Minnesota unemployment claims have dropped faster in August than in any period since the pandemic began

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The number of Minnesotans on unemployment has dropped faster in recent weeks than it has in any period since the pandemic began.

In the last week of July and first week of August, continued claims — which represent the number of people currently claiming unemployment benefits in Minnesota — dropped by 12 percent. New unemployment applications have also been on the decline in recent weeks.

Nearly 215,000 Minnesotans are still claiming unemployment — a number more than three times as high as pre-pandemic levels, according to data from the Minnesota Department of Employment and Economic Development.

Still, the shrinking number of claims is a positive development, said Cameron Macht, the acting assistant director at DEED’s Labor Market Information Office.

“It definitely is good news. It shows that a lot of people are able to go back to work and have gone back to work,” he said.

Regaining jobs

When the pandemic hit in mid-March, Minnesota started to see a massive surge in unemployment applications as the state, under executive order by Gov. Tim Walz, moved to close down bars and restaurants on March 17. More workers were sidelined after a stay-at-home order, which took effect on March 27.

As the shutdowns took effect, the number of Minnesotans receiving unemployment benefits climbed, reaching a peak of nearly 406,000 in late April/early May, per DEED.

Since then, the number of unemployed Minnesotans has declined, with 12 percent drops in the two most recent weeks of DEED’s data. Since workers can also collect unemployment if their hours are cut, some of the decreases in claims may be due to workers’ hours being restored.

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The declines in unemployment claims are likely not tied to the end of $600 in additional weekly unemployment dispersed as part of the CARES Act through July, Macht said, citing national studies that found supplemental benefits did not increase unemployment.

The number of people applying for unemployment continues to be high, but has trended downward in recent weeks. Nationally, about a million applied for unemployment this week, compared to 1.1 million last week. In Minnesota, applications dropped from 12,081 last week to 10,836 this week, the Department of Labor reported.

Also in positive news, some of the industries hardest-hit by the pandemic have begun to recover jobs, includding retail, accommodation, food services, arts entertainment and recreation, Macht said.

There’s also been growth by about 3,300 jobs over year in “All Other Administrative and Support and Waste Management and Remediation Services,” a sector that includes temporary staffing agencies. This sector is a good economic indicator because increases in staffing agency work tends to show businesses are looking to hire, but may be going through staffing agencies to find temporary workers because of looming uncertainty, Macht said.

That’s not the only encouraging sign: the rate of unemployment is also ticking down.

Between March and April, Minnesota’s unemployment rate went from a low 2.9 percent (seasonally adjusted) — the lowest it had been since it was 2.6 percent in March of 1999, to 9.9 percent in May, the highest it had been since May of 1976.

In June, unemployment dropped to 8.6 percent, which ticked down to 7.7 percent in July. The national unemployment rate is 10.2 percent.

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While the unemployment rate of 7.7 percent is very high, and it isn’t a perfect measure of all the Minnesotans who are out of work — it only includes those who don’t have jobs and are actively seeking work — an improvement in the rate is encouraging, Macht said.

Employment data, which shows the number of people in the labor force, has also shown gains in recent months.

And while the picture overall is of a Minnesota economy regaining some of its jobs, Macht pointed out that there are racial disparities: through July, 7.5 percent of Minnesota’s white workforce was claiming unemployment benefits, compared to 20 percent of Minnesota’s Black workforce, 18 percent of its Indigenous workforce, 11.5 percent of its Asian workforce and 10.4 percent of its Hispanic or Latino workforce.

That’s partly related to racial concentration in job industries.

“Those are areas where the workforce is more diverse and because those have been hit, that’s placing an additional burden on our workers of color,” Macht said.

Uncertainty ahead

In Minnesota, the majority of unemployment claims due to layoffs continue to be under a temporary classification, Macht said, which means workers and employers were under the impression that the jobs are coming back.

If the economic recovery is prolonged, that could change.

Ronald Wirtz, the regional outreach director at the Federal Reserve Bank of Minneapolis, said the circumstances in which this pandemic began may be causing employers to try to hang onto workers, laying them off temporarily in the hopes of bringing them back.

With unemployment rates under 3 percent leading up to the pandemic, one of the big economic stories of the last few years was a labor shortage. In light of that, employers may have been sensitized to the idea that finding workers was tough, and reluctant to get rid of them once economic conditions changed, hence making temporary layoffs, Wirtz said.

“People thought initially in the pandemic it was going to be temporary. They didn’t want to let workers go because they might not get them back,” he said.

Now, firms may be finding their planning at the time didn’t account for a longer economic struggle. Some are likely moving or will move to permanent layoffs, it’s just not clear the percentage, Wirtz said.

That’s not the only uncertainty ahead. While the unemployment rate has ticked down, it’s still high.

“I don’t think we really know where the economy is going right now,” Wirtz said. “We hope it’s on a continued growth path, but there are a lot of unknowns.”

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