Minnesota jobs stagnating

A second straight month of job losses in Minnesota is raising concerns about lower employment in the state's tourism industry, along with a decline in well-paid professional jobs.

State data out Thursday showed that those sectors saw the biggest declines as employers cut 900 jobs in May, offsetting modest gains in construction, manufacturing and local government hiring.

Unemployment was flat at 5.6 percent, still well below the national rate of 8.2 percent.

"After gaining 32,000 jobs between December and February, the past three months we've really stagnated," said Steve Hine, director of the state's Labor Market Information Office. "It's pretty clear that we've hit a soft spot, in line with what we're seeing nationally."

The report flags weakness in Minnesota's tourism industry at the beginning of the summer, when employers should be ramping up. It also shows the state is losing jobs in accounting, law and information technology after peaking in January.

The weakest job markets are in the state's service economy. Arts, entertainment and recreation dropped 2,900 jobs in May. Hotels and restaurants added 2,100 jobs in May, but almost 10,000 fewer jobs exist in Minnesota's leisure and hospitality sector than a year ago. That's a 4 percent decline.

The contracting leisure and hospitality job market can be seen in Duluth, which has lost 10 percent of those types of jobs in the past year.

Brian Hanson, chief executive of Apex, a private economic development group in northeast Minnesota, said his best guess is the warm winter cut into ski resort and ice fishing revenue.

"We had a dismal winter tourism season," Hanson said.

But hotel tax revenue is up in Duluth, and restaurants are busy, he said: "The tourism industry is definitely in full swing in the city of Duluth."

Other areas that shed jobs are professional services, information, and financial services. That part is confusing to Jim Kwapick, senior vice president for Robert Half International, a professional services staffing firm.

Perhaps employers are being overly picky, he said, or they're reluctant to make permanent hires because they worry about the ongoing strength of the economy. Minnesota lost 2,400 jobs in what state economists call professional, scientific and technical services.

"That is confounding to me, because it does not square with what we see," Kwapick said. "We did not experience softness in the month."

Minnesota added jobs in January and February, probably because the warm winter expedited job gains that usually don't happen until April or May, Hine said. The slowdown started in March, when job growth was flat.

The losses over the past two months are statistically negligible, amounting to less than one-tenth of 1 percent of the total 2.7 million jobs in Minnesota. What troubles economists is that flat growth or small declines can quickly turn into steeper drops.

"The trends aren't promising," said Scott Anderson, an economist with Wells Fargo Securities. "Some sectors of the Minnesota economy may be in recession."

A few bright spots

The state's bright spots include construction and manufacturing. Minnesota added 800 construction jobs in May on the strength of homebuilding and specialty trade contractor jobs.

Construction jobs rose 4.5 percent compared with May 2011, making it the fastest-growing sector in the state. Manufacturing added 900 jobs in May, and the sector has grown 1.8 percent over the past year.

Anderson, the Wells Fargo economist, is pessimistic about manufacturing, however. The state could easily lose those jobs as the European economy slows and U.S. exports suffer, he said.

"We think that's something where we're going to see more weakness develop as the year progresses," Anderson said.

Heavy construction jobs -- which are evidence of big building projects -- grew in May but have fallen 15.9 percent from a year ago. That's because federal economic stimulus dollars drove growth in 2011 that's not happening now, Hine said.

The new Vikings stadium will help create heavy construction jobs, but it won't offset the past year's decline.

"It's going to take a few stadiums to fill that hole," Hine said.

Adam Belz • 612-673-4405