Minnesota’s unemployment rate is relatively strong compared to the rest of the country, despite ticking up more than a percentage point since the beginning of the year.
So why do things feel harder for many Minnesotans? It’s not just vibes. Economists looking at “microdata” see some troubling trends under the hood.
Unemployment duration — the amount of time people spend between jobs — has crept up for more than a year, according to U.S. Bureau of Labor Statistics and Minnesota Department of Employment and Economic Development data.
Local nonprofits that aim to match workers to jobs, such as RISE Twin Cities, GoodWill Easter Seals, and Better Futures Minnesota have noticed clients waiting longer for interviews and placements than they used to.
“Duration is the canary,” said Tyler Schipper, associate economics professor at the University of St. Thomas. “When people are out of work longer, even when openings look high on paper, that tells you something in the matching process is breaking down.”
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Minnesota’s average duration of unemployment is over 11 weeks, a sharp increase from just a year ago, and despite major employers continuing to advertise thousands of open positions. Schipp says some employers are advertising vacancies in the hopes of attracting a “unicorn” candidate and are in no rush to fill some of the positions they publicize unless an absolutely perfect candidate comes along.
More broadly though, economists say the long average duration of unemployment indicates a mismatch — of skills, geography, wages, childcare constraints, or simply the kind of employers Minnesota has been shedding.
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That long average duration of unemployment can appear surprising because Minnesota still has more job vacancies than job seekers. Theoretically, that should mean fast re-employment.
It hasn’t for people like Barry Page, 68.
Since losing his industrial-painting job last January, he has submitted dozens of applications but has had no luck in finding a new position.
His case is highly individual — complicated by an arrest that was deemed illegal and a record he says followed him even after expungement — but the feeling is not. Minnesota economists have noted a broader stagnation in the labor market, leading to decreased job mobility, especially for older workers and workers without a college degree.
“One of the clearest warning signs is long-term unemployment,” said Joe Anderson, a macroeconomist at Macalester College in St. Paul. “Even with openings, some workers are not being matched back into the labor force. That’s a structural issue, not a cyclical one.”
DEED’s underemployment measures — particularly workers reporting part-time shifts when they want full-time — have risen faster than unemployment itself. The broadest measure of unemployment – which captures those officially unemployed, discouraged workers, and those working part-time for economic reasons – shows the same pattern at the national level that state underemployment figures capture. The result: A labor market that is not weak enough to show up in the headlines, but not strong enough to support everyone equally.
This is part of the divergence that doesn’t appear in the top-line numbers, said Kjetil Storesletten, a macroeconomist at the University of Minnesota.
“Aggregates hide pain,” he said. “When you look inside, the bottom half of workers see a much less rosy labor market than the unemployment rate suggests.”
Minnesota’s quiet white-collar erosion
Minnesota’s job growth in recent years has come overwhelmingly from sectors like health care, social assistance, and hospitality — labor-intensive and often lower-paid.
But DEED and BLS data show that Minnesota has actually lost employment in high-skill, high-wage sectors, a trend punctuated by recent mass corporate layoffs at Minneapolis-based Target.
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The three sectors that traditionally anchor white-collar opportunity — finance, professional services, and information — together employ tens of thousands fewer Minnesotans today than before the pandemic. But, economists say, these are precisely the sectors that boost mobility for mid-career workers.
“We’ve had a sectoral rotation toward care work and service work,” Schipper said. “There’s dignity in those jobs, but the wage ladders are shorter. And the state hasn’t regained the white-collar jobs that power long-term income growth.”
These sectors historically supported upward mobility and strong wage trajectories. Their stagnation creates a smaller middle- and upper-middle-income ladder for Minnesotans to climb.
“If you’re asking where the state’s highest-productivity jobs have gone,” said Anderson, “the answer is increasingly ‘elsewhere.’”
The unbearable weight of massive costs
Even as inflation slows, cumulative price increases remain historically high. Rent, groceries, utilities and transportation — all essentials — rose more over the past four years than many lower-income wages.
