facilities that cost less than ten million) manufacturing companies have either sold out or down sized to survive. Without domestic trade protections against cheap foreign production (Polaris) enjoyed by corporations exploiting third world workers and nonexistant environmental laws there will be many more “unskilled factory workers” as you call them joining the ranks of the unemployed. Where are those good paying jobs you think will materialize from their retraining? They simply don’t exist any longer. You need to understand, Mr. Schulze, that if you don’t pay the workers a livable wage there will be no long term economic recovery and if we don’t start producing real products instead of concentrating our growth in the financial sector the middle class will be left far behind.

  8. Submitted by Richard Schulze on 06/05/2010 - 08:30 pm.

    Fair trade’ is inherently unfair. It has to be executed from a command economy which has been proven not to work.

    Principles are hard to abide by, or they wouldn’t be principles and they wouldn’t be needed. abandon free market principles at your peril. fair trade is veiled socialism and will progressively destroy any economy.

    It is too bad that most people don’t understand that a free market might look unfair while it corrects misdeeds and misconceptions in ways that aren’t visible. free trade will strengthen all economies that are involved in it, thus raising the standard of living for all.

    Fair trade will slowly grind us all into decay.

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