Jobless rate in Minn. hits pre-pandemic level

Minnesota DEED Commissioner Steve Grove
Minnesota Department of Employment and Economic Development Commissioner Steve Grove speaks on the state's response to the COVID-19 outbreak during a news conference in March 2020.
Christine T. Nguyen | MPR News 2020

Minnesota’s job picture is moving closer to where it was prior to the COVID-19 disruptions, with hiring and wages on the rise and the unemployment rate gradually declining.

Figures released Thursday show November’s seasonally adjusted unemployment rate dipped to 3.3 percent – the level it was last at in February of 2020. Overall, the state gained 8,600 jobs and the prior month’s total was also revised upward.

The sectors with the strongest gains last month were leisure and hospitality, professional and business services, educational and health services, and construction and manufacturing.

Employment and Economic Development Commissioner Steve Grove said he’s encouraged by what he’s seen lately.

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“This is the third straight month we’ve seen solid, steady growth. While the pandemic recovery has been jumpy, this fall has provided some stability on our recovery as jobs have continued to be added to our economy,” Grove said. “When you look at the overall picture of wages, jobs and job growth, we are headed in the right direction.”

Minnesota shed about 416,000 jobs in the first months of the COVID-19 fight. The state has now gained back about three-quarters of them; the improvement is even stronger when only private sector jobs are counted. 

But the labor force participation rate — a closely watched metric that gauges how many potential workers have jobs — remains stuck at just under 68 percent. Prior to the pandemic upheaval, it was steadily above 70 percent.

Officials say some workers have left the labor force due to early retirement, to start their own businesses or because they can’t find the right fit.

Year over year, average hourly wages are up by about 5.4 percent — to $33.79 per hour — but that growth hasn’t kept up with faster-rising inflation estimated to be around 6.8 percent for the same period. 

Some sectors are seeing stronger wage bumps than others. Oriane Casale, director of the Labor Market Information Office, notes that food-service jobs are fetching abnormally high pay.

Casale said the average is now $16.99 per hour for non-management staff, which is 15 percent higher in the last year.

“Which is just stunning wage growth,” she said. Prior to this spike, $15 per hour was seen as strong for those jobs.

She said positions in lower-wage occupations are helping drive up wage growth overall. She said nursing care and residential facilities are also seeing sharper pay jumps.

Even with the recovery, Minnesota business leaders worry they won’t be able to escape new state-imposed costs. 

Higher tax assessments will soon hit businesses to replenish an unemployment fund that was strained during the COVID-19 pandemic.

DEED has sent notices that lay out increases that take hold in January. The hike is dictated by law to pay off a roughly $1 billion debt in the unemployment insurance trust fund.

Grove said those payments aren’t due until April. That could leave time for lawmakers to work out a fix. He notes that employers with large layoffs weren’t penalized as they would have been in normal times with higher “experience ratings.”

“We did throughout the pandemic hold harmless employers based on firings and layoffs they had to engage in due to COVID,” Grove said. “This is both an executive order from the governor and was passed by the Legislature.” 

Republicans want to tap federal money to plug the trust fund hole.

Rep. Rod Hamilton of Mountain Lake, the lead Republican on the House Workforce and Business Development Committee, said he doesn’t want the business rates to become a leverage point in the upcoming session.

"Employers have struggled with state mandated shutdowns, supply chain challenges, and rising inflation — they're now being hit with a tax increase when the state is sitting on a $7.7 billion surplus and more than $1 billion in unspent COVID funds,” he said in a statement this week. 

Gov. Tim Walz has said he’s open to a buydown but he and other DFLers have suggested tailoring it based on business size. They’re getting pressure to act from prominent officials in their party, including U.S. Rep. Dean Phillips. He wrote top state leaders on Wednesday to push for a solution.

“As you consider how best to allocate the resources made available by Minnesota’s strong economic recovery and hardworking citizens, I again respectfully request that targeted relief for small businesses be included among your priorities,” Phillips wrote.