Minnesota's jobless rate falls to 6%, mainly from people leaving workforce

The state's unemployment rate dropped more than a full percentage point last month, which should be good news in an economic crisis.

But a troubling development was behind the plunge: more than 56,000 Minnesotans stopped looking for work.

Economists define an unemployed person as one without a job but trying to find one, meaning that people who stop looking are no longer considered part of the overall workforce. Their exit was the chief reason Minnesota's unemployment rate fell to 6% in September from 7.4% in August.

"This is not an encouraging sign," said Steve Grove, commissioner of the Minnesota Department of Employment and Economic Development, which released the data Thursday. "It means there are folks who are for whatever reason getting discouraged about their job search."

The state had seen only a 10,000-person decline in the labor force from February to August until last month's drop of 56,299 people.

Minnesota's labor force participation rate, or the percentage of the working-age population that is either employed or is looking for work, fell by more than a percentage point to 68.4% last month, the lowest it has been since 1978.

Minnesota typically has one of the highest participation rates in the U.S. and it remained much higher than the national average, which was 61.4% in September.

"We're higher, but you never want to see that go down, especially at a time when there are a lot of firms that are hiring," Grove said.

Minnesota has recovered just under half of the nearly 390,000 jobs lost in the first few months of the pandemic. About 273,000 Minnesotans continue to collect unemployment benefits.

Separately Thursday, the Labor Department reported that the number of new applications for unemployment benefits in the U.S. rose last week to 898,000, the highest level since late August, as new rounds of layoffs continue to slow down the recovery.

Recent national data showed that 80% of those dropping out of the workforce have been women — a sign that some women were leaving their jobs so they could care for children at home during the day as many schools have moved to virtual learning amid the pandemic. But Grove noted that the Minnesota data has not yet shown that same demographic trend.

Oriane Casale, director of DEED's labor market information office, cautioned that the sample size for the data in the Minnesota survey is too small to draw reliable conclusions yet on who exactly has been dropping out of the labor force.

So far, the Minnesota data indicates it's more likely to be Latinos, teens and those between the ages of 25 and 34, she said. But as for gender, it actually showed men accounting for most of the decline.

"As you can see, that's probably an unreliable picture of what's going on," she said. "It's one month of data based on a very small sample. We really need to roll together multiple months to be able to understand what's going on."

She added that there are only 900 households in the monthly sample, so the data on who is leaving the workforce is coming from perhaps as few as 20 households.

Casale noted that the numbers have been bouncing around quite a bit — a lot more than normal amid a lot of uncertainty in the labor market.

Most of the Minnesotans who stopped looking for work last month were already unemployed. But about 15% of them were employed and decided to leave the labor force.

In September, the state also saw a slowdown in job growth with the addition of 14,800 jobs last month, compared to 40,500 in August and a bigger bounce earlier in the summer.

The private sector added 21,000 jobs, while government jobs took a hit with the loss of 6,200 jobs.

The biggest gains were 6,100 jobs in education and health services, 5,600 jobs in professional and business services, 2,400 jobs in manufacturing and 1,600 jobs in leisure and hospitality.

But all industries continued to show over-the-year job losses both in Minnesota and nationally, with the biggest decline still being in leisure and hospitality, which is down 25%.

Grove said DEED will be making a push in the coming weeks to get the word out that many employers are looking to hire people right now for jobs that don't require any special training or degrees.

"There's a lot of hesitancy in the market right now," he said. "We're hearing from employers that job seekers are taking a pause. They don't quite know yet if there will be a vaccine soon or if their job will come back or if there will be additional assistance from the federal government."

He added that the jobs available may not be in the same industry as someone has worked before, so job seekers should consider thinking about making the jump into different fields and career paths.

The U.S. unemployment rate fell to 7.9% last month from 8.4% in August. Minnesota usually has a lower unemployment rate than the U.S.