Update: Minnesota’s unemployment rate falls, but we’re not out of the woods yet

Minnesota’s unemployment rate fell slightly during August, for the second month in a row, but it’s far too soon to throw a recovery party.

The state’s employers shed 10,300 jobs during the month, erasing gains they had scored in July, according to figures released today by the Minnesota Department of Employment and Economic Development.

“I would have been a lot happier if we had shown an increase in jobs this month,” said DEED Commissioner Dan McElroy said. “That has not happened.”

The decline in the unemployment rate — to a seasonally adjusted 8.0 percent — was largely due to workers dropping out of the labor force. State officials said they don’t know why some 6,200 Minnesotans stopped counting themselves as workers during the month.

Even though the unemployment rate dropped slightly in August on the heels of a July drop of three-tenths of a percentage point, Minnesota is not seeing the kind of trend that would signal a rebounding jobs market, McElroy said.

Reliable indicators of workplace recovery have yet to light up for Minnesota. There are no signs that workers are putting in longer hours and that employers are stepping up requests for temporary help, he said.

One bright spot in the picture is that Minnesota workers seem to be pulling slightly ahead of the nation. The national unemployment rate rose to 9.7 percent in August, up from 9.4 percent in July. And Minnesota’s over-the-year job loss is 4.3 percent, compared with the nation’s loss of 4.4 percent.   

“I am encouraged to see the gap between Minnesota’s and the nation’s unemployment rates widening, suggesting that the state may experience an earlier economic rebound,” McElroy said.

The latest Minnesota numbers (below) come two days after Federal Reserve Chairman Ben Bernanke said that the recession is “very likely over.”

All labor force data are subject to revision. The unemployment rate is the percentage of people actively seeking work compared with those in the labor force (employed plus unemployed). Legend: NSA = Not Seasonally Adjusted; OTY = Over The Year; MSA = Metropolitan Statistical Area

His declaration is underscored this week by other economic news: The Commerce Department reported that retail sales jumped higher than expected in August. The Federal Reserve said that factories stepped up their output in August. And the Standard & Poor’s 500 stock index hit its highest level in nearly a year this week.

But Bernanke also predicted a rebound so moderate that jobs will come back slowly.

“It is still going to feel like a very weak economy for some time as many people still find their job security and their employment status is not what they wish it was,” Bernanke said during a speech at the Brookings Institution in Washington, D.C.

The speech marked the date a year after Lehman Brothers filed for the largest bankruptcy in U.S. history and set off a cascade of financial and business failures that nearly brought down the nation’s — indeed, the world’s — financial systems. 

It is not surprising, though, to see a persistently dim jobs picture while other parts of the economy pick up, said Steve Hine, research director for DEED’s Labor Market Information Office. Employment typically lags other indicators on the road to recovery.

Hine also said that the decline of 6,200 workers from Minnesota employment forces during August includes about 2,800 people who had been working and 3,400 who had been looking for jobs.

Did some stop job hunting because they were discouraged? Did some who had jobs decide to retire? Don’t know, Hine said. The estimate is based on a survey with a small sample and, therefore, a relatively high chance for error. An upcoming annual summary of the state’s workforce will give a better estimate of its actual size.

Unemployment statistics are based on surveys in which people are asked whether they are working or looking for work. If the answer is no to both questions, they are counted out of the labor force.

That makes for a “funny statistic” which “could be wrong in both directions,” said Christopher Phelan, an economics professor at the University of Minnesota who also does research for the Federal Reserve Bank of Minneapolis. It doesn’t tell why people aren’t looking for work – whether, for example, someone decided to be a stay-at-home parent. It also doesn’t tell us how hard someone might be looking.

Better measures are the rates and numbers of people actually working. Compared with August 2008, Minnesota is down 120,300 jobs (not seasonally adjusted), showing the state’s economy has a good way to go toward recovery.

