• Article by: H.J. Cummins
• Star Tribune
• October 16, 2007 - 10:12 PM

Minnesota's job picture worsened Tuesday as new state data showed a double whammy of bad news during the past two months.

The state set a record in the wrong direction last month, as its 4.9 percent unemployment rate came in 0.2 percentage points over the national average, according to Tuesday's monthly jobs report. In May, Minnesota's jobless rate was worse than the nation's for the first time in 30 years of record-keeping, then by 0.1 percentage points.

On Tuesday, the state also revised August numbers from a previously reported gain of 2,100 jobs to a loss of 2,000. The revision means job counts dropped every month of this quarter, for a total of 17,400 lost jobs.

"There's no way to dress up this news and make it look good," Minnesota state economist Tom Stinson said.

Home building took most of the blame for the bad September numbers -- 2,800 of the 6,300 jobs lost, the Minnesota Department of Employment and Economic Development reported.

Department officials cautioned not to overreact to one month's data. Business leaders saw optimistic signs that more people are looking for work. And the building industry cited indicators that the Midwest housing market has hit bottom.

Other economists said the gild is off the Minnesota lily.

"I put quite a bit of weight on this," said Wells Fargo & Co. senior economist Scott Anderson. "Minnesota has historically been a lower-unemployment state in the nation, and it was taken as a sign of the strength of our economy."

But with significant third-quarter job losses, Anderson said, "the Minnesota labor market is clearly struggling to maintain its momentum, and in my opinion, the state economy is very near stall speed, or recessionary level."

Problems in the construction industry, which has been hurt nationwide, may be hitting Minnesota particularly hard, given the state's lumber industry, for example.

Also, states in the South and West can more quickly absorb new-home construction with their fast-growing populations, said Bob Isaacson, the department's director of analysis.

The Housing Market Index, a complex measure that shows whether the home-building market is growing, turned positive for the Midwest in October for the first time in 22 months, said Jeff Schoenwetter, CEO of real estate firm JMS Companies in Eden Prairie, and former president of the Builders Association of Minnesota. All other regions continued with negative numbers, meaning conditions there worsened.

With fewer homes getting built in the metro area, the inventory of homes for sale is finally settling to more normal levels, Schoenwetter said.

Tuesday's report also put September's job market participation rate -- Minnesotans working or looking for work -- from 72.4 percent to 72.8 percent, about 17,600 more people.

"I think it really is a sign of optimism," Minnesota Chamber of Commerce vice president Bill Blazar said.

Big job losses were also seen in education and hospitality. That could reflect seasonal volatility in those sectors, said Kyle Uphoff, the department's regional labor market analyst. Because the monthly numbers come from a one-day survey of employers, they can fluctuate a lot depending on which day an amusement park closes and a school opens, Uphoff said.

H.J. Cummins • 612-673-4671

H.J. Cummins • hcummins@startribune.com