Minnesota job market flat in May, unemployment rate ticks upward

The weak May job numbers released Thursday reinforced a new reality in the state's economy: Minnesota's job market is slowing down.

After outperforming the nation in the aftermath of the recession, the state has fallen well behind the U.S. average for job growth and steadily dropped in state rankings.

Minnesota shed 200 jobs last month because of declines in professional jobs, leisure and hospitality, and manufacturing, according to figures released Thursday by the Minnesota Department of Employment and Economic Development.

That's a blip in a state where 3 million people work, but it highlights a two-year, downward trend in job creation. Thanks to a labor market that's already tight, with slow population growth and the absence of any major growth drivers, the trajectory for Minnesota is a job market in the middle of the national pack.

"We're soon going to hit a set of circumstances that are going to make it very hard for us to maintain [growth of] even 38,000 jobs per year," said Steve Hine, a labor market economist for the state.

The unemployment rate climbed in May slightly, to 3.8 percent, mostly because of growth in the labor force as another 6,000 people joined the ranks of those working or looking for a job.

Minnesota added 38,200 jobs in 2014, the lowest total since 2010. That ranked the state 30th in the nation, just ahead of Wisconsin, Illinois and Iowa. In May, Minnesota fell nearly a full percentage point behind the national average for job growth.

Stronger national job growth over the past 12 months contributes to the unfavorable comparison. U.S. job creation has accelerated since last spring.

"I'd be a lot more concerned about us lagging the nation if the nation weren't doing as well as it has been," Hine said. "It's one thing to be lagging a slow-growing national economy, but when you're lagging a really rapid rate of job growth, that's got to be less concerning."

Only four of the 16 most-recognizable industries in the state have not surpassed their pre-recession employment, with health care, professional and technical and food service jobs leading the way. Retail and publishing and telecommunication still have a little ground to make up.

Manufacturing and construction are still well below prerecession levels and likely won't regain their losses, Hine said. Manufacturing was already in long-term decline as an employer and construction employment spiked with the housing bubble.

There are no "glaring weak spots" in the job market, Hine said, adding it's just going to grow more slowly for a while.

That's because Minnesota wasn't hit as hard by the recession, bounced back more quickly, and now has less room to grow, said Louis Johnston, an economist at the College of St. Benedict and St. John's University.

"Middling growth in terms of the numbers, there's no doubt about that, but I think we're a victim of our own success," Johnston said. "We didn't dip as far as the rest of the nation, so we didn't have as far to get back."

More troubling than the job growth numbers, to Johnston, is that the average hourly wage hovers around $26 and is not keeping up with inflation.

"There just is no movement on wages, at least at the average," he said. "We just keep bouncing around that number in nominal terms."

Black unemployment climbed again in May, to 14.4 percent, its highest level since December 2013, according to the state figures. Hispanic and white unemployment levels keep falling. Hispanic joblessness is now 4.5 percent, compared to 8.5 percent 12 months ago. White unemployment is 2.9 percent.

The job picture in May varied dramatically by industry.

Trade, transportation and utilities led all sectors by adding 6,600 new jobs. Financial activities added 900. Professional and business services shed 4,400 jobs, leisure and hospitality dropped 1,600 and manufacturing lost 1,000.

Nine of the state's 11 major industrial sectors have added jobs in the past year. Government and logging and mining were the only sectors that lost jobs in the last 12 months.

All five of the state's urban areas have added jobs in the past 12 months. Minneapolis-St. Paul was up 1.8 percent, Duluth-Superior was up 1.3 percent, Rochester was up 0.6 percent, Mankato was up 0.3 percent and St. Cloud edged up by 0.1 percent.

The labor force grew thanks to more teenagers getting jobs and perhaps because of an influx of former oil workers leaving the Bakken field in North Dakota, Hine said.

Adam Belz • 612-673-4405 Twitter: @adambelz