Minnesota’s economy is making progress, but still has a ways to go to reach pre-pandemic levels.
The recession brought on by COVID-19 was like nothing the state or nation had ever seen, with some of the highest rates of unemployment on record — and the economic recovery seems to be equally unusual so far, economists say. Metrics like unemployment and labor force participation have stagnated, while job growth has been irregular.
“What we’ve found in this pandemic and coming out of it is that those same kinds of standards for determining progress are somewhat complicated,” due to changes in seasonal hiring patterns, said Steve Grove, commissioner of the Minnesota Department of Employment and Economic Development, in a July news conference. “This recovery from the pandemic is not going to be completely smooth. There’s going to be some choppiness.”
University of Minnesota economist Varadarajan V. Chari said the pace of recovery has been “disappointing” so far.
“The economy is set to return to its pre-COVID trend, but the process is taking longer than we thought,” Chari said.
For Andrea Ferstan, vice president of systems innovation at Minneapolis-based Center for Economic Inclusion, the changing labor market and high demand for workers is an opportunity to push employers to be more responsive to workers’ needs in wages, benefits and culture.
“There’s more and more conversation around what that needs to look like, and we’re in an economy that has more pressure to create that,” Ferstan said.
Here’s more on Minnesota’s economic recovery so far, in eight charts.
Minnesota’s unemployment rate has fallen, but still outpaces pre-pandemic levels
Minnesota’s unemployment rate skyrocketed to 11.3% — the highest rate in more than 30 years — in May 2020 as businesses shuttered during the first wave of the pandemic. It’s since fallen to 4%, which Chari said is more sluggish than economists predicted.
There are a number of factors keeping Minnesotans out of the workforce, he said. Many are nervous about getting infected at work and are especially reluctant to return to jobs with a high risk of exposure.
The extended unemployment benefits have also allowed some workers to be more choosy about their next position, Chari said. Experts also say mismatches in local job openings and job-seekers’ skill sets, as well as the availability of desirable jobs, play a role.
People of color, women still most affected by job loss
Typically, men are unemployed at higher rates than women. But in early 2021, the unemployment rate for women workers surpassed the rate for men.
Difficulties finding child care is a likely reason, Ferstan said. Minnesota’s child care shortage was exacerbated by the pandemic, and even families who used neighbors or relatives for child care pre-pandemic may not have that option again, she said.
The unemployment rate for Black and Hispanic workers has far outpaced the overall rate throughout the pandemic. For Black workers, it fell to 4.5% in June — nearly half the rate in April. DEED says that could be a quirk resulting from the small survey sizes used for the monthly demographic unemployment data.
“We need to unpack this in coming months,” Grove said during a July news conference. “But we suspect part of that is that Black workers have less opportunity to hold out on the marketplace and are going back into jobs more quickly.”
As the economy recovers, racial disparities in the state’s unemployment rate track with historical patterns, Chari said. Education level and job type account for some of the gaps, as Black workers and workers of color are overrepresented in industries hit hardest by the pandemic like food service and health care.
Black workers at higher risk for prolonged unemployment
Some Minnesotans have dropped out of the workforce altogether
Minnesota’s labor force participation rate fell to 67.8% in April 2020, the lowest in at least 30 years. It recovered over the summer only to drop again and has remained below 68% for most of 2021 so far. Still, Minnesota’s labor force participation rate remains far above the nation’s as a whole.
Earlier in the pandemic, when jobs were scarce, experts said workers were abandoning their job hunts out of application fatigue and frustration.
Now that job openings have rebounded, they suggest some of the same factors keeping the unemployment rate high, like struggles to find child care and concerns about being exposed to COVID-19 at work, are playing a role in Minnesotans’ decisions to leave the workforce.
Job growth has been uneven
Minnesota experienced its worst jobs loss on record between March and April 2020 — more than 398,000 positions, or 12% of the state’s total jobs.
The state doesn’t have employment data for the Great Depression, but that’s likely the best point of historical comparison, according to DEED.
The state lost a total of 416,000 jobs during the pandemic, and had recovered all but 245,800 of those by June 2021, Grove said during a July news conference. DEED projects the state will still be 61,000 jobs short of pre-pandemic levels by March 2022.
Jobs numbers have been unsteady from month to month. Minnesota was down 600 jobs in June compared to May — the first monthly loss since December — likely as a result of an adjustment during data analysis to account for seasonal trends, Grove said.
Minnesotans are spending more now than in January 2020
Minnesotans’ spending on goods and services fell significantly when the pandemic first hit the state in spring 2020.
In the last week of March 2020 and first days of April, consumer spending here was down nearly 38% compared to January, according to data on debit and credit card transactions from marketing company Affinity.
Spending by Minnesotans remained below January levels through the end of 2020, then picked up in the spring as more people became vaccinated. Since May, spending has been equal to or above January levels.
Professional services company Deloitte projects consumer spending nationwide will grow into 2022 as spending on services, like food services and travel, continues to rise.
Minnesotans are dining out more this summer
Minnesota restaurants are still reporting fewer diners than in 2019, with reservations down an average of 4% in July 2021 compared to 2019, according to OpenTable data.
That’s a significant improvement for restaurants from summer 2020, when reservations declined more than 60%.
The changes in diner traffic track with Minnesota’s COVID-19 restrictions, including two periods in 2020 when Gov. Tim Walz ordered restaurants to halt on-site dining altogether. Walz lifted capacity limits for bars and restaurants, which were in place for much of the pandemic, in late May.
Minnesotans are taking to the skies again
More than 1 million passengers boarded planes at the Minneapolis-St. Paul International Airport in May 2021 for the first time since December 2019.
Air travel has been climbing throughout 2021, although traffic remains down about 39% compared to the end of 2019. Americans are becoming more comfortable with leisure travel as the vaccination rate rises.
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Minnesota's economic recovery in 8 charts - Minnesota Reformer
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