For Page, this translates into a daily math exercise: $967 in Social Security and $1,035 in rent. “If I put all my money on my rent,” he said, “I ain’t going to never be able to pay my gas bill, my electric bill, my phone bill. … I have to have a job.”
He pauses. “It’s rough out here.”
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What the economists stress is that inflation’s pain is distributional, not uniform, leading to what’s been called the K-shaped economy. Households with savings, assets, and higher incomes absorb rising prices; households without those buffers cannot, contributing to higher debt and delinquency rates.
“That’s the divergence,” said Schipper. “Not whether inflation came down — it did — but who could afford the run-up.”
Home ownership: a vehicle for mobility, a source of inequality
If one indicator binds the upper and lower arms of the K more than any other, it’s housing.
Minnesota has failed to build enough housing for nearly two decades. The shortage — affecting both rentals and owner-occupied units — has driven prices and rents upward far faster than wages. The Minnesota Housing Partnership said in August that more than 100,000 affordable units are needed.
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“We’ve been building a million homes short of demand for almost 20 years,” said Joe Mueller, a real estate agent who grosses about $1.25 million annually from sales through his MOVE Group at RE/MAX and his rental properties. “There’s so many Millennials that want to own a home and can’t.”
That demand has helped drive home values higher — boosting the equity and wealth of households that already own property, like Mueller.
But Page, who pays more in rent than he receives in Social Security, sees the other side.
“Work, make money — you don’t see none of the pleasantries of American society because you’re focused on trying to keep your head above water.”
The divergence is financial, generational and racial. Older, wealthier, white households are far more likely to own, while younger, lower-income, and BIPOC households are far more likely to rent.
“Homeownership is a way most middle-class families actually build wealth … and those being frozen out are younger people and racial minorities,” Schipper said, noting that Minnesota has one of the worst racial home ownership gaps in the country.
Consumption driving stocks, stocks driving consumption
One of the least understood drivers of the split is how asset markets amplify already-unequal starting points.
Stock gains over the past two years have disproportionately benefited households already holding financial assets. In Minnesota — as in the country — wealth is highly concentrated. According to the Federal Reserve, the top 10 percent control nearly 70 percent of stock wealth.
The mechanism is circular: High-income households continue to spend, even during times of uncertainty, which boosts revenues and profits for consumer-facing companies. These positive earnings reports in turn support higher stock valuations, and these higher valuations in turn increase the value of the portfolios of the same high-income households. This “wealth effect” allows these high-income households to maintain strong spending, repeating the cycle.
“It’s not wrong to say that upper-income spending props up the stock market,” Anderson said. “And in turn, the stock market props up their spending. It’s a feedback loop.”
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Economists call it a positive feedback loop of asset-backed consumption, and it works only for households who have assets in the first place.
“This is why the top arm keeps rising,” Schipper said. “We measure growth in dollars, not households. And dollars flow through the hands of higher-income households first.”
Meanwhile, households without savings or assets have to absorb the persistent price hikes without reaping the rewards of a rising stock market.
Artificial intelligence, trade and political uncertainty accelerate divergence
Economists noted that uncertainty — in policy, in trade, and especially in AI — is a brake on mobility for those near the bottom while creating strategic advantage for those at the top.
For Mueller’s business, AI will change workflows, but he sees it as part of a cycle of innovation he can adapt to.
“I’m not worried about AI replacing me,” he said. “It’ll change things, sure, but, like the Internet, it’ll create new jobs, too.”
For Page, AI is not even on the radar. His uncertainty comes from more immediate sources: a job market that feels closed off, rising utilities, and the unpredictable cost of simply staying afloat.
“[Technological] transitions reward those who already have high levels of skill, education, or capital,” Storesletten said. “Everyone else experiences disruption, sometimes destructive disruption, first.”
Read more: How’s Minnesota’s economy? The answer depends on your income bracket
The post Not just vibes: These economic indicators raise concerns about Minnesota’s economy appeared first on MinnPost.
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