State's job growth lags behind Midwest neighbors

Minnesota ranks last in the Midwest in private sector job growth, according to new federal data that shows employers adding positions much more slowly than in previous years.

The new numbers, from a quarterly census that is considered more reliable than the figures the state releases each month, show Minnesota adding fewer jobs than labor market economists previously thought in almost every industry.

The data immediately found its way into the gubernatorial race, with Republican challenger Jeff Johnson on Friday charging that Gov. Mark Dayton has been "wreaking havoc" on the economy.

Dayton pointed out that the data are five months old and said, "Minnesota added 44,800 jobs from August 2013 to August 2014," which is "one of many economic indicators that Minnesota's economic strength since 2010 has been strong."

The numbers have limitations in that they run only through March, when the state was in the midst of a particularly tough winter. And economists say that, paradoxically, job growth may have slowed partly because the state has a strong economy with relatively few people out of work.

"We're pretty close to hitting that point where labor force growth is going to constrain job growth," said Steve Hine, labor market economist for the state. "Those states with more labor force slack are going to continue to grow at a faster rate, and that includes Wisconsin."

Minnesota added 19,000 private-sector jobs from March 2013 to March 2014, compared with an average of 47,000 over the same period each of the previous three years. The abrupt slowdown was severe enough that Minnesota's private sector job growth rate ranked 41st nationally.

Minnesota was not hit as hard in the recession as states to the east, and has recovered more quickly. With an unemployment rate of 4.3 percent and a shrinking labor force, Minnesota has a smaller pool of available workers to pull from than Michigan, where unemployment is 7.6 percent, or even Wisconsin, where unemployment is 5.6 percent.

Michigan and Ohio both doubled Minnesota's private sector job growth for the 12 months that ended in March, but that should be no surprise, said John Spry, an economist at the University of St. Thomas. Both states still have tens of thousands fewer jobs than they did in 2004.

Minnesota has 126,000 more jobs than it did 10 years ago, and so has less room to grow.

"The team that gets the first draft pick in the NFL draft improves a lot, but you got there by being terrible," Spry said. "Michigan's really suffered."

The theory that job growth is slowing in Minnesota because the labor market is tight was bolstered by a surge in wages. Total wages in Minnesota rose 4.7 percent over the 12 months that ended in March, compared with a 3.3 percent rise for the previous year.

And job gains in 2014 in Minnesota have been tepid so far. The state has added only 12,300 jobs since January, according to monthly figures, and the latest quarterly numbers revise away some of the huge gains in the fall of 2013.

The weakest industries in the 12 months that ended in March were information — which includes publishing, media and telecommunications — and finance and insurance. Construction, while growing, has added fewer jobs than the monthly estimates showed. So has manufacturing.

Spry said it's too early to say whether these numbers should be a major cause for worry.

"It's something you could say is concerning, but 'something to watch' is probably the best phrase I have," he said.

March of this year probably looks worse than usual because the long, severe winter kept construction crews and other seasonal workers on the sidelines.

The new figures for March come from the Department of Labor's Quarterly Census of Employment and Wages, and they stand in contrast to the monthly reports released over the past 18 months, echoing a controversy that's reared its head in Wisconsin politics.

It now appears the monthly figures, estimates based on surveys of businesses from the Current Employment Statistics program, have overstated private job growth in Minnesota by double from March 2013 to March 2014.

"The quality and reliability of CES is certainly a concern," said Hine, who added that the long winter may have undermined the state's attempts at seasonal adjustment. "I've been saying that for a long time."

The quarterly numbers are based on direct reports from companies who must give the government a head count for unemployment insurance purposes. Those figures are used to benchmark the monthly estimates and retroactively to revise them.

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