New DEED numbers suggest a turning point for unemployment in Minnesota

The Minnesota Department of Employment and Economic Development (DEED) announced yesterday that for February, Minnesota’s unemployment rate went down mainly due to people finding jobs. This is a positive turnaround compared to the last few months, when the unemployment rate declined due to people leaving the workforce. Minnesota still saw its labor force shrink, but the change was not significant.

Minnesota’s seasonally adjusted unemployment rate dropped to 4.3% in February, down from 4.5% in January, according to numbers released today by the Minnesota Department of Employment and Economic Development (DEED). The decline in the unemployment rate was due to more people finding work and a decrease in the number of unemployed people, which resulted in another decline in the number of people engaged in Minnesota’s labor force.

Minnesota’s labor force participation rate fell by a tenth of a point to 67.8% in February. It was 70.2% in February 2020, immediately before the start of the pandemic. Nationally, the unemployment rate fell one-tenth to 6.2% in February, with labor force participation staying level at 61.4%.

Minnesota gained 13,900 jobs, up 0.5%, in February on a seasonally adjusted basis. This is 200 jobs short of the peak pandemic recovery employment in October 2020. The private sector gained 11,000 jobs in February, up 0.5% over the month, bringing private sector employment 300 jobs above peak pandemic employment reached in October.

Despite the good news, issues remain.

For one, up to date, Minnesota has only recovered 49.3% of jobs lost between February and April 2020. The Hospitality industry also remains underwater with 26.1% over the year job losses as of February 2021.

As we noted in our report, The State of Minnesota’s Economy: 2020, Minnesota’s high levels of income are heavily dependent on the state’s high labor force participation rate. Our productivity is much lower compared to other states as well as the U.S. average. Therefore, a declining labor force participation rate could pose significant challenges to the future of Minnesota’s economy.

Albeit slow, Minnesota’s job gains are a good turning point. But more can be done to speed this process. With the majority of our elderly vaccinated and COVID-19 showing improvement, Minnesota’s small businesses ought to be fully reopened.