Minnesota's unemployment rate rose to record 9.9% in May as pandemic's effects seen

Minnesota's unemployment rate shot up to 9.9% last month, the highest level ever recorded since the state began tracking it in the 1970s.

But that snapshot of the state's economy was taken in the middle of the month before businesses such as retail stores began to reopen.

A different data set, based on a survey of employers, showed that the state added 9,800 jobs last month, a modest gain after losing 360,000 jobs in April and 27,800 jobs in March.

The June numbers are expected to show even more improvement, reflecting the reopening, albeit at limited capacities, of stores, restaurants, hair salons and gyms.

"But we have a long way to go," said Jeanne Boeh, an economics professor at Augsburg University. "Unfortunately, the uncertainty is going to be with us for a while. It's going to take a long time for everything to come back."

The steep job losses of the last few months have had a disproportionate impact on women and people of color because they fill a lot of service jobs, which have been hard hit during the state's stay-at-home order to slow the spread of the coronavirus, she said. The leisure and hospitality category has seen the biggest job declines, down about 50% in Minnesota last month.

There will be some longer-term repercussions, she added. Many college students, for example, have lost their summer internships. It's those internships that often help them land jobs once they graduate.

In May, the private sector in Minnesota added 27,500 jobs, with the biggest rebounds in areas such retail, restaurants and hotels, according to data from the Minnesota Department of Employment and Economic Development. That was offset by a loss of 17,770 government jobs.

Minnesota's small job gains in May reflect a slower bounceback than the U.S. as a whole, which added 2.5 million jobs last month, said Oriane Casale, a labor market analyst at DEED. She said that's likely due to Minnesota being more cautious than other states in reopening.

Those measuring the impact, using traditional methodologies to collect and adjust jobs and employment data, have been struggling to keep up with the fast-changing realities of the economy during the pandemic. Last month, state officials acknowledged that the 8.1% unemployment rate reported for April was probably too low. On Thursday, that April figure was revised to 8.7%.

"We think the job count is doing a better job at really picking up in an accurate way what's going on in the labor market, and the unemployment rate is struggling to catch up with that," Casale said.

The 9.9% unemployment rate for May seems to be a better reflection of job losses, she added.

But it doesn't capture the people who have had their hours reduced or lost one of two or more jobs who are also eligible for unemployment benefits. Since mid-March, more than 780,000 people, or about one-fourth of Minnesota workers, have filed for unemployment insurance.

The U.S. unemployment rate, which is usually higher than Minnesota's even in good times, was 13.3% in May.

As stay-at-home orders have eased around the country, there have been some signs of the beginning of an economic recovery.

U.S. retail sales rebounded by 17.7% last month, helping make up for the steep losses in March and April. But they were still down 6.1% from a year ago.

On Thursday, the Labor Department said 1.51 million people in the U.S. filed jobless claims last week for the first time, a drop from the week before but a higher-than-expected number given that many states are reopening. More than 20 million people in the U.S. continue to receive benefits out of the 45 million who have applied for unemployment at some point during the pandemic.

Earlier this week, Federal Reserve Chairman Jerome Powell told Congress that there is "significant uncertainty" about the timing and strength of a recovery. He said "a full recovery is unlikely" until the public is confident the disease has been contained.

Clare Brumback, president of the Community Emergency Assistance Programs, said her organization's food shelf in Brooklyn Center continues to see a 25% increase in first-time participants each month since March. Overall, the number of new families seeking food is up about 130%.

Many of the families the organization serves depended on savings in the first weeks of the pandemic after they lost their jobs, which were mostly in the hospitality and service sectors, she said. Stimulus checks helped for a while, too. But now that those funds have been depleted, she's seeing a growing need even as many businesses have begun to reopen. Some workers have not been called back yet, or are working fewer hours than before, she said.

"Not everyone is opening and fully functional," she said. "Not all restaurants are enjoying the same business they were before."

Minneapolis-based When I Work, which provides software that employers use for scheduling, has been tracking time worked during the pandemic among hourly workers in the retail, restaurant and the hospitality sector.

In Minnesota, its index shows that the hours worked plunged more than 70% in late March as many nonessential businesses shuttered to abide by the state's stay-at-home order. Hours have rebounded since then by about 30%, but are still down about 40% from the same time last year.

"Businesses are reopening at a much faster rate than the employment activity of the workforce," said Chad Halvorson, the firm's CEO. "The employment levels will recover slower because of the requirements such as that restaurants can only operate at 50% capacity.

"The other thing is they're reopening to very uncertain and unpredictable customer demand. People's comfort levels going out is probably going to ebb and flow throughout the summer."