Minnesota's unemployment rate drops to 3.5%, matching where it was in March 2020

Minnesota's unemployment rate is back down to where it was in March 2020, just before the coronavirus pandemic fueled a big spike in joblessness.

The state's jobless rate in October declined to 3.5%, down two-tenths a percent as more people were able to find jobs, according to figures released Thursday by the Minnesota Department of Employment and Economic Development (DEED). Minnesota remains lower, as it usually is, than the U.S. jobless rate of 4.6%.

But while the unemployment rate may be close to normalizing, the workforce, wages and the number of available jobs have all significantly changed since the start of the pandemic.

Minnesota's labor force shrank by nearly 1,000 people last month, and remains about 84,000 workers short of what it was before the pandemic. That has been a major factor in the state's tight labor market that has left some employers struggling to fill positions.

About 71% of the 416,300 jobs lost in Minnesota during the first few months of the pandemic have returned.

In 2019, Minnesota's unemployment rate hovered around 3.1% and began to inch up in the first months of 2020, jumping considerably in April as the pandemic led to significant job losses. It reached an all-time high of 11.3% in May 2020 and has been slowly but steadily falling since.

The unemployment rate last month for Black and Latino Minnesotans was 4.9%, compared to 3.9% for white Minnesotans. These figures, which are based on 12-month rolling averages, are calculated differently than the overall state unemployment rate, which is based on a single month.

As for the fewer number of people who want to or are looking for work, Oriane Casale, director of DEED's labor-market information office, noted that the state's labor force had been projected to decline in future years given the aging workforce.

"The timeline may have been accelerated a bit by the pandemic," she said, adding that some people may have decided to retire early when they lost their jobs earlier in the pandemic. "So this is not anything that probably is going to go away anytime soon."

She said DEED does not expect the state will return to the labor force participation rate it had before the pandemic, which was 70.2%. Its current rate held steady in October at 67.8%.

Minnesota also added 9,900 jobs in October, which was slightly slower growth than the nation as a whole and fewer jobs than it gained the month before. September's big jump of 17,100 jobs in Minnesota was also revised downward to 13,300.

Professional and business services, manufacturing, and leisure and hospitality led the way with job gains in October. That was partially offset by some job losses in information and government.

Wages have also been going up as many employers have stepped up pay to try to fill open positions. Those gains in Minnesota are more or less keeping pace with the high levels of inflation, state officials said.

Average hourly earnings for all private-sector workers in Minnesota rose 41 cents to $33.43 in October. Over the year, average hourly earnings rose nearly $2, up 6.3%.

That is a slightly higher rate than the consumer price index, a measure of inflation, which increased 6.2% percent over the year in October, the biggest such jump in more than 30 years.

Casale noted that low-wage jobs, which are in especially high demand right now, are seeing even bigger wage gains. Rank-and-file retail workers in Minnesota have seen their wages rise 7.7% over the year to $18.57. And employees at bars and restaurants have seen a 9.7% increase to $16.67.

Workers are also having an easier time finding full-time work than they have in the past. The number of Minnesotans working part time because they can't find full-time work fell to the lowest on record for an October, with data going back to 2001.

"It also might indicate that employers are using full-time schedules as a recruitment strategy for difficult-to-fill positions," Casale said.