The truth behind Minnesota’s low unemployment rate: Minnesotans leaving the labor force

Last Friday, the DFL tweeted:

Under the leadership of @Tim_Walz and @peggyflanagan, Minnesota has the lowest unemployment rate of any state in the nation and ranks as the fifth best state for job growth.

Let's re-elect them this November to keep moving Minnesota forward.

— Minnesota DFL Party (@MinnesotaDFL) September 30, 2022

But, as I’ve noted before, taken by itself the unemployment rate can be a misleading statistic:

The unemployment rate is calculated by dividing the number of people who are unemployed but looking for work by the total number of people in the labor force. Crucially, people who are unemployed and not looking for work are not counted in the labor force. Because of this, it is possible for the unemployment rate to fall without the number of people employed rising if people simply give up looking for work. So, to properly assess the employment situation in Minnesota we need to look at three things: changes in the number of people unemployed, changes in the number of people employed, and changes in the number of people not in the labor force at all.

So, lets take a look.

Unemployed

BLS numbers show that Minnesota is actually one of 33 states and the District of Columbia with fewer people unemployed in August 2022 than were unemployed at the pre-pandemic peak for employment in the United States in February 2020, as Figure 1 illustrates. Indeed, over this period we have seen the steepest percentage fall in the United States in the number of people unemployed, 52.6%. This would seem to be good news.

Figure 1: Change in total unemployment, February 2020 to August 2022

Employed

But this decline in total unemployment is not the result of increased employment. Indeed, as Figure 2 shows, Minnesota had 0.6% fewer people employed in August 2022 than it did in February 2020. Our state is one of 23 out of 51 jurisdictions that have fewer people employed now than before COVID-19 hit.

Figure 2: Change in total employment, February 2020 to August 2022

Out of the labor force

So, to account for a fall in the number of people both unemployed and employed we have to look at the number of people who have left the labor force completely. We can calculate this by subtracting the number of people in the labor force from the number for the civilian non-institutional population.

Figure 3 shows that the number of Minnesotans who are not in the labor force increased by 9.7% between February 2020 and August 2022: this is the 8th largest increase in the United States. This would seem to be bad news.

Figure 3: Change in total not in the labor force, February 2020 to August 2022

As I wrote in April when I made this point previously:

The next time a politician or anyone in the media remarks on Minnesota’s low unemployment rate, remember the numbers behind it.