The Minnesota jobs market lost momentum in August as employers cut 2,000 positions, punctuating the slow and uneven economic recovery in the state and across the country.
Most sectors of the state labor market contracted as the unemployment rate ticked up to 5.9 percent. Meanwhile, the state's robust estimate for job creation in July was revised downward -- from 6,800 to 4,800 net jobs.
"The labor market is still struggling to find its footing," said Mark Phillips, commissioner of the Minnesota Department of Employment and Economic Development.
Most striking in the August report was the decline in manufacturing and construction jobs, as both sectors were producing a steady stream of new jobs over the past 12 months. But Minnesota manufacturers cut 2,700 jobs last month, erasing more than half the gains over the past year; construction companies dropped 1,300 jobs.
"We've been noticing a little softening in the manufacturing sector over the past few months," said Toby Madden, an economist at the Federal Reserve Bank of Minneapolis.
In a state where 2.7 million people are working, the loss of 2,000 jobs could be little more than a rounding error, economists noted. Overall, Minnesota's economy has created 24,500 jobs in the past 12 months and regained more than half the jobs lost in the Great Recession.
Some indicators are encouraging. The economy has added 3,800 professional jobs since April, mostly in well-paid computer professions and accounting. New claims for unemployment benefits fell by 1,400 in August to their lowest level since March 2008. Minnesota ranks fourth in the nation for the number of job openings per unemployed person, behind only its neighbors to the west.
"We fall behind the Dakotas and Nebraska, which is perhaps because few people want to live there," joked Steve Hine, a labor market economist at DEED.
And monthly job surveys are not the final word on the health of the state economy. A more comprehensive quarterly census shows job growth may be stronger than the monthly reports portray.
But declines in manufacturing, construction and retail jobs reflect weaknesses in the United States' economy. The Institute for Supply Management manufacturing index -- which measures the strength of factories -- fell in August for the third consecutive month, to its lowest reading since July 2009. A national jobs report showing 96,000 jobs added in August also was disappointing.
Within Minnesota manufacturing, jobs in wood and paper products and food have declined the most over the past year. In contrast, production of durable goods like fabricated metal and machinery has seen steady growth.
"I'm a little surprised to hear that manufacturing is down," said Dave Jensen, at Career Management Services in Plymouth. "It certainly hasn't dried up."
The loss of construction jobs is even more puzzling, Madden said, since construction permits are up. It could be that more construction workers are working as independent contractors.
Government jobs helped offset the loss of 7,400 private-sector jobs in August, and Hine pinned that on school hiring. Even that bump is uncertain, possibly a result of a timing problem in the job-reporting process. Whether schools have actually hired more people this year than last won't be clear until October, Hine said.
Retail trade shed 2,800 jobs in the month, evidence that consumers are still staying away from stores. In the past 12 months, retail and leisure and hospitality have lost 12,300 jobs, making them the weakest sectors in the Minnesota job market.
"Those are two areas that are particularly sensitive to discretionary consumer spending," Hine said.
Adam Belz • 612-673-4405