St. Cloud area sees 'jaw-droppingly large' decline in labor force during pandemic

ST. CLOUD – The St. Cloud area saw a slight uptick in jobs last month but experts warn the region has a long way to go to reach pre-pandemic employment and labor force participation levels.

The St. Cloud Metropolitan Statistical Area, which includes Stearns and Benton counties, added about 1,150 jobs from January to February, according to state data released this week. That 1.1% growth is the second highest of any metro area in the state — following Duluth, which saw a rise of 1.8%.

In the same time frame, the unemployment rate in the St. Cloud area dropped from 5.5% to 5.2%, which is a typical shift between the months of January and February, according to local economist King Banaian.

But January's unemployment rate is a seven-year high for that month and February's rate is the highest since 2017. This year's rates are also a little more than a percentage point higher than rates in January and February of 2020 — the last months before the pandemic halted commerce and shuttered businesses.

Even more telling than unemployment rates are the year-over-year declines in labor force, according to Banaian, who is dean of the School of Public Affairs at St. Cloud State University.

"You could say, and many people do say, [unemployment rates are] an understatement of the number of people that are unemployed because you had all these people leave the labor force," he said.

In the St. Cloud area, the labor force declined by approximately 3% year-over-year in January and 2.5% year-over-year in February.

"I haven't seen a 3% drop in the labor force in a single year in most of the time I can remember," Banaian said. "It strikes me as jaw-droppingly large."

People who are not employed but have looked for work within the last four weeks are counted as unemployed in the state's statistics; those who have not looked for work in the last four weeks are considered out of the labor force.

Banaian said the pandemic is likely influencing these numbers because people have made the choice not to work — or look for work — because they feel it is unsafe to work or they have to care for children who might not be in school or daycare full time. Others are perhaps in industries, such as hospitality, that have not fully recovered from COVID-19 shutdowns.

"Our unemployment rate has been declining but it's been declining from people leaving the labor force, not necessarily getting jobs. And that's not the way you want to decrease your unemployment rate," said Luke Greiner, regional analyst for central and southwest Minnesota for the Department of Employment and Economic Development.

"Economically, you'd like to leverage as much of the labor force as possible. And when people drop out of the labor force for any type of reason ... we don't know if or when they'll come back."

Statewide, the employment-to-population ratio dropped by 3.6% year-over-year in January and by about 3% year-over-year in February. January's drop was almost three times what the state saw in 2010 during the Great Recession, when the ratio dropped by 1.3% year-over-year.

"That's a bigger drop than I think we've seen," Banaian said.

The St. Cloud area is buoyed a bit by a higher percentage of manufacturing jobs and lower percentage of hospitality jobs than other metro areas, some of which saw steeper year-over-year declines in the labor force. In January, when St. Cloud saw a 3% decrease in the labor force, Duluth saw a 3.5% drop and Minneapolis and Mankato saw drops of about 4.2%.

"What's unique is that people commonly leave the labor force when they see a lack of opportunity. That's not necessarily the case," Greiner said. "We still have a relatively tight labor market. Employers I hear from are struggling to fill positions, anywhere from entry level to highly skilled. It leads me to believe that people are leaving the labor force not necessarily from a lack of opportunity."

Banaian said he predicts hospitality workers who might be discouraged by the lack of jobs will return to the labor force quicker than people with health concerns or those caring for children.

Greiner agreed it will likely take a "return to normalcy" for workers before the economy can rebound.

"One thing is for certain — we've got a ways to go," Greiner said.

Jenny Berg • 612-673-7299

Twitter: @bergjenny