Minnesota's jobless rate falls to lowest in more than 20 years

Minnesota's unemployment rate dipped last month to the lowest it's been in more than 20 years as the state's labor shortage remains intense.

The jobless rate ticked down two-tenths of a percent to 2.7% in February, the Minnesota Department of Employment and Economic Development (DEED) reported Thursday.

That's more than a full percentage point lower than the U.S. unemployment rate, which was 3.8% last month.

At the same time, Minnesota is steadily adding jobs every month, but is lagging behind the nation when it comes to the rate of job growth — both in February and over the last year.

The state added 5,200 jobs last month, roughly on par with January after an initially reported jump of 10,200 jobs was revised downward to a gain of 4,800 jobs.

Steve Grove, DEED commissioner, said that the slow rate of additional jobs reflects the extremely tight labor market. There are 2.8 job openings for every available worker in Minnesota compared to 1.7 nationwide.

In another sign of the extreme tilt of the job scene, first-time claims for unemployment benefits nationally fell last week to 187,000 people, the fewest in any week in 52 years. Those applications are generally seen as a way to track the pace of layoffs.

Just 1.35 million Americans were collecting unemployment benefits at the middle of this month, which was also the fewest in five decades.

Grove said pulling more people into Minnesota's workforce is a top priority for DEED.

"We continue to be convinced by the data and by anecdotes [that] there are a lot of workers hiding in plain sight that businesses can and should be recruiting into their firms," Grove said, pointing out that immigrant communities, people with disabilities and high school students as some potential labor sources that could be better tapped.

The data shows that there continues to be a disparity, as there was before the pandemic, in who is finding jobs. The Black unemployment rate in Minnesota inched up in February and is now more than double that of the unemployment rate for white Minnesotans.

About 13,000 people joined Minnesota's labor force last month, leading to an uptick of three-tenths of a percent in the state's labor force participation rate to 67.9%.

Minnesota's labor force is about 106,000 workers smaller than it was before the pandemic, when the participation rate was about three percentage points higher. The pandemic spurred some workers to retire early and led others to drop out of the workforce due to child care and other challenges.

And the number of employed people is 122,000 below where it was in February 2020. Minnesota has recovered about 71% of the jobs it lost in March and April 2020, when many businesses were forced to close as COVID-19 spread across the country.

Last month, the biggest job gains came from education and health services, which added 3,800 jobs. That was followed by 3,100 jobs added in trade, transportation and utilities, 900 jobs added in manufacturing, and 100 jobs added each in information and government.

That was partially offset by a loss of 1,500 jobs in financial activities, 800 jobs in other services, and 200 jobs in construction.

Leisure and hospitality, one of the hardest-hit sectors during the pandemic, saw no change in job numbers last month, the first month it hasn't seen growth since September 2021. Jobs were also flat in mining and logging.

While employers have been responding to the tight labor market by raising wages, inflation continues to outpace those increases.

Average hourly earnings for private sector workers in Minnesota have risen 7.1% over the past year and are up 10% over two years, a bit higher than the nation.

Meanwhile, the consumer price index, a measure of inflation, rose 7.9% in February and is up 9.7% over two years.

Some low-wage jobs in high demand are seeing increases that are surpassing inflation. Wages are up 14.1% at nursing and residential care facilities, and they're up nearly 10% at restaurants and bars.

In addition to raising wages, Minnesota employers try other ways to try to recruit workers such as offering more flexible schedules and hours, child care subsidies, and parking reimbursement, Grove said.

"I've even heard of employers giving pet insurance as a new benefit," he said. "People are getting creative. And those that are doing new things are seeing results."