Minnesota unemployment rate falls to 4.8%, lowest since December 2007

In a long-awaited glimpse into the Minnesota job market, a surprise spike in factory hiring and reliable growth in health care helped drive down the state's unemployment rate to 4.8 percent, its lowest level since before the start of the Great Recession.

Employers in Minnesota added a modest 1,200 jobs over the past two months — shedding 8,700 jobs in September, then adding 9,900 positions in October, the Department of Employment and Economic Development reported Thursday.

But Minnesota has gained more than 34,000 jobs this year and more than 50,000 since October 2012.

"That's good growth," said Tom Stinson, an economist at the University of Minnesota. "There's nothing wrong with what's going on here."

Minnesotans had to wait more than two months for the September and October jobs reports because the government shutdown in Washington, D.C., slowed the compilation of federal data that's used to calculate the state results.

Minnesota's jobless rate hasn't been as low as 4.8 percent since a two-month period spanning December 2007 and January 2008, when the recession was just beginning. The rate remains significantly lower than the national average of 7.3 percent, a sign of the relative economic strength of the Upper Midwest. As of Sept. 1, four of the eight states with jobless rates below 5 percent were in the Midwest, North Dakota, South Dakota, Nebraska and Iowa.

Economists say the Minnesota unemployment rate is dropping in part because fewer people are trying to work.

The decline is due mostly to the aging of Minnesota workers, said Steve Hine, the state's labor market economist. It's not, as many have argued, a result of large numbers of Minnesotans giving up on job searches, he said.

"A lot of this is demographics," Hine said. "We have state data on discouraged and marginally attached workers, and that factor doesn't seem to be playing a big role."

Since the labor force shows little sign of growing, Minnesota's jobless rate will likely continue to fall, Hine said. "This is going to continue to occur in the coming 10 years or more."

Across the state, the biggest job gainers in the early fall were manufacturing, which added 5,300 jobs, and health care, which added 4,300.

Health care has been creating jobs steadily through the recession and recovery, but factories had been shedding jobs for about a year, so the spike in manufacturing hiring was a welcome reversal.

"At some point you have to start hiring to grow your business," Kill said.

The food industry helped drive growth in manufacturing jobs, said Hine, though October hiring may have been boosted by a late harvest.

"Ag and food processing has been really solid, and it hasn't slowed down," Kill said. "We're blessed to have a pretty diverse manufacturing base here — as I always say, from tractor parts to things you need a microscope to see in medical devices."

Hiring in most industries was flat through September and October, but one notable decline was in professional and business services, which shed 7,300 jobs over the two months (mostly in September).

The weakness was noticeable in temporary hiring, which sends mixed signals. An increase in temp jobs, while seen as less than a victory for workers who would prefer permanent ones, is also considered a positive leading indicator for the broader economy. One theory is that some of the temporary workers in the state moved into permanent jobs in manufacturing.

It's also difficult to pinpoint any impact on jobs in Minnesota from the government shutdown and debt ceiling debate, perhaps because businesses are desensitized to the wrangling in Washington, Hine said.

"We've been going through a sequence of looming government shutdowns that always seem to be resolved at the 11th hour," he said.

The unemployment rate was down 0.2 percent from September's jobless rate of 5 percent, which was not calculated earlier because data were unavailable due to the federal government shutdown in October. The U.S. unemployment rate was 7.2 percent in September and 7.3 percent in October.

The low unemployment rate is good, Stinson said, but still too high considering how long it has been since the recession ended.

"It's noticeably better than the U.S. average," Stinson said. "But I'm not going to be doing cartwheels for a 4.8 percent unemployment rate."