Another telling measure would be population – whether people actually are leaving the state to seek better prospects elsewhere, Phelan said. There is anecdotal evidence that some northern Minnesotans who lost jobs in forest products plants are commuting long distance to jobs in North Dakota and elsewhere. But firm numbers on short-term population shifts are not available and only time will tell whether those commuters truly pick up and leave the state.

Job cuts slowing nationwide
Nationwide, the number of newly laid-off workers seeking unemployment benefits fell last week to the lowest level since early July, evidence that job cuts are slowing, the Associated Press reported. The Labor Department said initial claims for unemployment insurance dropped to a seasonally adjusted 545,000 from an upwardly revised 557,000 the previous week. Wall Street economists expected claims to rise by 5,000.

The decline is the third in the past four weeks, the AP said. The four-week average, which smoothes out fluctuations, dropped 8,750 to 563,000. That’s still far above the 325,000 per week typical in a healthy economy.

Still, the number of people claiming benefits for more than a week rose by 129,000 to a seasonally adjusted 6.2 million.

Summer at the beach?
One interesting group of workers hit by the recession’s heavy blow on jobs is teenagers. Not surprisingly, summer jobs were scarce for them. But a fascinating new report from the Federal Reserve Bank of Minneapolis says that teen labor was falling anyway.

“It would be wrong to conclude that the downward trend in teen labor participation is a result of the recession,” said Ronald A. Wirtz in the September issue of the Fedgazette. “It’s more accurate to say the recession has compounded a long-running trend. Teen labor force participation, which counts both workers and those actively seeking a job, has fallen across the United States for about 15 years. But the rate has dropped much more steeply since 2000.”

Of course, teens in the Fed’s five-state Upper Midwestern district work harder than their nationwide counterparts.

“The district’s labor force participation rate has consistently maintained a 10-14 percentage point advantage over the national rate,” Wirtz said.

“Labor force participation in North Dakota is near 60 percent; in Montana, it’s about 45 percent,” he said. “But each state in the district (including all of Wisconsin) has experienced a general decline in its teen labor participation, though to varying degrees. Minnesota, Montana, South Dakota and Wisconsin all saw drops of at least 10 percentage points from 1994 to 2009, with Minnesota seeing the largest drop, from 71 percent to less than 55 percent.”

Details of the August picture
Look deeper into the jobs picture for Minnesota in August and you see a mixture of gains and losses. Three of the state’s 11 industry sectors gained employment during the month, DEED reported. The strongest sector was professional and business services, which added 1,300 jobs. Gains also were seen in other services and in the information sector.

Job losses occurred in leisure and hospitality (down 3,200), trade, transportation and utilities (down 3,000), education and health care (down 2,200), government (down 2,100), manufacturing (down 900), financial activities (down 500), construction (down 300) and logging and mining (down 100).

Over the past year, education and health services added 11,600 jobs and government added 700 jobs.

DEED also announced the findings of its fourth annual business services survey in conjunction with the Federal Reserve Bank of Minneapolis, which showed mixed prospects for employment, sales revenue, profits and wages over the next year among Minnesota professional business services firms. The survey showed that 66 percent of business services firms expect employment levels to remain the same in 2010. About 55 percent of firms expect employee wages to remain the same or decrease. The survey also indicates that 30 percent of business services respondents expect revenue increases, and 27 percent expect increases in profits for 2010.

Sharon Schmickle writes about national and foreign affairs and science. She can be reached at sschmickle [at] minnpost [dot] com.

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Comments (8)

  1. Submitted by Francis Ferrell on 09/17/2009 - 12:11 pm.

    Unemployment numbers are so homogenized and sifted that reading these new numbers make me believe the situation is still bad news for those out of work, receiving no benefits, or under employed. The numbers only reflect that for every person listed as unemployed there are 1.5 to 2+ more persons that should be listed!

    There has to be better way and more accurate way to show the true unemployment picture. Minnesota has a rather archaic, convoluted way to show employment among its working demographic groups. People suffer with system of counting the unemployed! Based on MN’s ‘per capita’ rates the unemployment percentage[s] should be higher when compared to other cities/states.

