Unemployment rate back to pre-pandemic levels but the labor force is smaller

Yesterday the Minnesota Department of Employment and Economic Development (DEED) published new employment numbers showing how the Minnesota labor force fared in October. According to the data, job growth has continued and the unemployment rate is down to 3.5 percent. This is where it was in March 2020 before the massive job losses that happened in the weeks following lockdown mandates.

Up to date, Minnesota’s labor force has regained 71 percent of all jobs lost during the pandemic. Additionally, due to a tight labor market, wages have gone up in the job market.

Unfortunately, even though Minnesota’s unemployment went down due to job gains, our labor force is 2.2 percent smaller compared to the time before the pandemic.

The decline in Minnesota’s unemployment rate in October was primarily due to people moving from unemployment to employment, although the size of the labor force shrank slightly by nearly 1,000 people. Nationally, the unemployment rate fell two-tenths of a percentage point to 4.6%.

Minnesota’s labor force participation remains down from where we were immediately before the pandemic. The state’s rate remained unchanged from September to October 2021 at 67.8%, down from 70.2% in March 2020. Minnesota’s labor force is now more than 84,000 workers smaller than it was just prior to the pandemic. Still, Minnesota’s labor force participation rate is well above the national rate of 61.6% in October.

Certainly, if low unemployment is due to people moving from unemployment to unemployment, it is a good thing. However, when unemployment is low due to a shrinking labor force, that’s cause for concern. We can see this from the fact that businesses all around the state are having trouble finding workers, which is losing them revenue and losing the state economic activity.

Not to mention that a shrinking workforce might understate unemployment. In fact, DEED estimates that when adjusted to account for people leaving the workforce, unemployment goes up to 6.3 percent.


With COVID-19 cases surging in Minnesota, we need to be worried about whether and how long it will take the Minnesota labor force to recover.