Minnesota’s labor force: The exit continues

Suppose the entire population of Winona disappeared over five months. We’d notice. And we’d ask, what’s going on?

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Winona’s still there. But 32,217 Minnesotans left the state’s labor force (sum of the employed plus the unemployed) between April and August. There are guesses why, but no one good explanation. August data show another drop — not nearly the cliff dive we saw in June and July, but still down.

The crucial question we’ve been asking: Why isn’t the improving economy bringing discouraged workers back into the labor force the way experts expected? That’s the way it’s supposed to work — things get better and all those folks who gave up start trying again.

We know the number of state job vacancies is jumping. So where are the workers to fill them?

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Minnesota’s August labor force participation rate — the percentage of working age people who have a job or are unemployed and seeking a job — slipped to 71.8 percent. We haven’t see a rate that low here since December 1988.

Online, state seasonally adjusted labor force data go back to 1976. There’s never been a drop even close to what we’ve seen since April. (Click on the chart below for a larger view.)

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“There is certainly no single obvious reason for the decline. We can really only speculate at this point,” said Kyle Uphoff, assistant labor market information director with Minnesota’s Department of Employment and Economic Development.

The reduction in workforce participation obviously runs contrary to what we might expect- people are dropping out of the labor force at the same time that opportunities are being created.

One possibility is that there is a mismatch between the skills of the unemployed and the skills required in new jobs.

At our worst point in the recession, the state had lost 50,200 manufacturing jobs. We have gained back only 10,600 of those jobs. We have also lost 34,200 construction jobs — a bleed which is still continuing.

It is possible that those who have lost jobs in those industries (or others) have simply given up looking for employment if there are no specific job openings requiring their skills. Lacking specific skills to transition to other industries or occupations, such groups may drop out of the labor force.

The alternative explanation, he added, may be more simple.

“The jobless may be going back to school, retiring early or taking care of family until the labor market creates opportunities that use their skills and match their reservation wage.”

Why is this a big deal? Towns aren’t disappearing and people aren’t being kidnapped. But Minnesota’s economic success has always been a draw. We don’t really expect people to leave Minnesota to look for opportunity.

But that’s no longer the case. We’ve highlighted the ongoing struggles of young adults in the Great Recession and Minnesota’s ability to keep its young talent in state.

Tuesday’s terrific MPR story on the boom and bust in Isanti County is stunning — people in the construction trades who built the Twin Cities but can’t afford to live here now.

The family recently decided to give up on Minnesota. They’re selling everything they can, and next week they will get in their car and head to New Mexico.

Yes, it’s just one family. And if the labor force swings back around by year’s end, our hand-wringing will be forgotten quickly.

State experts, though, have been worried for more than a year about the future health of Minnesota’s economy given what’s already projected to be a slow growth, aging workforce.

We’ve always believed that when the job opportunities return, the people will, too. Right now, that’s not the case.

The absolute worst scenario coming out of a recession this bad would be a Minnesota economy where the jobs are here but the people are not.

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See something different from what we see? What’s the job market look like around you? Post below or contact us directly.

  • John O.

    North Dakota is another destination for jobseekers. And, as a recent article in the New York Times revealed, a lot of fifty-somethings are being left out of the recovery altogether.

    Another point to ponder is this: just because a political pundit (or 349 of them) say the recession is over, does it really mean it is over? Or are those saying that (and yes, I am including POTUS here) just trying to generate a buzz? I’m not convinced that we are “out” of the recession by any means.

  • Paul / MinnEcon

    John, thanks. I know North Dakota’s been a destination for some in the building trades. I’ve heard stories of Minnesota construction folks going to work in the North Dakota oil fields.

    To me, the broader worry is that Minnesota will lose its home-grown talent and won’t be able to draw people in. Labor force growth the next decade is already projected to grow at about half the rate as the prior decade.