Minnesota jobless rate hits 17-year high

Minnesota recorded the highest state unemployment rate in 17 years in May, a month when just 1,700 people were added to payrolls. By some measures, the May report was the grimmest in decades.

The 5.4 percent state unemployment rate, up from 4.8 percent in April, came at a time when six of 11 major industries posted job gains, albeit small advances. In the last recession, in 2001, the state unemployment rate never topped 5 percent.

The number of unemployed across the state rose to 158,404, a peak not seen since 1983. State non-farm employment stood at 2.8 million last month, up 0.3 percent from a year earlier.

In another bleak note, the percentage of working-age Minnesotans with jobs fell to 68.9 percent in May -- the lowest share in 20 years.

"I think the situation here already has touched bottom, but the improvement will be very, very weak," said Eugenio Aleman, senior economist at the Minneapolis office of Wells Fargo & Co.

"The economy is very weak, very close to a recession, although I don't think we're in a recession right now," he said.

Aleman expects the U.S. and Minnesota job markets to improve later this year, but he doesn't foresee a major upswing until 2009.

By May, the state job market had erased all employment growth over the past six months.

"We're back to the number of jobs in November 2007," Casale said.

"I suspect the labor market is getting more and more difficult for job seekers," she added. "Job seekers who rely on a big increase in jobs in the spring are not seeing that seasonal buildup of jobs to the extent we're used to seeing in Minnesota."

The biggest losers in May were in professional services, down 2,300 jobs, and manufacturing, which shed 2,100 positions. Trade, transportation, information services and financial activities together dropped 1,200 jobs.

Gainers included the leisure and hospitality industries, up 3,200; government, up 2,300, and construction, up 900 jobs. Another 900 jobs were gained in natural resource/mining industries, education and health services and other services.

Art Rolnick, director of research at the Federal Reserve Bank of Minneapolis, said the latest job report offers a familiar picture.

"The nation's economy has been weak," he said. "It's not surprising that that's happening in Minnesota."