No good news on labor force decline

Posted at 3:00 PM on December 20, 2010 by Paul Tosto (1 Comments)
Filed under: Jobs & unemployment

The erosion of Minnesota's labor force continues. We remain at the lowest points in decades when it comes to the percentage of working age Minnesotans in the workforce and the ratio of employed people to population.

Those are facts. The only question right now is whether the worrisome trends we've seen since late spring will continue.

We should be seeing just the opposite trends in a recovering economy.

Even though the latest jobless data showed unemployment holding steady at 7.1 percent for November, it also revealed little positive information on the counts of people employed, unemployed or even looking for work.

The labor force participation rate -- the percentage of working age people who have a job or are unemployed and seeking a job -- slipped to 71.6 percent. The last time that rate was lower? May 1988.

Minnesota labor to population ratio -- the proportion of the state's working age population that is employed -- fell a tick to 66.5 percent in November. The last time that ratio was lower? January 1984.

We've been asking for months: 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 and the labor force rises. We've heard various explanations -- people who've gone back to school and are waiting for the job market to need their skills again is the most plausible. But right now it's still speculation.

Here's a look at the graph we've running each month, updated with the November numbers (click on the graph for a larger view).

So a year and a half after the recovery began, the percentage of employment-age population in Minnesota that's actually employed is at its lowest point in 20-plus years and the ratio of people who are employed or seeking a job is at its lowest point in 20-plus years.

The one positive to take away from the November data: a small drop in the number of unemployed Minnesotans. It's a small change, from 209,485 to 208,438, or 1,047 fewer people counted as unemployed in November vs. October.

Given that the number of unemployed people has been rising since June, it's something to see that trend pause.

The numbers, though, reinforce the growing concern that there's still a long way to go in Minnesota to dig out of our jobs hole.

State officials believe we won't recoup all the jobs lost in the recession until mid-2013, noting:

The number of jobs Minnesota employers add to their payrolls is forecast to average just 2,000 a month... in the early part of next year before picking up to over 4,000 by early 2012. Minnesota's labor market needs to produce an estimated 2,000 jobs a month to simply keep pace with population growth and new people entering the workforce.

This slower pace of job creation ... over the next 6 to 12 months will continue to make it very difficult to put the state's unemployed, displaced, and underutilized workers back to work promptly.

If anyone has a read on the labor force ratios and why they continue to move in the opposite direction here, please post something below.

The Federal Reserve Bank of Minneapolis recently announced that the "optimism is back" as it released its 2011 economic forecast for the Upper Midwest.

We got excited about that until we read a little closer and discovered 2011 job growth will beat 2010 numbers in all parts of the region ... except Minnesota.

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Comments (1)

Labor force participation is falling nationally as well - we haven't seen national rates this low since March of 1984. MN's labor force participation rate is considerably higher than the national rate (BLS seasonally adjusted March figures:71.8% and 64.2% respectively). The Congressional Budget Office recently put out a paper on national labor force projections (free to read: http://www.cbo.gov/doc.cfm?index=12052&zzz=41622) that forecasted the effects of demographics lowering labor force participation rate will fall about 0.2% each year through 2021 (think ageing baby boomers). Since MN's participation rate has fallen by about 1.0% over the last year, there are probably other factors besides the baby boomers retiring. One possibility is Social Security Disability Insurance (SSDI). Applications are way up.

Posted by Brian | May 12, 2011 9:03 AM

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