Turning point in Minnesota's recovery as people find jobs

For the first time in months, Minnesota's unemployment rate declined not just because people stopped looking for work, but also because they actually found jobs.

About 2,500 Minnesotans returned to work in February, which helped knock down the state's jobless rate by two-tenths of a percentage point to 4.3%.

Minnesota's unemployment rate has been steadily declining since peaking at 11.3% in May, a figure which was revised earlier this month after initially being reported as 9.9%. But throughout the fall and winter, most of the drop was due to the exodus of people from the labor force.

Steve Grove, commissioner of the Minnesota Department of Employment and Economic Development (DEED), called the latest development a good sign.

"Our unemployment rate isn't going down just because of the fact that people are either getting discouraged or stopping looking for work. But it's also being affected by people getting into the labor market, which is something of course we want to see a lot more of in the coming months," he said.

Still, Minnesota has a long way to go in its jobs recovery. About 300,000 Minnesotans continue to receive unemployment benefits. The state has only gained back about 49% of the 416,300 jobs it lost in the first few months of the pandemic.

And people of color continue to face much higher levels of unemployment. The unemployment rate for Black Minnesotans, based on a 12-month moving average, is still more than double what it was before the pandemic even though it declined slightly to 9.2% last month, down from 9.5% in January. The jobless rate for Latinos inched up two-tenths of a percent to 7.5% in February, compared to 5.9% for white Minnesotans.

Grove called those disparities "inexcusable" and said it's something that DEED will be focused on addressing in the coming months.

"We've got to help employers and help job seekers ensure that more people of color are hired in good jobs across Minnesota," he said.

At the same time, he pointed to other promising signs in the state's latest jobs report, such as the addition of 13,900 jobs in February. That was a slower bounceback than in January, when the state saw 51,800 jobs return as indoor dining and other services were able to resume at limited capacities after state restrictions eased.

"Recovery continues, never as fast as we'd like, but it's good to see those jobs coming back," Grove said. "Spring is always a time of hope and optimism in Minnesota's economy. This year I think it's especially true."

He noted that vaccines are rolling out and the federal stimulus measure is sending more money into people's bank accounts as well as bringing additional support for unemployed workers.

Most of last month's job growth came from the pandemic's hardest-hit sector, leisure and hospitality, which gained 13,500 jobs as restaurants and bars continued to staff up following job losses in November and December.

That industry, which saw jobs plummet by more than 50% in the first months of the pandemic, is now down about 26%. The state as a whole now has about 7.2% fewer jobs than it did a year ago.

Other areas that added jobs last month include government with 2,900 jobs, educational and health services with 2,000 jobs, trade, transportation and utilities with 1,700 jobs and financial activities with 600 jobs.

Meanwhile, some industries saw further setbacks in February. Construction lost 3,300 jobs, which state officials said was likely due in part to the cold snap last month. Other services declined by 1,700 jobs and manufacturing dropped by 1,600 jobs.

In February, about 3,700 Minnesotans left the labor force, which led to a slight decline in the state's labor force participation rate to 67.8%. That is down from 70.2% a year ago.

About 95,000 Minnesotans have stopped working or stopped looking for work in the past year as the pandemic raised safety concerns and added pressures on families.

Grove said he's eager to see the state's labor force numbers begin bouncing back soon, especially as there are many companies who are wanting to hire more workers. He added that DEED is calling thousands of unemployed workers every week to let them know about what jobs are available.

"We are really trying to share this message that there's opportunity in our economy today if people are ready to go seize it and are willing to think of industries they may not have worked in where they could get some on-the-job training and really succeed in," he said.

Minnesota continues to fare better than the nation as a whole. The U.S. unemployment rate fell slightly in February to 6.2% and the nation's labor force participation held steady at 61.4%.

Kavita Kumar • 612-673-4113 Twitter: @kavitakumar