Minnesota’s jobs picture improves, but not much

Minnesota’s unemployment rate fell to 7.3 percent in September — down from 8 percent in August and well below the national rate of 9.8 percent

But hold your applause. The reality is that the state’s jobs picture has improved tentatively at best. Even so, the official unemployment drop is likely to strip eligibility for benefit extensions away from about 7,000 laid-off Minnesotans in November.

Behind the simple statistic is a dizzying web of complications beginning with the fact that 4,000 Minnesotans dropped out of the labor force during September. In all, the state’s labor force has dropped 10,000 people since July.

Further, Minnesota employers shed 7,900 jobs during September, according to the latest report from the Minnesota Department of Employment and Economic Development. Looking at the big picture another way, Minnesota’s over-the-year job loss is 4.5 percent, compared with the nation’s loss of 4.2 percent.

Despite the complications, the upshot of the lowered official rate is that some 7,000 Minnesotans stand to lose up to seven weeks of unemployment benefits this fall because federal rules peg eligibility for benefit extensions to the unemployment rate.

“I would love to have a real unemployment rate we were confident in [register] that low,” DEED Commissioner Dan McElroy told reporters in a conference call Thursday.

But, based on analysis of job listings and other factors, “the reality is that is not going to happen in the near future,” McElroy said.

Still, Minnesota’s jobs picture appears to be improving here and there.

Tentative recovery in manufacturing
In many parts of the state, the recovery in jobs will come when manufacturing recovers. And one of the brightest findings in the new report is that manufacturers added 1,800 jobs during September. Transportation, closely tied to manufacturing, gained jobs too.

At this point, though, Rob Wegscheid sees manufacturers taking small strides rather than giant leaps toward full employment. He is regional vice president of Adecco Group in Edina, a staffing firm that helps manufacturers with temporary hiring.

“It has gotten better, but it is nowhere near a point where it is time to celebrate,” Wegscheid said.

Temp hiring is a key step in the jobs recovery process because companies typically add temporary workers before they take the next step and actually start hiring.

Wegscheid said he has seen a slight uptick in temp hiring. But “slight” is the key word. Companies that operate with 50 or more temps during good economic times are asking for three to five now, he said.

“They are starting to put a foot in the water but by no means are they getting back to where they were,” Wegscheid said. “They are very cautious.”

What about permanent hiring? “Flat all year,” Wegscheid said.

Back to class
The spread between Minnesota’s seasonally adjusted unemployment rate of 7.3 percent and the 9.8 percent national rate is the largest difference since 1992, McElroy said.

The best explanation for what’s happening in Minnesota is that laid-off workers are hitting the classrooms for more training. The Minnesota State Colleges and Universities System reported an increase of 13,000 students this fall over last. Enrollment also jumped on the University of Minnesota’s campuses.

Because students aren’t counted as unemployed, that shift lowered the state’s official jobless rate even though it’s safe to bet that virtually all of those people are likely to be job hunting again.

The promise from that trend is that Minnesota should emerge from this wrenching recession with a better-trained and more productive labor force.

Meanwhile, though, their loss from the ranks of the jobless hurt the state’s eligibility for federal unemployment benefits. The eligibility is based on a three-month rolling average of a state’s unemployment rate. Once the average drops below 8 percent, which Minnesota now has done, some who are receiving benefits will see their eligibility drop on Nov. 14, from 79 weeks of benefits to 72 weeks.

Congress has made noises about changing that federal rule, but as things stand now, the eligibility drop will become official if the U.S. secretary of labor certifies the state unemployment reports next week, as expected.

The best hope for those Minnesotans is to find jobs before November, McElroy said. But their prospects for doing so are not great.

The state’s largest job losses in September came in local government education — a drop of 4,900 jobs. That was largely due to cutbacks in the ranks of teachers and other local school workers. Another loser was the leisure and hospitality sector, where the state shed 4,900 jobs, primarily in food services, arts and entertainment.

Glimmer of hope nationally
On a national level, hope for recovery in the labor market is pinned on last week’s report that the number of U.S. workers filing new claims for jobless insurance fell more than expected to a nine-month low.

Initial claims for unemployment benefits dropped 33,000 to a seasonally adjusted 521,000 in the week that ended Oct. 3, the lowest level since early January, the Labor Department said.

Analysts had expected new claims of at least 540,000 for the week, partly because the nationwide unemployment rate rose to 9.8 percent in September, a 26-year high.

Minnesota saw 28,259 initial unemployment claims filed in September, 576 fewer than in August. Over the year, initial claims rose by 49.5 percent, with the biggest increases in manufacturing.

National data suggest the economy started growing in the third quarter after a recession that started in December 2007, but a persistently weak labor market is casting doubts over the strength and sustainability of that recovery, Reuters said.

“The labor market is improving, but rather slowly,” Cary Leahey, an economist at Decision Economics in New York, told Reuters.

“Both the initial and continuing [unemployment] claims numbers suggest that October ought to be a better month for payrolls than September,” he said.

In Minnesota, though, there still are 7.7 unemployed workers for each job vacancy statewide.

“The job market continues to be tight,” McElroy said. “It continues to be very competitive. There are some signs it is improving just a little bit.”

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 (2)

  1. Submitted by dan buechler on 10/15/2009 - 02:03 pm.

    Early in his administration President Obama alluded to the fact that those unemployed but retraining needed a federal boost. This was perhaps an idea floated about but deferred by other pressing concerns. I hope in a year he can bring back this issue as President Clinton often alluded to “a bridge to the 21rst century” which is basically a communitarian idea of personal responsibility buttressed by outside help.
    This administration is pushing on a string which is a very difficult and delicate thing to do. But better a string than the do nothing polcies openly advocated by Senator McCain whose 2 strongest campaign appeals were his military service and that the Republicans overspent on public works projects. One of the few bright spots of this terrible recession is that some aging public infrastrucure is being rebuilt. The question will be can we sustain it? These are interesting times. Joe the plumber might even become a democrat.

  2. Submitted by Richard Schulze on 10/18/2009 - 10:15 pm.

    I expect early 2010 to be a different story.

    Changes in private inventories is transitory, and without a pickup in end demand, the boost will end soon.

    Usually increases in Residential Investment (RI) lead the economy out of recession and provide a boost to employment. This time, with the huge overhang of vacant housing units, I expect any further growth in RI to be muted.

    PCE also usually leads a recovery, however this time household balance sheets are still in need of repair – and I expect the personal saving rate to increase over the next year – leading to slow PCE growth.

    Non-residential investment in structures will be a drag throughout 2010.

    On the plus side, exports might continue to provide a boost (an export led recovery?)

    Although I expect solid GDP growth in Q3 (and probably OK in Q4), I think GDP growth in 2010 will be sluggish, with downside risks.

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