Wages are going up in Minnesota, and employers are hiring more teens amid a tight labor market

Two signs of an increasingly tight labor market popped out in Minnesota's latest jobs report: Wages are still going up, and employers are hiring more teens.

In August, the average wage of leisure and hospitality workers in Minnesota was above $18 an hour. And a subset of that, wages of rank-and-file workers at restaurants and bars, have now been above $16 an hour for the last four months.

"This is really unprecedented," said Oriane Casale, director of the labor market information office at the Minnesota Department of Employment and Economic Development (DEED). "We haven't seen this kind of growth in wages in this low-wage sector ever."

Data released Thursday by DEED also showed that Minnesota's job growth slowed in August, similar to the U.S. as a whole, amid the recent surge in COVID-19 cases. The state unemployment rate ticked down one-tenth of a percent to 3.8%.

As employers have been struggling to hire in recent months, many have been raising wages to attract and retain workers.

Average hourly wages across all private sector workers in Minnesota was $32.96 in August. That's up 3.2% compared to a year ago, and an 8% increase from August 2019.

Wages are rising even faster for non-supervisory retail workers, which grew 5% in the last year, and are up 10% over two years. For restaurant and bar workers, wages climbed 11% in the last year, and 13% over the last two years.

"That certainly outpaces inflation and is a good sign that wages are continuing to increase for workers who need that money to be in a situation where they have a family sustaining wage," said DEED Commissioner Steve Grove, who noted that the average cost of living for a typical family in Minnesota is $18.85 an hour.

The jobs report showed that employers are also increasingly hiring teens to fill staffing shortfalls. The unemployment rate for teenagers decreased to 6.2% in August, down 4.8 percentage points over the year.

That's Minnesota's second-lowest teen unemployment rate for August on record since the state started tracking it in 2002.

The State Fair is among those who have experienced the labor shortage firsthand this year. As both the fair organization and vendors had a harder time filling those temporary jobs than in years past, managers said they hired more teens this year to help fill in that gap. Many also bumped up pay.

Valleyfair, which depends on teens for a large part of its seasonal workforce, raised pay for workers 16 and over to $20 an hour this fall for its weekends-only ValleySCARE season. The amusement park had already increased pay for many jobs to $15 an hour, and then $17, earlier in the year as it struggled to fill jobs.

While there are only about 11,000 more unemployed workers in Minnesota at this point compared to before the pandemic, the state's labor market has also lost about 86,000 workers during that time who have decided to either stop working or stop looking for work.

Some workers remain wary about taking in-person jobs during the pandemic, especially as COVID-19 cases have surged. Child care issues remain a big concern for some families, though students returning to in-person school this fall should help provide some relief on that front. Some people are also considering changing career paths, while others are still having trouble finding jobs in their particular fields.

Federal jobless benefits for roughly 100,000 Minnesotans, or about half of those in the state still receiving some unemployment aid, expired earlier this month. But it's still unclear the extent to which that will spur a bigger rebound in jobs.

Hiring cooled off in Minnesota after a big July hiring spree. The state added 4,300 jobs in August, compared to 17,100 jobs the month before.

The July figures were upwardly revised by 2,600 jobs, nearly half of which were in leisure and hospitality.

"After a really strong July when there was clearly optimism on where our economy was headed and a sense that things with the coronavirus pandemic were progressing nicely, we obviously have seen the delta variant continue to grow," said Grove. "And that seems to have had at least some effect on the optimism and growth in our economy as we head into the fall."

Job growth has been uneven in recent months, swinging quite a bit from month to month.

The biggest job gains last month came from the state's second-largest industry, manufacturing, which added 2,300 jobs. It was followed by leisure and hospitality with 2,000 jobs, and trade, transportation and utilities with 1,500 jobs.

That was offset by losses in government, which was down 1,900 jobs, education and health services, which lost 1,200 jobs, and information, which declined by 600 jobs.

Casale noted that nursing and residential care facilities in particular are down about 5,200 jobs, or about 5%, over the year.

"There have been staffing challenges in this industry for many years and they seem to be getting worse, not better at this point," she said.

Minnesota has now regained nearly 66% of the 416,300 jobs it lost last year in the first months of the pandemic.