Salad days of Minnesota job growth have run course

Minnesota's rate of job growth once streaked ahead of those of most states in the nation. The streak is broken.

In industry after industry, month after month, Minnesota job growth has been lagging the national rate of gains.

Nationwide, 4.3 percent more people are working now than at the start of the last recession, in February 2001. Minnesota has boosted payrolls by 2.4 percent in that same period.

The deterioration has accelerated on many fronts.

Measured over the past 45 months, Minnesota's year-over-year job growth has been slower than the national average nearly 90 percent of the time.

Measured since April 2006, Minnesota's non-farm jobs failed to post growth exceeding the national year-over-year average even once, according to figures compiled for the Star Tribune by the Minnesota Department of Employment and Economic Development (DEED).

And in June, for the first time in 31 years, the state's unemployment rate was higher than the national jobless rate. In September, the gap widened: The state's seasonally adjusted jobless rate rose to 4.9 percent; nationally, it was 4.7 percent.

Part of the jump in the unemployment rate is tied to growing numbers of Minnesotans looking for work.

That is considered by economists to be a sign of optimism that there are jobs to be had.

But Minnesota's job growth tallies don't inspire cheer.

More than two-thirds of the state's major industries -- from retail trade and transportation to construction and leisure and hospitality -- have been growing at a pace slower than the national average more than half the time since the end of 2003, DEED numbers show.

Labor market watchers can explain some, but not all, of the slowdown in job growth here. Diminished population growth gets some of the blame. So do cyclical swings, whether it's a bust in the housing market or spotty retail sales.

But something more may be at work.

"It's hard to imagine that these are just idiosyncratic factors at work and not something more fundamental going on," said John Budd, labor economist at the University of Minnesota.

"Unfortunately, I don't know if anyone has any easy answers to what's going on."

One explanation could be that Minnesota's workforce, long praised for being highly educated and skilled, is dealing with a temporary mismatch between the skill sets of its workers and new jobs in fast-changing, growing industries, Budd said.

"That might reduce the cause for alarm," Budd said. "But I think it's over-optimistic to explain such a broad period of underperforming."

Toby Madden, regional economist at the Federal Reserve Bank of Minneapolis, said demographics could be a key reason for Minnesota's slipping job performance.

In the 1990s, the state's population grew at a pace only 6 percent below the nation's growth rate; in more recent years, the U.S. population has grown at a rate 30 to 50 percent faster than Minnesota's.

What's more, only four states have a higher worker participation rate than here, where more than 75 percent of working-age people have jobs or are looking for work.

Under those circumstances, Madden said, "It's tough to grow faster than the nation."

The abrupt downturn in the housing market has prompted a fall in construction jobs, as well as related industries such as paint, furniture, windows and lumber -- goods that represent a greater share of the state's economy than that of the nation -- that doesn't explain the breadth of the Minnesota job market's losses.

"This diminished relative performance has predated the impact of the housing market," noted Steve Hine, DEED labor market research director.

State Economist Tom Stinson said that the worst may have come and gone for some industries here. Northwest Airlines has emerged from bankruptcy, is making a profit and is hiring. In the months ahead, Ford Motor Co. is expected to shed the last of the workers at its St. Paul plant.

If Minnesota's job performance continues to lag, Stinson said, the state's problems may lie beyond the setbacks at a few big companies or industries -- forcing a political debate about the role of government and industry in sparking job growth.

"One of the things that's disconcerting, there doesn't seem to be anyplace, other than the health care sector, where we're doing better than the U.S. economy," Stinson said.

Mike Meyers • 612-673-1746

Mike Meyers • meyers@startribune.com