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Minnesota’s unemployment rate is down from July to August, but the number of people unemployed is up 20% over the year

“Minnesota Unemployment Rate Decreases to 3.3% in August” So said a release from Minnesota’s Department of Employment and Economic Development today.

The data, indeed, shows that Minnesota’s unemployment rate fell from 3.4% in July to 3.3% in August. But this is 0.5 percentage points up on the level of August 2018, when unemployment stood at just 2.8%. What is happening?

Population, labor force, and unemployment 

As I’ve noted before, the working age population (over 16s) can be divided between those in the labor force and those not in it. Data from the Bureau of Labor Statistics’ Current Population Survey suggests that most of those who aren’t in the labor force simply don’t want a job.

Those in the labor force can, in turn, be divided between those who are employed and those who are unemployed but looking for work. The ratio of this latter number to the number in the labor force gives you the unemployment rate. You can think of it as

Working age population = In labor force + Not in labor force

and

In labor force = Employed + Unemployed

Minnesota’s numbers

Over the last 12 months, from September 2018 to August 2019, Minnesota’s working age population has risen by 0.9% (37,838). The number in the labor force has grown by 1.3% (39,731) and the number not in the labor force has fallen by 0.1% (1,893). This is good news. As a result of these numbers, Minnesota’s Labor Force Participation Rate – the share of the working age population either employed or unemployed but looking for work – has risen from 69.8% in September 2018 to 70.1% in August 2019.

But now the bad news. While Minnesota’s labor force grew between August 2018 and September 2019 by 1.3% (39,731 – the sum of the increase in population and decrease in those not in the labor force), the number employed grew by only 0.8% (22,445). This was below the growth rate of the labor force so the number of Minnesotans unemployed grew by a staggering 20.1% (17,286).

Over the last year, Minnesota’s working age population has grown faster than that of the United States generally (0.9% to 0.4%), but employment has increase more slowly (0.8% to 1.2%). As a result, while the number of unemployed rose across the country by 1.3%, in Minnesota it increased by 20.1%.

Perhaps it is time to stop worrying about that labor shortage?

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

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