Turnaround takes hold for state's largest firms

After two recession-racked years of often desperate struggle, Minnesota's largest publicly traded companies enjoyed a reversal from their misfortune last year, as profits surged and hiring increased.

Sales at the top public firms rose 5.7 percent in 2010, a striking turnaround from the previous year, when sales had been in decline, according to the Star Tribune's 20th annual survey of the state's 100 largest public companies.

This year's review clearly shows that executives have greater confidence that the U.S. economy is finally accelerating after suffering the deepest recession since the 1930s. In fact, four out of five companies expect revenues to be better this year than last.

"That was a 'wow' to me," said Christopher Puto, dean of the University of St. Thomas Opus School of Business. Companies "are anticipating the opportunity to raise more revenue."

The outlook for Minnesota's largest companies is a significant indicator of not only the state's economic health, but the nation's as well. Minnesota is home to leading companies across a wide range of industries, such as 3M Co. (manufacturing), U.S. Bancorp (financial services) and Medtronic (medical devices).

Each year, the Star Tribune analyzes the financial performance of the top public companies in Minnesota, then seeks their reflections and asks their expectations for the future. The news from the latest survey is especially heartening on the jobs front. After shedding more than 25,000 jobs in 2009, the top 100 companies added 9,135 jobs last year.

"Conditions have improved. Consumers have recovered a bit," said Scott Anderson, senior economist at Wells Fargo Securities in Minneapolis. "We are closer to a self-sustaining recovery that will be led by private sector growth."

That's good news, because capital spending and hiring are critical factors in any recovery.

Among the Star Tribune 100, 66 companies added workers in 2010, including UnitedHealth Group, 3M, Target, General Mills and U.S. Bancorp. In 2009, only 36 companies added jobs.

An important caveat: The jobs reported by ST100 companies reflect their payrolls worldwide, not just in Minnesota. Still, the hiring demonstrates that some of Minnesota's biggest economic engines are starting to roar.

Manufacturers, in particular, illustrate the hiring turnaround. As their order books dried up in late 2008 and early 2009, manufacturers cut payrolls deep and fast. In 2009, ST100 manufacturing firms cut more than 11,000 jobs. In 2010, the sector led the hiring by adding 12,742 jobs.

For example, 3M, Minnesota's largest manufacturer and a major employer, cut 5 percent of its global workforce in 2009 and then added another 5,000 jobs to its payroll (6.7 percent) last year -- many of them through acquisitions.

Tom Stinson, Minnesota state economist, said all Minnesota employers added a net 10,500 jobs between December 2009 and December 2010. In the first three months of this year, Minnesota employers added another 7,000 jobs and Stinson expects the pace of hiring to increase as the year plays out.

"We continue to improve, but it still is taking time," Stinson said. "Don't be fooled by what's happened [in the stock market]. They economy is not back to where it was before the recession started."

But as the economic momentum has slowly shifted from layoffs to hiring, consumer spending has recovered.

"Consumers who have jobs will continue to spend," said Dan Laufenberg, an economist with Stonebridge Capital Advisors in St. Paul. "Consumer balance sheets have improved, and they are not taking on more mortgage debt. With consumers spending, businesses can justify investing."