Tuesday, January 15, 2008
I have certainly said publicly that I think we are at risk of going into a recession here in central MN, but I do not think I could make the claim that we are in one right now. I'm interested in what data he is looking at. The last budget update cites the Global Insights forecast that shows an increase to 40% in its forecast of a national recession (Alan Greenspan today says 50-50.) That update, by the way, shows revenues running ahead of forecast so far in the biennium.
Minnesota's unemployment rate climbed to 4.9 percent in December, up from 4.4 percent the month before. The loss of 2,300 jobs last month capped a string of job losses, 23,000 in all, over the last six months.
That's the worst string of jobs numbers since the 2001 U.S. economic downturn. "Minnesota is in a recession," said Minnesota state economist Tom Stinson. "I don't see how you can lable it anything else."
..."We should normally add somewhere around 23,000 jobs or a little bit more just to keep up with labor market growth," Stinson said. Instead, the year-over-year job total fell by 700.
But Stinson has only data for November on which to rely, meaning he is making a call for a recession to have started in Q4 2007. While the potential exists for the recession to have begun in December nationally (see today's retail sales figures nationally and these payroll data for employment in Minnesota, for example) I simply am not ready to be as definitive as Tom's statement is.
Full year 2007 employment in Minnesota firms fell 353 jobs, out of a total of 2.78 million. How sure are we that a revision of this data will not change the result? The LAUS data Stinson is describing (which is where he gets the 700 job loss versus my 353, which comes from the CES survey instead) considers only 0.3% to 0.4% changes in employment to be statistically significant. The decline this time was 0.08%. It argues instead that there has been a 11,000 increase in the size of the labor force (see this), which accounts for a good portion of the increase in the unemployment rate. To put this in perspective, had the number of jobs (seasonally adjusted) in Minnesota increased in December by the same amount as they did in November, the unemployment rate would STILL have risen to 4.7% from 4.4% in November, just because we added so many more people looking for work.
The loss of jobs is no doubt real, and I'm not saying Stinson is wrong. But I see a recession call for Minnesota at this time as premature.