Despite headline-grabbing layoff announcements, the job market in Minnesota continued to defy signs of a slowing economy as employers in the state added 7,700 jobs last month.

That is an acceleration from April when the state logged 4,300 more jobs, a number revised down slightly by 200 jobs.

"It's one of the many indicators showing the continued strength of the economy," said Kevin McKinnon, interim commissioner of the Minnesota Department of Employment and Economic Development (DEED).

The state unemployment rate also ticked up slightly but still remains low at 2.9%, according to data DEED released Thursday. It's nearly a percentage point lower than the U.S. jobless rate of 3.7%.

The one-tenth of a percent increase in Minnesota's jobless rate was actually a reflection of a positive trend for the state struggling with a labor shortage: More Minnesotans are getting back into the workforce.

"The good news is that Minnesota's labor force grew a lot last month," McKinnon said. "In the last two months, we've added over 12,000 workers to the labor market."

About 8,700 Minnesotans entered the labor force in May, some of whom found jobs right away and others who were still looking. That is the largest monthly gain since June 2020 and the third consecutive month of such an increase, according to DEED.

With that recent infusion, the state now has about 32,200 fewer workers in its labor force compared to before the pandemic, a gap that — while still sizable — has been shrinking.

"If this growth that we've seen continues, then we should eventually get back to how it was pre-pandemic," said Angelina Nguyễn, DEED's labor market information director. "But it's really hard to say when that would happen."

With an aging workforce, Minnesota saw a surge of retirements during the pandemic.

Nguyễn pointed to some clues as to who might be fueling the recent labor force increase. She nodded to higher participation rates among Black, Latino and female workers as well as teens, the latter of which tend to pick up more jobs at this time of year with school out for summer.

Wage growth slowed in May with average hourly earnings in Minnesota increasing just 2% compared to a year ago. But with inflation cooling off, it still surpassed the 1.8% year-over-year increase in the consumer price index last month for the Twin Cities region.

"Inflation rates are slowing down with each month, and so is wage growth in most sectors," Nguyễn said.

Still, some areas — such as manufacturing, finance, nursing and residential care — have maintained strong wage growth while others — such as retail, transportation and warehousing — saw small declines, she said.

"It makes sense from an economic perspective that employers cannot keep up with high wage growth that we've seen in the last year and earlier this year," she said. "And for the sectors that have been able to gain people back ... they no longer need to raise wages to attract workers."

Several industries added jobs last month: business and professional services with 2,900 jobs, leisure and hospitality with 2,300 jobs, educational and health services with 1,900 jobs, government with 1,400 jobs and construction with 1,000 jobs.

Meanwhile some sectors saw job losses: trade, transportation and utilities with 1,100 jobs; information with 400 jobs; and mining and logging and financial activities, each with 200 jobs.

With May's job gains, Minnesota's private sector has now once again recovered all jobs lost in the pandemic, a milestone it initially reached in February before slipping below that benchmark after some job losses in March.

Including government jobs, the state is now just shy of a full jobs recovery, having regained about 99.8% of those jobs. The U.S. fully recovered all jobs last year.