A survey of manufacturing supply managers shows the Upper Midwest economic recovery is somewhat more robust than the nation as a whole, and one regional economist forecasts that Minnesota is on track to post up to 2 percent employment growth for the year, which would translate into more than 50,000 jobs.
Dr. Ernie P. Goss, Midwest regional economist at Creighton University in Omaha, which compiles the Midwest data, said that “Minnesota’s leading economic indicator … points to advancing economic conditions ahead.”
He notes: “Economic signals from businesses across the state remain positive. Manufacturers, both durable and nondurable, are reporting healthy growth in business. This expansion has spilled over into the rest of the state economy. As a result, I expect second-half job growth in Minnesota to match annualized growth of 2.0 percent in the first half.”
“Our projections are a little bit more conservative,” said Kyle Uphoff of the Minnesota Department of Employment and Economic Development (DEED). Uphoff, assistant labor market information director, said DEED is projecting 1.1 percent job growth, or about 28,000 jobs added, in 2010. “The good news is we’re fairly bullish on manufacturing,” he added, saying DEED projects about 5,500 new manufacturing jobs.
According to the latest nationwide Institute of Supply Management survey, economic activity in the manufacturing sector continued to expand in July for the 12th consecutive month, although at a slower pace than in June. The index, a leading economic indicator, ticked down to 55.5 in July from 56.2 in June, prompting some handwringing about slowing economic growth.
Manufacturing growth has been driven by both a replenishment of depleted inventories and continued export growth, according to the report. It also showed that customer inventories remain “too low” and that manufacturers continue to hire, after shedding jobs a year ago.
Manufacturing Payroll % Change
The index for the nine-state Midwest region, ranging from the Dakotas and Minnesota to Oklahoma and Arkansas, dipped to 60.8 from 62.5 in June, while Minnesota’s Index dipped slightly to 64.4 in July from June’s 65.5.
An index value of greater than 50 indicates growth for the leading economic indicator. Manufacturing, which represents about 30 percent of the economy nationwide, is a very volatile segment, and changes in manufacturing momentum have an important impact on overall economic activity.
Commenting on the region’s relative strength, Creighton University’s Goss said “We’re a little at variance with the national gloom-and-doom reports … Is this part of the country an outlier? I don’t think so. I think gloom-and-doom at the national level is a little overdone right now.”
Goss also called on the Fed to “step up and say this economic downturn is over” and to consider raising the federal funds discount rate from the current historic lows (ranging between zero and 0.25 percent). He also suggested that Congress stand back and allow the economy to continue to recover on its own without additional stimulus spending. “Have a little patience, folks … Sometimes no action is the best course.”
The index findings also echoed the most recent Federal Reserve Bank Beige Book, which reported manufacturing activity picking up across most of the country. The Beige Book compiles anecdotal information from businesses across the spectrum and around the country and is released by the Fed four times a year.
The Minneapolis Fed reported that consumer spending, tourism, manufacturing, energy, mining and agriculture all saw growth in the region. Rresidential construction and the service sectors, meanwhile, reported “mixed activity,” and commercial construction “remained weak.” Both commercial and residential real estate activity decreased.
DEED’s payroll data showed total employment growing 0.2 percent from June 2009 to June 2010, compared with a decline of 4.5 percent from 2008 to 2009. Manufacturing payrolls declined 0.5 percent from June 2009 to 2010, compared with a decline of 11.8 percent in the previous period. For the six months from January to June 2010, however, manufacturing payrolls increased 1.4 percent, compared with a drop of 7.6 percent for the same period a year earlier.