A bad time for state's manufacturers

  • Article by: DEE DEPASS , Star Tribune
  • Updated: January 2, 2008 - 9:51 PM

Struggling Minnesota stands out for all the wrong reasons in a survey of business supply managers in nine Midwestern states.

Business conditions in Minnesota fell for the third consecutive month in December as the economy continues to be dogged by a dismal housing market, credit tightening and concerns over unemployment, according to a Creighton University survey of Midwestern business supply managers.

Wednesday's survey results for nine Midwestern states found that Minnesota has also been "battered by weakness" in durable-goods manufacturing.

While survey organizers at Creighton, in Omaha, declined to name participating companies, it is no secret that many Minnesota manufacturers trimmed their employment ranks last year.

The Ford Ranger truck plant in St. Paul cut in half its 1,800-person workforce after it shut down the night shift and offered buyouts. Maplewood-based 3M eliminated about 800 Minnesota jobs in the past 13 months. Boston Scientific, the Massachusetts medical supply company with substantial operations in Minnesota, cut 2,300 jobs worldwide, including about 1,000 from the Twin Cities.

On Jan. 2, 2007, Andersen Corp. let go 400 workers from its Bayport window-and-door plant because of the drop in new home construction. In June, Medtronic cut 550 jobs, about 80 from Minnesota, while nonprofit Minnesota Diversified Industries let go 40 workers in September.

Overall the ranks of the unemployed in Minnesota rose by 10,000 from a year ago, the report said.

"Based on our survey, I expect the jobless rate [in Minnesota] to rise by another 0.2 percent in the first quarter of 2008 before it stabilizes," said Ernie Goss, the Creighton economics professor who surveyed 150 Minnesota purchasing managers as part of a nine-state study on the Midwest's business climate.

The regional survey's findings echo a national report, also released Wednesday, from the Institute for Supply Management that shows the U.S. manufacturing sector contracted unexpectedly in December.

Minnesota's new export orders jumped in December, but its total new orders fell, the Creighton survey said. The state's overall business condition fell from 50.8 in November to 47.3 in December. Figures above 50 indicate expansion; below 50, contraction.

While purchasing managers across the Midwest expressed little optimism for the next six months, Minnesota managers "set a new record" for pessimism, Goss said.

Despite Minnesota's woes, Midwest supply managers reported that overall business conditions in the region improved in December. That upbeat report came as exports rose in the wake of a weakening U.S. dollar and as farm income and alternative energy production surged. The Midwest business conditions index rose from 49.2 in November to 55.0 in December to create the largest one-month rise since February 2002, officials said.

The Midwest report surveyed businesses in Minnesota, Iowa, South Dakota, North Dakota, Nebraska, Kansas, Missouri, Oklahoma and Arkansas.

"Looking at the [Midwest] numbers, it's clear that Minnesota, Nebraska and Kansas is where activity declined, much like the nation," Goss said. The question is not '''why did Minnesota and the nation decline?'" he said. "It's 'why did the rest of the Midwest region go up?'''

That's a mystery, he said. "But I think it has more to do with the cheap U.S. dollar and [subsequent] increase in exports" from across the Midwest.

"I remain concerned that the region could still dip into recession territory in early 2008,'' Goss said. Though Midwest companies added jobs in December, "a large upturn for one month does not convince me that the job market has turned the corner."

Dee DePass • 612-673-7725

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