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Minnesota’s unemployment rate fell to 6% in September, but it’s not good news

According to a press release by the Minnesota Department of Employment and Economic Development (DEED), “Minnesota’s seasonally adjusted unemployment rate dropped substantially in September, down to 6.0% from 7.4% in August.” However, this was largely due to a large number of people leaving the labor force. The labor force participation rate for Minnesota declined by 1.3 percentage points from 69.7% in June to 68.4 % in August. In February 2020, the labor force participation rate was 70.2%.

Compared to the national average, Minnesota is slightly better off. As shown in the above chart the U.S. unemployment rate declined from 8.4% in August to 7.9% in September. Moreover, the national labor participation rate for September stands at 61.4%. However, this is still not a good picture.

Job losses are still high among industries, and even though Minnesota’s private sector fared slightly better compared to the national overall, some industries performed worse compared to the national average. Those include: construction, information, financial activities, education and health services as well as leisure and hospitality.

Minnesota is the state that works

Generally, Minnesota’s employment outlook has continued to improve, but growth in employment has slowed the past few months. This is a trend that is being experienced nationally. The same is with the drop in the labor force participation rate. But regardless of that fact, this is a worrying trend, especially for Minnesota.

Normally, a reduction in the number of people in the workforce has the potential to reduce output. This is especially likely for a society that is not very highly productive. In a situation whereby every worker produces little output, more and more people are needed in the labor force in order to increase output. And Minnesota is something like that.

Compared to other states, Minnesota has a lower productivity per worker. However, Minnesota also has one of the top highest labor force participation rates in the country. As shown by the Center’s economy report, this has been largely behind Minnesota’s higher than average income per capita. Therefore, a reduction in the labor participation rate is very threatening to Minnesota’s economy.