Trump’s tariffs, other federal policies starting to ding Minnesota’s economy

Minnesota’s labor market is slowing in what state officials said is likely an indication President Donald Trump’s federal policy is trickling down to the local economy.

From on-again, off-again tariffs and federal funding cuts to mass government layoffs and an immigration crackdown, federal policies are creating widespread uncertainty and chipping away at the U.S. economy. While Minnesota has tended to do better than the country as a whole, signs of strain are showing — and could have wide-ranging implications for the state’s future growth.

“Over the course of months, we’ve been talking about a number of actions at the federal level that we have feared could eventually filter their way into the data and into a broader economic slowdown,” said Matt Varilek, Department of Employment and Economic Development (DEED) commissioner. “And it seems plausible that that may be the early signs of what we’re having here.”

Minnesota lost 4,400 jobs in July, and the unemployment rate ticked up to 3.5%, according to data DEED released Thursday. The state also lost more jobs than initially reported in June, mirroring national revisions earlier this month that showed tariffs might have weakened the labor market more than previously thought.

Minnesota’s diverse economy is still stable, officials said, and continues to outperform the country overall on unemployment, wage growth and labor force participation. The state added more jobs in May than first reported and gained more than 35,000 jobs year-over-year in July.

Two “supersectors” DEED measures — education and health services as well as construction — added jobs last month, while eight lost jobs. Government experienced the greatest monthly losses, with declines in local and state positions. Federal jobs were mostly flat through the month but have declined since July of last year.

The labor market has been in a holding pattern this year, as employers waiting for trade policy to shake out have held off on both hiring and layoffs. Though the national unemployment rate has stayed relatively low, so has the hiring rate — a tough reality for jobseekers that doesn’t jibe with the headline numbers.

“I feel like it’s always been a struggle — like good, bad, is pretty relative,” said the Brooklyn Park resident as she waited in line recently for a free professional headshot at her local library’s CareerForce event. “I never really trust reports and stuff like that, because I just feel like it often leaves out the people on the margins.”

The U.S. Bureau of Labor Statistics (BLS), an independent federal agency, produces the monthly jobs report. For years, diminished funding and declining survey responses have complicated the agency’s work.

Still, it’s a foundational economic measure, informing decisions from the training programs colleges invest in to whether the Federal Reserve raises or lowers interest rates.

After claiming without evidence the Aug. 1 report on July jobs was “rigged,” Trump fired BLS commissioner and labor economist Erika McEntarfer. His pick to replace her, conservative economist Erwin John “E.J.” Antoni, has criticized the agency and proposed ending the jobs report.

Varilek said Thursday that McEntarfer’s firing “flummoxed” him and noted officials across the political spectrum agree there’s no proof the revised data was inaccurate.

DEED works closely with BLS to produce state jobs reports which, like the national numbers, rely on business survey responses. Preliminary monthly figures report available data, and revisions are routine as more survey responses come in, said Angelina Nguyễn, DEED’s labor market information director.