Minnesota's unsteady job market slipped in October, shedding 8,100 jobs in what has so far been the worst month of the year.
The losses were partially offset by upward revisions to the September numbers -- when businesses added 5,100 more jobs than initially reported.
But headcounts fell across the state in October, especially in back-end business jobs, as employers who are still smarting from the downturn braced for the potential impact of $500 billion in automatic tax increases and spending cuts that will go into effect in January unless addressed before then by Congress and the White House.
"Employment data for October does certainly reinforce the concerns we've expressed here, that the recovery, while it does continue, is a fragile one," said Steve Hine, labor market economist for the state's Department of Employment and Economic Development. "We'll be paying a great deal of attention to Congress as they grapple with the so-called fiscal cliff."
Average hours worked per week, which had risen encouragingly in September, fell back to their August level. The unemployment rate held steady at 5.8 percent.
Employers cut 4,800 jobs in administrative support and business services. Especially vulnerable were lower-paid and temporary positions. The weakness is a bad sign for the economy, since business-to-business service jobs, which are often outsourced, are hypersensitive to shifts in the economy.
"You might take it as somewhat of a leading indicator," Hine said. "I'm a little bit disconcerted by the flattening out of the job growth in this sector."
Month-to-month volatility has not been unusual as the state's economy shuffles toward recovery. The dramatic revision to September's figures is a reminder that the monthly numbers are preliminary, and October's numbers will also be revised when November's job report comes out next month.
Over the past 12 months, Minnesota has added 34,700 jobs, a 1.3 percent increase. The state has now recovered 86,700 of the 156,300 jobs it lost in the recession.
In 2012, the state has added positions in most categories, though increases in the health care industry have contributed almost half of the growth.
One bright spot in the October report was a gain of 1,200 jobs in the construction sector, a part of the economy that suffered heavy losses in the recession but has now added 4,400 jobs on the year. Most of that has been driven by growth in the specialty trades, including plumbers, pipefitters and other types of subcontractors, Hine said.
"Nearly 70 percent of the total construction sector is captured by that specialty trades component, and that's up over 10 percent in the past year," Hine said.
But the unsettled nature of the nation's economic policy -- particularly the automatic tax increases that would be triggered by a plunge over the fiscal cliff -- is keeping businesses nervous and tentative, said Bill Blazar, an executive with the Minnesota Chamber of Commerce.
"Whether it's a fiscal cliff or a fiscal slope or a fiscal void, there's just a lot of uncertainty," Blazar said. "It's just like a big wet blanket over the economy,"
The painful layoffs that came with the recession in 2008 are still fresh in executives' memories, impending tax increases may cut into Christmas sales and companies don't want to start hiring only to have to lay people off.
"The trauma of 2008 is not too far in the rearview mirror," Blazar said. "They don't want to repeat that."
Adam Belz • 612-673-4405 Twitter: @adambelz