Manufacturing employment dips, but Minnesota's unemployment improves
Susan E. Peterson
Star Tribune
Wednesday, July 18, 2001
Minnesota's unemployment rate showed a marked improvement in June, thanks mostly to a rebound in construction jobs. However, state and national
manufacturing activity continued to slide, with production at the nation's factories, mines and utilities posting the worst showing since January.
Minnesota's seasonally adjusted unemployment rate dropped to 3.5 percent in June after hitting a four-year high of 3.9 percent in April and May. The state gained
3,500 jobs in June, including 2,900 in construction, where favorable weather and lower interest rates sparked increased activity.
But that increase offset the loss of 2,000 Minnesota manufacturing jobs in June and a decline of 8,500 such jobs in the state since June 2000. More bad news for
manufacturing was that the number of initial claims for unemployment benefits by laid-off manufacturing workers tripled to 8,584 in June, from 2,533 a year
earlier.
"Manufacturing employment continues to bleed," said Jay Mousa, research and statistics director for the Minnesota Department of Economic Security. "We haven't
seen this kind of job loss in this sector since the last recession" in the early 1990s.
The job losses are hitting almost all categories of manufacturers except medical instruments, which had a "modest gain" for the year, Mousa said. The biggest declines
were in industrial machinery, which includes making office and computer equipment, electronic products, transportation equipment and measuring and controlling
devices.
Mousa noted that 15.9 percent of Minnesota's jobs are in manufacturing, a higher proportion than the national total of 13.4 percent. "In the past 10 years, while the
nation was losing manufacturing jobs, Minnesota was adding them," he said. "But this is no longer the case."
That view was echoed by Art Sneen, president of the Manufacturers Alliance, a New Hope-based organization with about 500 Minnesota members. Manufacturing
employment has declined sharply in the past four months, and more companies are cutting temporary employees or making small layoffs, as well as reining in
expenses such as training budgets, Sneen said.
"Last year and at the beginning of this year, manufacturers were still scrambling to hire qualified people. Now there's been a surprising change," Sneen said.
Meanwhile, the Federal Reserve Board reported Tuesday that total U.S. manufacturing production fell by 0.7 percent last month on top of a 0.5 percent drop in May.
It was the ninth consecutive monthly decline.
"These numbers don't provide any evidence that the bottom has indeed been hit in the factory sector," said Lynn Reaser, chief economist at Banc of America Capital
Management.
Operating capacity sank to its lowest point in nearly 18 years as companies throttled back production in the face of sagging demand. The sector operated at 77
percent of capacity in June, compared with 77.6 percent in May.
"It's clear that the downturn in manufacturing that began last September has been nearly as severe as the 1990-91 recession," said Jerry Jasinowski, president of the
National Association of Manufacturers.
At factories, output fell by 0.8 percent in June, after a 0.5 percent decline. The weakness was widespread, with lower production of cars and trucks, home electronics
and appliances, industrial machinery, semiconductors and metal products.
To stave off recession, the Fed has slashed interest rates six times this year, totaling 2.75 percentage points. Fed Chairman Alan Greenspan today will provide
Congress with his twice-a-year report on the economy. Many analysts believe that he will deliver a cautiously optimistic assessment and that he might signal that the
Fed's latest credit-easing campaign might be ending.
Still, analysts don't expect Greenspan to close the door on another interest-rate cut. They predict that he will cite continued risks to the economy, including the
ailing manufacturing sector.
Recent data have offered mixed signals on the sector's outlook. The National Association of Purchasing Management reported this month that a key gauge of
industrial activity in June turned in its best performance in seven months. However, the measure still was at a level indicating that the manufacturing sector
remained in recession.
Analysts were heartened that the index regained some lost ground and were hoping that the worst of the manufacturing recession might have ended. But Tuesday's
report clouded the picture.
"The question now is when manufacturers will hit bottom and start to work their way out of this economic mess," Jasinowski said.
-- The Associated Press contributed to this report.
-- Susan E. Peterson is at sepeterson@startribune.com .
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