Strong job growth in U.S. will likely extend to Minnesota

The U.S. labor market remains strong, with employers adding a whopping 336,000 jobs in September and unemployment holding at a near-record low — and economists expect Minnesota to show similar results for the month.

The data released Friday by the Bureau of Labor Statistics shows the largest gain in jobs since January.

But what may be good news for job seekers was startling for economists, who had predicted employers would add about half as many jobs last month. The Fed has already raised interest rates to the highest level in more than 20 years in an effort to calm price and wage gains, and is expected to continue to do so.

"The Fed is trying to pull off this soft landing where they take some of the heat out of the economy and settle into a very healthy and stable economy where everyone has a productive place in it," said Aaron Sojourner, a labor economist at the W.E. Upjohn Institute for Employment Research. "There's a risk there that they hold rates too high, too long."

Erick Garcia Luna, regional outreach director at the Minneapolis Fed, said steps the central bank has taken have already had a positive effect on inflation, which has dropped from a high of about 9% to 3.7%.

"If the labor market remains resilient as we work toward reaching our 2% inflation target rate, I think that is a good thing," he said. "The other thing is we do not only look at one particular data point. We have to look at a variety of indicators."

Even though the top-line job growth number is surprising, Sojourner said, there are other pieces of the September report that indicate stability, including labor force participation, unemployment and average hours worked. The report also showed slowing wage growth.

In Minnesota, which tends to mirror the national economy, the picture is likely to be similar, he said.

Though state-specific numbers are not yet available, Minnesota's labor force participation has been higher than the country as a whole. In August, the state added 4,400 jobs and the unemployment rate was 3.1% — a slight uptick, but still lower than the 3.8% national rate.

Minnesota sectors that are more exposed to out-of-state markets — such as manufacturing, professional services, wholesale trade, finance and insurance — have experienced job losses this year, while more localized industries, such as health care and retail, have seen gains, said Sean O'Neil, director of economic development and research at the Minnesota Chamber of Commerce.

"In terms of just consumer activity, those industries that are serving very local customer bases — some of those industries were especially hard-hit during the pandemic and are still recovering the jobs that were lost in 2020," he said.

The federal data on Friday showed no change in the national unemployment rate, and job growth across industries, particularly in leisure and hospitality, government, private education and health care and professional and business services, continued to climb.

Louis Johnston, professor of economics at the College of St. Benedict and St. John's University, said the strong job growth — including in industries key to Minnesota's economy — likely reflects a correction after the contractions of the pandemic.

"One thing that I think we have to keep in mind is that we are in uncharted waters, or at least not very well-charted waters, because we've just gone through one of those, hopefully, once-in-a-lifetime situations that each generation seems to go through," he said. "And the way that you come out of those is never predictable."