Minnesota's jobs recovery uneven across industries, but everyone agrees more workers needed

More than two years since the onset of the pandemic, a handful of industries in Minnesota have seen a full recovery of jobs. Most, though, still have a ways to go.

So QR codes at restaurants, shortened hours, and in some cases fewer days of operation are still a facet of life for some Minnesota businesses.

"We need to make sure we're taking care of our existing talent and not running them ragged and burning them out," said Elizabeth Morrissey Brown, a vice president for Morrissey Hospitality, which manages several restaurants, hotels and event spaces around the Twin Cities.

The leisure and hospitality, education and health services sectors, as well as retail, still have a lot of lost ground to make up to recover the jobs lost in the pandemic. The construction, manufacturing and professional and business services fields have now surpassed pre-pandemic levels of employment.

No matter how the data stacks up, though, pretty much every sector is hurting for workers.

"It's not that we're not creating jobs," said Steve Grove, commissioner of the Minnesota Department of Employment and Economic Development (DEED). "It's not that we're not hiring. It's that we're struggling to fill them at the rate we need to. And that's holding us back."

The state's jobs report for June will be released on Thursday, providing the most recent snapshot of the rebound since the loss of 417,600 jobs in the initial months of the pandemic.

As of May, the state had regained about 85% of private-sector jobs. That amounts to about 57,000 jobs still missing in the state's economy — 82,000 jobs if you also include government jobs.

That stands in contrast to the nation as a whole, which hit a significant milestone last month. The U.S., while still down in government jobs, has now fully recovered private-sector positions.

So why is Minnesota lagging behind?

Grove pointed to a few factors, including the state's especially tight labor market. Minnesota has the fifth tightest labor market in the U.S., with about twice as many job openings as unemployed people. At 2%, it also has the second-lowest unemployment rate in the nation.

In addition, Minnesota got hit hard by a second wave of COVID-19 in the fall and winter of 2020, which led to a second round of state shutdowns and a bigger hole to dig out of.

"But I think the good news is the last six months we're outpacing the U.S. pretty significantly," he said, pointing to 1.6% job growth in Minnesota in the first five months of the year compared with 1.3% for the U.S.

With a workforce that skews slightly older than the rest of the U.S., some state officials think Minnesota also got hit harder by a wave of early retirements during the pandemic. By one estimate, the pandemic spurred about 60,000 Minnesotans to retire. About half of those workers have since returned to work, Grove said.

Minnesota also saw more people leave the state last year. An estimated 13,000 people moved to other states. In a typical year, the state loses about 4,000 people to domestic migration, said Susan Brower, the state's demographer.

Immigration from other countries, which usually makes up for the domestic losses, also dropped last year.

Also, while wages have been rising in Minnesota to lure more workers off the sidelines, they are not moving as fast as in the nation as a whole.

Wages are also probably a reason why some industries in Minnesota have recovered faster than others, said Angelina Nguyễn, research director for DEED's labor-market information office.

"The industries that traditionally pay lower, we have seen them struggle more to get workers," she said. "Those are also the same industries where we see the highest wage growth because the employers are really trying hard to attract workers."

Here's a look at the jobs recovery in a few industries:

Nearly half of the private-sector jobs still missing in the state are in leisure and hospitality, which was the industry hardest hit by job losses at the beginning of the pandemic.

The trade group Hospitality Minnesota estimates that as many as 90,000 workers left the industry during the first and second shutdowns in 2020.

"They likely made lateral moves to other work in order to keep a steady paycheck coming in, given the uncertainty in the industry in general," said Ben Wogsland, the group's executive vice president.

As demand has picked up in the past year, many restaurants and other operators, eager to hire workers, have been having a hard time finding them even as they raise wages and offer referral bonuses.

Many also have added technology to help fill gaps.

The Bad Waitress in Minneapolis started using QR codes for ordering and paying a few months after the first shutdown in 2020, said Brown of Morrissey Hospitality, which manages the restaurant.

It made sense since the restaurant already had a more limited service model. Guests previously ordered via a notepad. But QR codes are not a one-size-fits-all solution, with some restaurants requiring higher levels of customer service, she said.

"We have no plans for doing this at the St. Paul Grill, for example," she said. "That is a different type of dining experience."

At Bad Waitress, staffing the back of the house — the kitchen — remains the biggest problem. That's why the restaurant recently started closing on Tuesdays and Wednesdays.

Minnesota's retail sector has recovered about 85% of the jobs it lost in the first months of the pandemic.

The employment crunch in retail doesn't seem as severe as it did a year ago, said Bruce Nustad, president of the Minnesota Retailers Association. "But we definitely could use a few more employees."

The industry, which has been raising wages, lost some workers to other lines of work such as manufacturing. But some workers seem to be coming back, he said, lured by more flexible hours.

Down in the Valley, a record store with locations in Golden Valley, Crystal and Maple Grove, is at full staff for the first time since the pandemic.

"We're back now, but it just seems volatile still," said Scott Farrell, the company's general manager.

Even with full staff, the retailer is sticking with slightly shortened hours put in place to deal with the previous staff shortage.

"We just found out that kind of works for us," Farrell said.

Employment in the state's manufacturing industry rebounded to above pre-pandemic levels in March.

"Manufacturing has definitely been blessed with demand," said Steve Kalina, president of the Minnesota Precision Manufacturing Association, nodding to strong consumer spending and snarled-up supply chains abroad.

While the industry has an aging workforce and saw some retirements in the pandemic, it didn't see as many people leaving for other career paths, he said.

Still, hiring was a challenge before the pandemic — and it still is. Many companies are still looking to hire more to handle an uptick in orders. Employers have been raising wages.

"You're seeing positions that might have been starting out of tech school at $22 to $24 an hour that are now $30 an hour," Kalina said.

NTM, a small manufacturer in Fridley, is now about even in staffing with where it was when the pandemic hit, said Vickie Parks, director of business development.

The company has been working with a recruiter who helped find six younger employees who are fairly new to manufacturing. One didn't work out, but the others are still at NTM.

Parks would like to hire a couple more workers this year if she can, especially since business is booming and a few workers are on the cusp of retirement.

"I don't have a crystal ball, but the demand is not going away," she said.