Minnesota jobless rate dips to record 2%, but pace of growth slows

Minnesota's unemployment rate fell to its second straight monthly record low in May even as signs of an economic slowdown appeared on the horizon.

The jobless rate dipped to 2 percent, down from the previous record of 2.2 percent in April, according to state Department of Employment and Economic Development data. Minnesota's recordkeeping goes back to 1976.

Hiring slowed in May as the state added just 6,600 jobs, down from 11,700 jobs added a month earlier. Employers are dealing with one of the country's tightest labor markets, 40-year-high inflation, and rising interest rates that are stoking fears of a recession.

"Everybody who’s watching the economy is holding their breath a little bit at this moment," Economic Development Commissioner Steve Grove told reporters on a conference call. "I do not hear from employers right now that they are at all slowing down their need for workers. I’m hearing the opposite – that they want our help to find more."

Minnesota's construction sector gained 4,100 jobs, while educational and health services added 3,200. Professional and business services gained 2,500 jobs.

Leisure and hospitality, which has experienced the strongest job growth coming out of the COVID-19 pandemic, slowed in May by losing 4,300 jobs.

Average wages grew at a 3.4 percent pace over the year, weaker than the national average of 5.5 percent and far below the Twin Cities' inflation rate of 8.7 percent in May.

"Our message to businesses in the aggregate is that Minnesota businesses probably need to be raising wages faster than they are to attract workers especially given we have the fifth-tightest labor market in the country," Grove said.

The labor force participation rate -- a measure of the percentage of working-age people who are either employed or actively looking for work -- ticked up to 68.4 percent in May. That is higher than the national average but still lower than pre-pandemic.

The state has regained 85 percent of the jobs lost at the start of the pandemic, the data indicate.