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For unemployment during the COVID-19 pandemic, Minnesota is below average

With its diversified economy, Minnesota’s economy has once again proven to be more resilient in the face of recession than the national economy as a whole.

The state and federal governments recently released data for unemployment at the national, state, and county levels for April — some of the first data to show the effects of the COVID-19 pandemic and related shutdowns on jobs. So far, Minnesota is doing better than the nation and its neighboring states but there are wide variations across counties within the state and across states.

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Minnesota compared to the nation and its neighbors

In comparison to the US at large, Minnesota is weathering the crisis with lower rates of unemployment. This follows historical trends, as Minnesota’s unemployment rate is typically lower than the national average.

Monthly unemployment rate, December 2007–February 2020

The figure above shows the unemployment rate in the US and Minnesota from December 2007 (the official beginning of the Great Recession) to February 2020 (the start of the COVID-19 outbreak.) Unemployment rose both nationally and within the state in 2008 and 2009 but since then has fallen considerably, with Minnesota’s unemployment rate remaining consistently lower than the national rate.

Minnesota’s diversified economy and well-educated workforce have been the primary reasons why Minnesota’s unemployment rate remained below the national average. This also explains what happened to unemployment during the past three months. The figure below charts the unemployment rates for the US and Minnesota in February, March, and April of 2020. In February both the nation and the state were at historically low rates, but with the shut-down and stay-at-home orders the US jumped to an unemployment rate of 14.7 percent while Minnesota’s rose, but only to 8.1 percent.

Monthly unemployment rate, February 2020–April 2020

Minnesota’s neighboring states were also at historically low unemployment rates in February and March. As a result of the coronavirus shutdowns, all four states (Iowa, North Dakota, South Dakota, and Wisconsin) jumped upwards along with Minnesota, as shown in the graph below.

Monthly unemployment rates, February 2020–April 2020
Source: Federal Reserve Data, Federal Reserve Bank of St. Louis

Wisconsin leapt as high as the national rate, primarily due to its greater reliance on manufacturing. South Dakota and Iowa both saw their unemployment rates rise above 10 percent. North Dakota did almost as well as Minnesota, but its rate will probably rise rapidly in the coming months due to the collapse of crude oil prices and the subsequent turmoil in the broader industry.

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Unemployment across Minnesota

Unemployment rates also vary within Minnesota. It rose in all 87 Minnesota counties this past spring, ranging from 0.3 percentage points in Pipestone County to 12.5 percentage points in Mahnomen County.

Unemployment rate by Minnesota county, April 2020

In particular, the counties hit hardest were those that had industries most vulnerable to shutdowns. For instance, casinos are one of the biggest employer in Mahnomen County and these facilities were closed almost immediately, resulting in large job losses. At the other extreme, counties that were heavily agricultural saw only small rises in unemployment rates since their businesses were minimally affected by the shut-down.

Looking to the future

The big question to which we don’t yet have an answer is: what happens next? Specifically, will Minnesota follow the same pattern it did in the last recovery, as it stayed below the national average following the post-2008 financial crisis? Or is the worst yet to come?

One trend that I believe we will see clearly as more data become available is that people of color are bearing a disproportionate share of the unemployment burden. Indigenous folks in Beltrami, Clearwater, and Mahnomen Counties along with African American and Hispanic people in the Twin Cities are bearing the brunt of this unemployment crisis. Those with race and class privilege are being cushioned from many of the most immediate and devastating effects of the crisis, while those who are most marginalized continue to be the most vulnerable.

The political and social unrest in the Twin Cities following the murder of George Floyd will affect unemployment as well. On the one hand, jobs and businesses have been harmed in the turmoil, with the destruction of buildings. On the other hand, it will take a variety of different skills and jobs to attend the urgent task of rebuilding, which may cushion the blow. All of this, combined with the continuing effects of the pandemic, will cloud Minnesota’s labor market for months to come and pull at the fabric of Minnesota’s economy for a long time.

Overall, though, my best prediction is that, yes, we will persevere as we did before. Minnesota’s economy is more diversified than other states and will prove more resilient in the face of continuing uncertainty. For once, I’m glad that we are below average.