As unemployment benefit ‘enhancements’ end in MN, what’s next for the labor market?

Last week, The Globe carried a story titled ‘Southwest Minnesota sees labor shortage, including Nobles County‘:

The numbers in southwest Minnesota still add up to a labor shortage, the Nobles County Board of Commissioners learned Tuesday during its regular meeting.

“We had a labor shortage prior to COVID-19 that was significant,” said Carrie Bendix, executive director of the Southwest Minnesota Private Industry Council. “COVID just made it worse.”

There are 10,177 job openings and just 7,704 job seekers in the 23-county southwest Minnesota area, based on numbers from the fourth quarter of 2020, according to the Minnesota Department of Employment and Economic Development.

That translates to not enough workers to fill every job in the county.

In an article titled ‘Filling the worker void,’ the Marshall Independent reported:

Jen Griebel received only one application this year when she advertised for a part-time store assistant at her downtown gift shop called Nettie’s, but one was all she needed.

She hired Tiffanie Downing, who is entering her junior year at Marshall High School. Downing has a variety of duties that relate to merchandise and customers.

“I was lucky to find Tiffanie,” Griebel said. “She’s a great assistant. She definitely wants to work, and always shows enthusiasm.”

Griebel said she wasn’t sure she’d be able to hire anyone because of the worker shortage that’s affected the Marshall area and many other locations.

Currently more than a dozen local employers are advertising for workers. The shortage took shape as the recovery from the COVID pandemic outpaced the supply of people looking for jobs.

The Hastings Star Gazette reports the numbers:

Minnesota’s unemployment rate for July is at 3.9%, nearly where it was before the pandemic hit in early 2020.

But the unemployment rate is only part of the story. Minnesota’s labor force participation rate was 67.8% in July, significantly higher than the national rate of 61.7%, but down from Minnesota’s rate of 70.2% right before the pandemic.

That drop of 2.4 percentage points translates to 87,050 Minnesotans no longer working or looking for work. 

The situation faced by employers could be about to improve, however. As KAAL TV reports:

Businesses in Minnesota have been struggling for months to find employees. Many restaurants have had to shorten their hours across the state. 

“I don’t think there’s a business I talk to that’s not looking for workers and isn’t struggling a little bit to find them,” Steve Grove, the state Department of Employment and Economic Development’s commissioner, said. 

Grove said things could change soon.

“A lot of things are going to happen this fall. You do have those unemployment benefits ending. That will have some effect. You’ve also got kids going back to school, and that’s a major component for workforce. Having a place for your kids to go during the day changes your options as a worker,” Grove said. 

The state is expecting to see more Minnesotans heading back to work this fall and fewer people using unemployment benefits.

“Right now there’s about 205,000 Minnesotans pulling in a weekly unemployment benefit. We expect that number to dwindle to less than 100,000 by the time October rolls around,” Grove said. 

Grove’s point — that federal ‘enhancements’ of unemployment insurance totaling $300 a week have played some part in elevated levels of unemployment coexisting with record numbers of job openings — might seem obvious to many, but is by no means uncontroversial.

It is not the full story, to be sure. Nobles County, for example, noted a labor shortage prior to COVID-19 and, The Globe reports, “if every single person receiving unemployment benefits in Nobles County immediately got a job, that would mean only another 172 jobs filled.” Grove himself offers a lack of childcare as a major cause.

Research casts doubt on this, however. As I wrote in June:

…economists Jason Furman, Melissa Kearney and Wilson Powell III conclude that school and daycare closures are not driving low employment levels: indeed, they find that that the employment rate for parents of young children actually declined at a lower rate than it did for those without kids. The authors suggest that other factors, including increased federal unemployment benefits, are playing a role in keeping people out of the workforce.

This evidence is worth listening to. Furman chaired the Council of Economic Advisers in the Obama administration so he cannot be written off as some right wing shill.

This past weekend, the Star Tribune reported that ‘Unemployment benefits expire this weekend for about 100,000 Minnesotans‘:

About half of Minnesotans now receiving unemployment aid will see their jobless benefits end this weekend as several programs Congress put into place as a pandemic-related safety net expire.

In all, about 100,000 people will get their final payments in the coming weeks, and the $300 a week provided as an enhanced benefit will also come to an end.

Beginning this week, those still eligible for unemployment benefits in Minnesota will go back to receiving just half of their previous wages up to a maximum of $762 a week. The average payout will be around $400 a week, according to the state.

Reports with titles such as ‘Jobless Americans will have few options as benefits expire‘ need to be set against other stories with titles like ‘Job openings hit record high, with 10.1 million openings,’ after all, a job is an option.