Minnesota manufacturers barely grew in March, and the pace of growth slowed so much that the state is performing worse than half of its regional peers and the national average, according to a closely watched economic report issued Friday.
The Mid-America Business Conditions Index report by Creighton University found that Minnesota's March index declined to 50.7 from 52.1 in February. To compare, the index for the report's nine-state region grew slightly for a third consecutive month to 50.6 in March from 50.5 in February, buoyed by Arkansas, Iowa, Nebraska and South Dakota. Any index over 50 indicates growth.
Minnesota's 50.7 March manufacturing index is a setback because the state had been enjoying a comeback of sorts. The state's indexes had risen steadily from a dismal 39.4 in December to 50.1 in January and 52.1 in February, before sliding to just above "growth neutral" in March. Minnesota factories were hamstrung in March by job losses, lower production rates and worsening delivery lead times.
The lack of hiring is a key issue in Minnesota factories, said Creighton University economics professor and report author Ernie Goss. He noted that Minnesota added 17,000 manufacturing jobs since the economic recovery began in 2009. At the same time, its output per worker soared, which kept new hiring down.
"Creighton's surveys over the past several months point to an expansion in manufacturing output [in Minnesota], but with the number of manufacturing jobs remaining flat for the next three to six months," Goss said.
Officials from several rural manufacturers, including Alexandria Industries, Harmony Enterprises and Superior Industries, recently said they would like to hire more workers, but face stiff competition because of severely low unemployment rates and increasing retirements. Those companies and firms such as Minneapolis-based Graco have increasingly relied on automation and robotics to keep production rates high.
Still, in March, the entire nine-state region tracked by Creighton University (which also includes North Dakota, Missouri, Kansas and Oklahoma) saw small improvements in factory employment, wholesale prices, trade and inventories.
However, the region's manufacturers continued to be hurt by a high U.S. dollar that pinches foreign profits, Goss said. While area exports finally moved from negative to barely positive growth territory, factory managers said they are still seeing weakness among key trading partners such as Canada and China.
Separately, ag equipment manufacturers such as AGCO, which has large tractor and combine plants in Jackson, Minn., and Kansas, continue to be hurt by stubbornly low crop prices.
Such issues vexed manufacturers nationwide. A U.S. Labor Department report issued Friday found that the nation lost 29,000 factory jobs in March. Still, the hit to employment was not enough to prevent an overall uptick in U.S. factory results, according to a separate report issued Friday by the Institute of Supply Management (ISM). The ISM reported a national manufacturing index that grew to 51.8 in March from 49.5 in February.
The rise proved "the highest level since July 2015. The data is stronger than expected," said Thomas Simons, senior vice president of Jefferies LLC.
Bradley Holcomb, chairman of the ISM Business Manufacturing Survey Committee, noted that U.S. factory employment worsened slightly during March. But new product orders, production, inventories and product prices saw sizable gains nationwide.
As a result, 12 of 18 U.S. manufacturing industries — including printing, machinery, plastics and food and beverage — reported beefed up orders in March.
Dee DePass • 612-673-7725
