Unemployment is down, but MN is recovering poorly compared to most states

On Thursday, June 22, the Minnesota Department of Employment and Economic Development (DEED) announced that Minnesota’s unemployment was at yet another historic low. According to DEED, Minnesota’s unemployment rate dropped down to 2.0 percent in May, prompting Walz to cheer for what he considers a strong economy.

With high inflation rates pinching the pockets of Minnesotans, whether Minnesota has a strong economy is clearly up for debate. But even the employment numbers show that Minnesota’s economy is far from strong. Our historically low unemployment numbers are hiding a lot of mediocrity. When examined deeply, compared to most states, the fact of the matter is that Minnesota is performing poorly when it comes to recovering the jobs lost during the pandemic.

The labor force is still shrunken

The Minnesota labor force is still short of over 75,000 people. While Minnesota’s labor force participation rate was 70.8 percent in January 2020 before the pandemic, as of May 2022 it is down to 68.4 percent.

And as American Experiment research has shown, among the four bordering neighbors, the only other state performing as poorly as Minnesota on this metric is Iowa. Both North and South Dakota as well as Wisconsin have fared better in attracting workers back into the labor force. In fact, Wisconsin’s labor force, as well as that of South Dakota, is much bigger now than it was before the pandemic.

Labor Force Participation Rate by State
 Jan-20May-22Difference
Iowa70.0%67.6%-2.4%
Minnesota70.8%68.4%-2.4%
North Dakota69.6%69.3%-0.3%
South Dakota68.7%68.8%0.1%
Wisconsin66.3%66.5%0.2%

A significant number of jobs haven’t yet been recovered

Partly due to people being out of the labor force, Minnesota is missing a lot more jobs compared to most states. As reported by the Star Tribune,

Minnesota has recovered about 80% of the jobs it lost in the first months of the pandemic, a slower bounce back than the rest of the nation. That’s partly a result of the slower rebound of the state’s labor force, which has nearly 78,000 fewer workers than it did before the pandemic. The retirements of baby boomers contributed to the gap.

All is not well

Minnesota’s historically low unemployment is not entirely good news. Our labor force is missing workers, and in addition to that, our state is doing poorly in recovering jobs compared to most states. It’s safe to say that all is not well with Minnesota’s job market.