Minnesota added 8,000 jobs in September, another surge in an already tight labor market

Minnesota added 8,000 jobs in September, another month of growth in an already tight labor market that's outpacing the country as a whole.

Unemployment in the state held steady last month at 3.1%, compared with 3.8% nationally, according to data the Minnesota Department of Employment and Economic Development (DEED) released Thursday. Labor force participation also remained unchanged at 68.5%, higher than the 62.8% national rate.

September was the seventh-consecutive month of labor force growth in Minnesota, and the number of new jobs was nearly double those added in August. The state has gained nearly 50,000 payroll jobs in the past year.

The continued growth has presented a hiring hurdle for employers, who have struggled to find and retain skilled workers.

"The challenges of [employers] trying to find talented employees are significant, and in some ways, it's the central feature of our economy right now," DEED Commissioner Matt Varilek said Thursday at a news conference.

"It reflects the fact that businesses experience strong demand for their goods and services, and that's great, and it means that a lot of employees have been able to find great career opportunities and to earn rising wages. But there's demand for more."

DEED is collaborating with employers and higher education institutions to help workers find training and jobs, Varilek said. Last week, the department and Gov. Tim Walz announced an initiative aiming to boost employment in technology, the trades, caring professions, manufacturing and education.

Employers also bear responsibility for creating an environment where people want to work and for being open to job candidates whose resumes might not match exactly what they're looking for, said Alissa Henriksen, co-president of Minnetonka-based recruiting firm Grey Search + Strategy.

The current level of competition for skilled workers is similar to what Henriksen said she saw as hiring made up for from the mass layoffs of the Great Recession. What's different coming out of the pandemic is employees expect more flexibility and can look elsewhere if they don't find it.

"[Employers] need to continue to be open-minded to what they're seeing and hearing. So if they are working with a recruiting partner, if their internal talent acquisition team is coming to the table and saying, 'We're not able to bring the right talent to the interviews,' they should be like, 'Let's go deeper. Why? What is it?'" she said.

"Step outside of your business, look in and look at what other thriving companies are doing and start to make adjustments."

Widespread growth, but some losses

Most of the "supersectors" that DEED measures gained jobs in September: Education and health services, leisure and hospitality, trade, transportation and utilities and government led the pack.

Construction was among the sectors where year-over-year growth outpaced the nation, with 7,322 new jobs, a 5.1% bump compared with 2.7% nationally.

Varilek said he sees the rise in construction jobs as "a positive sign, and hopefully indicative, really, of other positive news when it comes to investment across a range of sectors where construction is part of the equation."

He noted some renewable energy projects that he expects to spur job growth, including a planned hydrogen hub in Minnesota, North Dakota and South Dakota that has drawn nearly $1 billion in federal investment.

Some Minnesota sectors, including financial activities, mining and logging, lost jobs last month. Professional and business services saw the greatest decline, shedding 3,600 jobs.

Manufacturing gained 600 jobs from August to September but has lost more than 1,700 year-over-year. DEED attributed that drop mostly to losses in animal slaughtering and processing and food manufacturing.

'Something's got to give'

Minnesota's economy tends to mirror the nation's, which has exceeded growth expectations but is starting to show signs of slowing. A report released Tuesday by the financial services company BMO predicted the U.S. economy will decelerate in the final months of 2023 "before stalling early next year."

The healthy labor market is a bright spot, said Priscilla Thiagamoorthy, a senior economist with BMO. And as hiring continues, so will consumer spending. On Tuesday, the Census Bureau released advance estimates of retail and food services sales showing a 3.8% year-over-year increase in September.

"That's how the U.S. consumer is still staying mighty," Thiagamoorthy said.

Persistent growth could present a challenge for the Federal Reserve as it continues efforts to temper inflation — currently 3.7% nationally — and balance its goals of stable prices and maximum employment.

In a speech Wednesday at the European Economics and Financial Centre in London, Christopher Waller, a member of the Fed's board of governors, said the combination of strong economic activity, low unemployment, declining inflation and slowing wage growth is "great news" — with the caveat that continued economic growth could threaten the central bank's progress toward its 2% inflation goal.

"While I tend to be an optimist, things are looking a little too good to be true," Waller said, "so it makes me think that something's got to give."