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May employment report: Minnesota needs more productive jobs

Today saw the release of Minnesota’s jobs figures for May. Our state’s unemployment rate edged down to 3.7%, matching a post-recession low point last seen in June 2015. But, for the first time since January, Minnesota lost jobs. Taken together, this means people left the workforce. Another concern was the pattern of job losses. There is a slight correlation between GDP per job in each sector and jobs lost per sector. In other words, more productive sectors lost more jobs.

Productivity in Minnesota

In the Center’s 2016 report “Minnesota’s Economy: Mediocre Performance Threatens State’s Future“, we looked at which sectors of our economy generated the most GDP per head. The leader was Mining & Logging with $366,429 of GDP generated per job. In last place, with $43,933 of GDP generated per job, was Leisure & Hospitality.

Picture2

May’s jobs numbers and productivity

So its good news that Mining & Logging was one of the three major sectors to register job growth (100 new jobs). But the biggest gaining sector was Other Services (2,100 new jobs) which generated just $60,941 of GDP per job in 2015.

Leisure & Hospitality employment held up. So, largely, did Educational & Health Services (100 job losses). But these sectors generate relatively little GDP per job. Leisure & Hospitality generated $43,933 of GDP per job in 2015, Educational Services $45,343, and Health Care $68,760. In other words, two of the better performing sectors in terms of employment were among the worst performing in terms of GDP generated per job.

This is a longstanding trend. Between 2000 and 2015, Education and Health Services employment grew at a combined rate of 54 per cent, well above the 4.8 percent rate for the total of all non-farm jobs. By contrast, employment in the second fastest growing sector, Professional and Business Services, grew by 17 per cent over the period. As a result, in April, for the first time, more Minnesotans — 538,800 — were employed in Education and Health Services than in any of the other sectors.

Minnesota needs more productive jobs

As I’ve written before, this is in no way to denigrate jobs in these sectors. Health and education are vital. Leisure and hospitality are mainstays of the economy in vast swathes of Minnesota.

But to have high quality hospitals and schools and to be able to afford that week in the cabin Up North, we need high productivity, high wage jobs. This is key for the state’s economic future. Keep an eye on the data.

John Phelan is an economist at Center of the American Experiment.

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