Government shutdown leading factor in Minnesota losing 19,800 jobs last month

Caused largely by the three-week state government shutdown, Minnesota lost 19,800 jobs in July, according to figures released today.

The state unemployment rate rose 0.4 percent to a seasonally adjusted 7.2 percent, compared with the U.S. rate of 9.1 percent, the Minnesota Department of Employment and Economic Development (DEED) reported.

 “While the numbers are temporarily distorted by the state government shutdown, Minnesota’s job growth continues to improve incrementally and actually shows signs of strength in a number of sectors.”  said DEED Commissioner Mark Phillips.

He said, for example, that he’s “encouraged by the gain of 8,200 private-sector jobs in July.”

The biggest gains came in the manufacturing sector, which added 3,500 jobs.

Other sectors reporting gains are professional and business services (3,000), financial activities (1,900), education and health services (1,300), other services (1,000), trade, transportation and utilities (200), and logging and mining ( 100).

Sectors reporting job losses are government (28,000), construction (2,000), information (700), and leisure and hospitality (100).

The department also reported these revisions: “Preliminary data as calculated by the Bureau of Labor Statistics during the state government shutdown reported a gain of 13,200 jobs during the month of June and another 0.1 percent uptick in unemployment to 6.8 percent. Due to significant revisions, construction employment gained 4,800 jobs in June, so total employment growth now stands at 18,600.”

DEED issued the data this morning, as scheduled, but Phillips has decided to no longer hold teleconference backgrounders. “The teleconference was the preferred format of the former Commissioner [Dan McElroy],” explained  DEED spokesperson Kim Isenberg.

In other employment news, the U.S. Department of Labor in a downbeat note this morning reported that initial claims for unemployment benefits rose 9,000 to a seasonally adjusted 408,000, moving above what economists have designated as the significant 400,000 threshold. The four-week moving average was 402,500, a decrease of 3,500 from the previous week’s revised average of 406,000, according to the Labor department.

James Kwapick, Minneapolis-based district manager for temporary staffing firm Robert Half International (NYSE: RHI), said “our business unequivocally is up nicely year over year both locally and globally.” His firm specializes in placing professional and white-collar workers. Robert Half’s search practice is “up off the charts” and conversion of temporary employees to permanent is double or triple the level of last year, he said.

The economy is coming out of “a longer, deeper recession with more acute pent-up [employer] demand” than during previous recoveries, he said. “Companies leaned back like never before,” he added.

The typical recovery pattern sees an uptick in temporary jobs, followed by higher-end contract hiring as employers restart projects that had been put on hold, he explained. Those temporary and contract positions are converted into permanent positions as employers gain more confidence in their business prospects.

“The last shoe to drop is permanent hiring,” he added. Kwapick does not see a wholesale recovery under way yet, however. Many employers “are more bullish, and an equal number are staying at same level” or reducing headcount, he said.

In particular, Kwapick sees strong demand for web developers, tax and accounting and litigation specialists, information technology system analysts, and general office and administrative workers. He also said demand for customer service representatives is “off the charts,” indicating businesses are seeing growth in customer orders. 

“If you’re unemployed that’s a big deal, but if you have the right sort of skill set, there is demand and movement,” Kwapick  said.

In a discouraging sign for unemployed managers and executives, however, a recent nationwide survey showed that business start-ups in the first half of 2011 fell to their lowest level in the history of tracking, according Chicago-based outplacement consultancy Challenger, Gray & Christmas.

The quarterly survey of about 3,000 job seekers re-entering the workforce found that in the year’s first six months, an average of just 3.3 percent of job seekers decided to start their own business. That was down from the previous record-low of 3.7 percent averaged over the first two quarters of 2010.  In the second quarter of 2011 the start-up rate was even lower, at only 2.5 percent.

By contrast, nearly 8 percent of job seekers took an entrepreneurial path a decade ago, in the quarters following the dot-com bust, according to the report.

“The survey results reflect the harsh conditions that currently exist for would-be entrepreneurs, whose biggest obstacle may be securing the funds to undertake such an endeavor,” Challenger reported.

In its monthly survey of announced job cuts, Challenger, Gray had previously reported a “sudden and unexpected burst” of activity pushing future  job cuts to a 16-month high of 66,414 in July.

The potentially troubling sign for national unemployment trends was driven by layoff announcements at Merck, Borders, Cisco, Systems, Lockheed Martin and Boston Scientific. Minnesota private-sector employers announced only 50 job cuts in July.

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