Manufacturers express cautious optimism about the economy, though initial jobless claims continue to rise.
October 1, 2009
Minnesota's manufacturing sector continues to recover -- although barely -- according to a September survey of supply managers released Thursday.
"It's rather sluggish at this point," said Toby Madden, a regional economist for the Federal Reserve Bank of Minneapolis. "They are getting more orders and they are producing more, but they are getting more out of their current workforces," Madden said. "What is lagging is employment."
People are still struggling to find work in Minnesota and across the country. The U.S. Department of Labor reported Thursday that weekly initial claims for unemployment insurance rose again. About 551,000 claims were filed for the week ending Sept. 26, up 17,000 from the previous week.
In the manufacturing survey, Minnesota's "business conditions index" number was 55.4 in September, down from 58 in August. But economists said that slight dip is not a major concern, because any number above 50 signals growth.
"We are seeing the housing market improving in Minnesota. Construction activity is spilling over into all sorts of other sectors," said Ernie Goss, a Creighton University economist who oversees the monthly nine-state survey of supply managers.
Minnesota registered just below the regional average of 56.2, which Goss said was the highest in two years of conducting the survey. The regional index jumped nearly 8 points from August.
"The economy is improving and the pace of improvement is a bit stronger than I anticipated," Goss said, but in the region's economy he's worried about inflationary pressures, lingering unemployment and a reduction in farm income. The survey covers Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma and South Dakota.
Tom Mason, on behalf of Enterprise Minnesota, a nonprofit consulting organization for manufacturers, recently completed seven focus groups with leaders of Minnesota manufacturing companies.
"There is a real cautious optimism out there," Mason said. "There wasn't a single person who thought the worst was yet to come."
Mason said most companies had laid off workers and some may cut even more. "But they see the end in sight," he said.
The state's unemployment rate was 8 percent in August, and manufacturers cut about 900 jobs during that month, the most recent for which statistics are available.
Over the past year Minnesota employers have cut 40,100 manufacturing jobs, or 11.7 percent of the sector's employment base, according to the state of Minnesota.
During the third quarter, which ended Wednesday, Goss said he believes that Minnesota's economy moved out of the recession. "The problem was the jobs weren't there," he said.
Goss anticipates the economy will recover at a gradual pace and Minnesota's unemployment rate could rise slightly as some discouraged and unemployed workers once again resume their job searches.
The Institute for Supply Management, which conducts a national survey, reported Thursday that the manufacturing sector grew in September for the second month in a row. The national index was 52.6, down from 52.9 in August.
But employment among U.S. manufacturers declined for the 14th consecutive month.
"While the rate of growth moderated slightly when compared to August, the recovery broadened as the number of industries reporting growth increased from 11 to 13," Norbert Ore, chairman of the U.S. survey committee, said in a statement. "Both new orders and production are growing, but at a slower rate when compared to August."
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