A perplexing workforce trend is emerging in Minnesota and stumping economists. Minnesotans are, in total, increasingly giving up on finding work.
Coming out of a recession, that's the opposite of what economists expect. The trend could hurt prosperity in Minnesota both at the individual and state level, but economists disagree on how much to worry.
Bill Royce had always looked forward to retirementm, but he didn't think it would come so soon. Royce was laid off from his job as an electrician three years ago at age 59 and ended up retiring early.
Lately, he spends his days volunteering -- and buying Christmas gifts for his adult kids.
"You always have to sign your life away," Royce says as he signs a credit receipt at the Hockey Lodge in St. Paul.
Royce had wanted to work at least a couple years longer to build up his 401k. But he only saw job postings in other states and didn't think he could easily sell his house in Cottage Grove.
He gave up on his job hunt, tapped his union pension and now draws social security benefits.
He's one of the faces of a long-running trend. The portion of working-age people who have a job or want a job has been dropping.
In early 2001, more than 75 percent of working age Minnesotans were in the labor force. Now the number has fallen below 72 percent. Some of the trend is due to a big exodus of older workers into retirement. But to economists, that doesn't fully explain why 32,000 Minnesotans have dropped out of the workforce just between March and October of this year.
Steve Hine, Minnesota's head job market analyst, said what's known as the "labor force participation rate" is dropping here in Minnesota faster than it is nationally. It is still much higher than the national average, which Hine attributes to higher educational levels in the state.
But Hine is perplexed by why the state's rate is going down faster, and he's worried about what it means for the economic recovery, even with the state adding about 34,000 jobs so far this year.
"There is evidence that labor market conditions are increasing. One would expect to see that reflected in higher participation rates," he said.
Hine and others say the declining rate is a problem at a couple of levels. On the one hand, it means that individuals who leave the workforce prematurely will have less personal prosperity, according to state demographer Tom Gillaspy.
"Their lifetime permanent income stream is going to be lower, their social security payments are going to be lower," he said.
And a drop in workforce participation echoes a decline in Minnesota's prosperity relative to other states. Minnesota ranked seventh in total income per person in 2003. The state has fallen to 14th.
But Paul Anton, head economist with Minneapolis-based Anton Economics, says there's no reason to worry yet about the labor force participation rate's changes. He thinks its recent decline is a temporary phenomenon tied to people's continued pessimism about the economy.
"Economists pay a lot of attention to gross domestic product and say 'Gee, the recession has been over for a year.'" he said. "But I think the man on the street, the woman on the street, and the teen on the street all feel differently about that, and that could be what's reflected in these numbers right now, rather than some more basic shift in Minnesota."
If more jobs open up and greater optimism takes hold, workers on the sidelines might decide to rejoin the labor force.
But if they don't, Anton said there are real concerns over the long term. Without enough workers down the road, the state could struggle to achieve robust economic growth.