Lower unemployment and fewer jobs? Say what?

Minnesota’s jobless rate fell by half a percentage point to 5.9 percent in November even as employers cut nearly 14,000 jobs in the state. That’s the third month in a row Minnesota has seen both declining unemployment and shrinking payrolls.

The state has lost 22,900 payroll jobs over the past three months, even while the unemployment rate dropped from 7.2 percent to 5.9 percent.

State officials say the mixed results make it difficult to draw clear conclusions about the state of the labor market. They say several factors could explain the conflicting results, including sampling errors, more people becoming self-employed, changes in methodology, and more people giving up on finding work.

In November the education and health services led all sectors with a gain of 1,300 jobs.

Job losses hit many sectors:

• leisure and hospitality – 4,400

• government – 4,000

• construction – 1,600

• manufacturing – 1,200

• professional and business services – 1,100

• financial activities – 800

• trade, transportation and utilities – 700

• information – 600

• other services – 600

A peek under the hood of the falling unemployment rate shows some interesting trends. The jobless rate is based on a large survey of households. Over the past four months the survey indicates 30,000 additional people had been paid for work in Minnesota. Being paid for work may or may not involve a job with an employer. Getting a $15 spiff to shovel someone’s driveway will qualify someone as “employed” in the household survey. But, as state officials note, a growing number of people who are self-employed could explain the trend.

Obviously more people being paid for work is favorable factor pushing down unemployment. Another factor is more pessimistic. An additional 13,000 people have given up on finding work in the past two months. People who aren’t looking for work aren’t counted as unemployed. They’ve dropped out of the workforce.

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All that said, it’s important to bear in mind that state officials are raising serious questions about the findings. Two of the four possible explanations for the conflicting unemployment and payroll employment findings relate to the way the numbers are derived–sampling error and changes in methodology–not changes in the job market. In other words, it’s unclear whether we’re seeing changes in the economy or just artifacts produced by number crunching.

In any case, as Annie Baxter reports today this unemployment report means potentially thousands of Minnesotans could become ineligible for extended unemployment benefits. The three month average jobless rate has fallen to 6.43 percent, below the threshold for the extended benefits to continue.