    The same accounting methods holds true for jobs [guesstimated] created. In the end, MN seems to be at the short end of the stick when showing “true” statistics. When will the real statistical picture regarding jobs and unemployed ever be revealed? The real true picture might be more surprising to us all!

  2. Submitted by Tim Nelson on 09/17/2009 - 01:03 pm.

    I have applied for hundreds of jobs since last November, and have had one interview.

    My listed references have not gotten a call, either.

  3. Submitted by dan buechler on 09/17/2009 - 02:54 pm.

    We need to keep our eyes focused here as it is easy to get distracted. Very few seem to have total credible answers to this problem although Obama and crew have a full plate of problems to attempt to solve.

  4. Submitted by Richard Schulze on 09/17/2009 - 08:39 pm.

    The hollow economic expansion of the last eight or so years was really fueled by housing. A huge amount of job creation was tied to housing. As well as a huge amount of consumption. Housing peaked in 2006.

    The timber and wood products industry in northern MN is just one example of this. The related industries such as home improvement, appliances and retail in general etc…. The statistics above show how unemployment relates to a lack growth in the housing industry.

    The country built too many houses during the boom years. So there’s millions of units waiting to be sold. Add in foreclosures, which put even more inventory on the market. Any real rebound for the construction industry is a long way away. Analysts says there’s enough housing on the market to meet demand for up to three years.
    Housing construction is up, but apartments have a lot to do with today’s housing starts.

  5. Submitted by Tim Nelson on 09/18/2009 - 08:38 am.

    If you consider the demographics, we may have enough (redundant) housing to last the rest of our lives.

    Group housing is another matter.

  6. Submitted by Richard Knoll on 09/22/2009 - 02:44 pm.

    Yes, the unemployment rate is falling. As one of the unemployed whose benefits are exhausted I will simply become homeless and not counted as unemployed. The data that is used is flawed and doesn’t reflect the reality of the current economic mess. Anyone, who by the criteria, who has not looked for a job in the last 4 weeks is also not included. The data they collect is sketchy at best with so many exclusions it is a poor representation of the reality. Besides, the actual unemployment rate is bad for politics. The federal government is more aware of the current unemployment crisis and will act to extend benefits. The unemployed in Minnesota will likely be excluded as the rate as reported is below the 8.5 percent threshold. The politicians need to get out of the bubble they created for themselves and leave their gated communities and see what they have really created.

  7. Submitted by Richard Knoll on 09/22/2009 - 03:00 pm.

    The decline in the unemployment rate — to a seasonally adjusted 8.0 percent — was largely due to workers dropping out of the labor force. State officials said they don’t know why some 6,200 Minnesotans stopped counting themselves as workers during the month. State officials “don’t know”, people do not just drop out of the work force, they get discouraged, disenfranchised and are still unemployed. They quit reporting to the unemployment centers as their benefits are exhausted. They are not counting themselves, The state is not counting them, as unemployed. The actual unemployment rate in Minnesota is under reported for political reasons. This policy is hurting the unemployed as they will not be eligible for the pending federal extension. It is time for Minnesota to help their unemployed with real reporting and facing the reality of the current economic climate.

  8. Submitted by Richard Knoll on 09/22/2009 - 03:24 pm.

    The estimate is based on a survey with a small sample and, therefore, a relatively high chance for error. Pretty much tells it all, plus it is based on 2 questions. This is not significant data,it fails to account for those who are underemployed, discouraged or otherwise unemployed. The small sample size is another matter as it is not representative of the population. Governor Pawlenty’s political aspirations and barbaric budget cuts have left many Minnesotans out in the cold. Now more will be left out of the unemployment extensions the federal government is willing to pass. It is not good for an aspiring president to have a state with high unemployment numbers or budget issues. He is slashing and burning his way through Minnesota, a mere stepping stone for his personal political aspiration. I for one have no desire to see him do the same to the whole country.

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