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Letter from the Director

With the pandemic threat level declining in the U.S. and 65% of Minnesotans 16 and over fully vaccinated by the start of June, the focus is now labor market and broader economic recovery. At the time of writing, we have a total of just over 235,000 continued claims for Unemployment Insurance (UI), down from a peak of 559,000 in May 2020. Many Minnesotans who were laid off have gone back to work, although some of these workers may not yet be working as many hours as they typically work. We have regained over 50% of the jobs lost between February and April 2020 and our unemployment rate, at 4.1% in April, is less than one percentage point above where it was prior to the pandemic and down from a peak of 11.3% in May 2020.

Minnesota experienced a double dip job loss during the pandemic: The greatest losses were in spring of 2020 but a smaller dip occurred during a spike in virus infection rates in November and December 2020. This second dip set us back a bit compared to some other states. In April 2021 our over the year employment growth, at 9.1%, ranked 34th nationwide even though on a monthly basis we added jobs a bit faster than or at the same pace as the nation in the three preceding months. At the same time we have the 13th lowest unemployment rate among states, at 4.1% in April.

This relatively tight labor market is making it difficult for employers to find the qualified workers they need to fill open positions and may be pushing up wages in sectors most impacted by the pandemic. Between January and April 2021, average hourly wages for Minnesota's Retail Trade sector showed stronger over the year growth in all four months compared to hourly wages for all private sector workers in Minnesota. Average hourly wages for workers in Food Service & Drinking Places also showed stronger over the year growth in March and April1.

Job vacancies continue to be high, leading to the conclusion that as employers fill those vacancies the number of jobs in the economy will continue to rise, and hopefully rise quickly. But the matching and hiring process takes time and ongoing low labor force participation rates, by Minnesota standards, showed that not all workers were ready to return to work, at least as of April 2021. Minnesota's labor force participation rate was at 67.7% in April, down from 70.2% in February 2020. But its important to note that Minnesota's labor force participation rate remains among the top in the nation, still among the top five despite recent declines in the rate here. For comparison the national labor force participation rate in April 2021 is 61.7%. Some Minnesotans who have dropped out of the labor force may be waiting to be called back by a previous employer while others may be waiting until they can be fully vaccinated or until their children are back in school, child care or summer programs fulltime. Still others may have decided to retire.

One of the most concerning aspects of the pandemic recession is that it has exacerbated existing inequalities. The occupations hit hardest were low-wage occupations while the jobs hit hardest were those with part-time and seasonal work patterns. (Black, Indigenous and People of Color) BIPOC workers were hit harder, as a whole, than white workers in Minnesota, primarily because of the industries and occupations in which they are most likely to work. And the first workers to lose their jobs were often the last to get reemployed as restrictions were lifted, with many experiencing a second job loss in late 2020.

Each of the articles in this issue addresses aspects of job loss and rebound, and reemployment patterns in Minnesota and its regional labor markets.

Several of the articles in this issue address reemployment and hiring difficulties specifically. Reemployment After COVID-19 Layoffs in Minnesota: Early Findings shows that 75% of laid off workers had already returned to work in third quarter 2020, the most recent data available to track workers laid off during second quarter 2020. We also know, from UI data, that some of these workers were laid off a second time during the second pandemic employment dip in November and December 2020. We don't have numbers for 2021 yet, but we can assume that by now the share who has returned to work has surpassed the third quarter 2020 share.

A second article – Where Are the Workers: Why Are There Unfilled Jobs Amid High Unemployment? – addresses the question of hiring difficulties and skills mismatches. The author tracks workers laid off from the Leisure & Hospitality sector during second quarter 20202 who transitioned to another industry sector upon reemployment during third quarter 2020. This article explores why the majority of these workers remained in low-wage industries rather than moving to high demand, higher wage industries and points to the need for shifts in employment practices, workforce training and the need for stronger workforce infrastructure like child care and transportation.

More than Simple Supply and Demand provides a practical approach for employers who are struggling to hire workers. Many employers in industries across the spectrum are recalling workers and trying to hire new workers with the right skills and experience. Those matches take time to sort out and even more time in a tight labor market. Moreover, in April fewer than half of Minnesotans 16 and over were fully vaccinated (with the fully vaccinated group skewing older) and child care programs and schools continued to close classrooms due to COVID-19 exposure, likely slowing workers' reentry into the job market. Since April, the vaccination rate among Minnesotans 16 and older has continued to slowly inch up, so COVID-19 related reentry barriers should continue to fall away. It is clear that as of the writing of this that the lack of growth in the labor force is holding Minnesota back from more rapid job growth. But as the authors point out, employers have a role to play in drawing workers back into the workforce.

A set of regional labor market articles in this issues explore the experiences with the pandemic recession and recovery to date across each of Minnesota's six workforce development regions. And COVID-19 and Ex-Offender Employment provides an analysis of the best occupational options for ex-offenders.

Finally, First Quarter Forecast: A Rapid Rebound examines when can we expect to return to something like a normal labor market in Minnesota. One-year employment forecasts show that employment will return to roughly 98% of its pre-pandemic level by first quarter 2022. By March 2022, Minnesota employment forecasts show that we'll be 61,000 jobs short of February 2020 levels, having regained 85% of the jobs that were lost during the pandemic. These job growth numbers assume that most people who lost their jobs during the pandemic recession will have reentered employment by the first quarter of 2022.

Not all industries are expected to recover fully by mid-2022. The job recovery in Minnesota's BIPOC communities will still trail the overall job recovery, since a large share of the 61,000 jobs predicted not to come back by mid-2022 are in industries and occupations disproportionally staffed by BIPOC workers.

1These average hourly wages are for production workers rather than managers and supervisors in these two sectors.

By Oriane Casale

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