Minnesota lost 2,000 jobs in December, but unemployment rate fell to 3.1%

Minnesota lost 2,000 jobs in December, the first monthly drop it's recorded in a year as the omicron variant began picking up speed.

While not a big decline, it was a speed bump for the state's labor market, which added jobs every other month of 2021.

One of the sectors that appeared to be directly affected by surging COVID-19 cases and concerns was arts, entertainment and recreation, which lost 1,600 jobs last month.

"That was clearly related to people canceling events and also just not wanting to attend large group events during this period," said Oriane Casale, deputy director of the labor-market information office at the Minnesota Department of Employment and Economic Development (DEED), which released the latest numbers on Thursday.

Restaurants and hotels, which saw some of the steepest job losses at the beginning of the pandemic, actually added 1,000 jobs last month.

Other data released Thursday, however, pointed to the opposite of job loss: The state's unemployment rate dropped two-tenths of a percentage point last month to 3.1%, the lowest it's been since 2019. That was due to people finding and moving into jobs.

It's not the first time during the pandemic that Minnesota economic data appeared contradictory. The divergence in this case stems largely from the fact that the data is drawn from two surveys — one of employers and one of households.

For example, the number of jobs added in Minnesota in November was upwardly revised by 5,000 jobs to 13,600 jobs, which made it the largest single month of job growth since March.

"So a stronger November than we had originally reported, but a December that showed a downward trend in job growth," said DEED Commissioner Steve Grove. "That speaks to the volatility we've come to expect in a pandemic as we come back from this."

The U.S. as a whole showed modest job growth in December with the addition of 199,000 jobs. But that was the smallest gain all year and also indicated a slowdown of hiring at the end of the year.

In addition to omicron, Grove noted that he's also hearing from employers that supply-chain issues may be depressing hiring as well. The unpredictability of child care and school schedules in recent weeks may also be factors, he said.

The last time the state logged a monthly loss of jobs was in December 2020 when the state put operational restrictions back in place on restaurants and other businesses. That month the state lost 52,800 jobs.

But as was the case the previous month, wages are not keeping pace with the even more rapid rise in inflation. The consumer price index jumped 7% in December, the highest in about four decades.

Wages are rising fastest in low-wage jobs that are in high demand such as at restaurant bars, which saw average wages spike 20%. Wages for workers at nursing and residential care facilities rose 12.4%, a considerable acceleration from earlier in the year for the industry that lost 5,000 workers over the year.

Minnesota's labor force participation rate held steady at 67.7% in December, with just 238 more workers coming off the sidelines. That means the state's labor force still has nearly 87,000 fewer workers than it did before the pandemic as some people decided to retire early and others are staying away from work due to health concerns and other reasons.

"Over the course of 2021 — from January to December — we made unfortunately no gains in the labor force participation rate," said Casale, who noted that only about 5,000 Minnesotans returned to the labor force this year. "So we are definitely going into 2022 with a very tight labor market."

The state has now recovered about 74% of the jobs it lost since the beginning of the pandemic.