Northeast Minnesota’s latest economic status, in accordance to its natural sources base

Stephanie Moua
Minneapolis Government

MINNEAPOLIS, MN — On June 2021, Minnesota Department of Employment and Economic Development shares about Northeast Minnesota's economic status. This is relevant to their dependency on natural sources.

Some industries were affected worse than others by the pandemic, especially those located in Northeast Minnesota. Leisure & Hospitality is a major sector in the Arrowhead, using the region's natural resources. The combined industries of Arts, Entertainment and Recreation, as well as Accommodation and Food Services, make for 11.1% of all jobs in Northeast. While in the state, Leisure and Hospitality occupations accounted for 9.4% of all jobs.

Many of the economic activity in the Arrowhead has always been based on the natural resources available. The Iron Range is located in this area, which has a long history of iron ore mining. Location quotients reflect how concentrated an industry's employment is in comparison to a bigger area, such as Minnesota.

Mining employment is not only the most focused of all industries in the region, but is also the most concentrated of any industry in the entire state. In terms of jobs, the mining industry is quite modest, making for about 3% of the total in the region. Yet, the 3,889 mining jobs in Northeast Minnesota make about 71% of the state's total employment in the industry.

Health Care & Social Assistance as the state's largest sector, employs 18% of all workers and is less dependent on natural resources. Their employment is even higher in Northeast Minnesota, making up to 25.1 % of all jobs. Only Southeast Minnesota has a larger ratio of health care employees than the other planning regions.

The concentration of employment by industry was a key factor of how a region fared during the pandemic recession, in comparison to other parts of the state.

Last year, the Leisure and Hospitality sector was by far the most affected in terms of job losses. Between the first and second quarters, overall employment fell by 11.8% whereas employment in Accommodation & Food Service dropped by 35.8% and Arts, Entertainment and Recreation dropped by 37.2%.

The number of job loss was not the only sign of the pandemic's impact. Not only were many individuals only laid off, but they also chose to exit the workforce entirely, avoiding a job search at least for awhile.

Northeast Minnesota's labor force is 5,469 workers, or 3.3% fewer in April 2021 than it was in February 2020, before the epidemic began. The lowest point of labor force was in October, when it reached 154,804 workers.

To put it into perspective, the last time the region's labor force fell below 155,000 was in 1995. Over 4,000 workers have returned to work since the low point last fall, but that's still less than half of those who left. Because of the huge drop in the work force, employment increases were not equal in size, even though unemployment fell rapidly,

However, it is crucial to emphasize that the labor force loss in Northeast Minnesota is not a new phenomena. The pandemic crisis worsened a decades-long trend of stagnation and decrease in the work force.

During the 1990s, the regional labor force grew by over 2,000 workers each year on average. Since 2000, though, the yearly change has become a loss of 227 workers per year. Larger population movements usually follow labor force trends. The total population of the region has declined, leading to labor force decrease. And as labor force growth slowed, it eventually led to labor force decliner.

From 1990 to 2010, the region saw mild population growth, which turned into a mild population drop from 2010 to 2019, when the region lost 0.6% of its population.

The ongoing tightening of the labor force is one of the results of a declining labor force. Despite the fairly high unemployment rate, job vacancies have remained high, meaning that there are few job searchers per position. This means more possibilities for employees who have stayed in the workforce, but it also means more competition for qualified applicants for companies.

The jobseekers-to-openings ratio neared 1-to-1 by the end of 2020. This is similar to the pre-pandemic restrictive labor market conditions, and it happened in less than a year.

As previously stated, the pandemic's effects were not evenly spread among industry. Employment decreases in service-providing industries were considerably larger than in goods-producing industries. Employment in Arts, Entertainment and Recreation, and also Accommodation and Food Services, fell over 20% from 2019 to 2020.

Other services suffered a similar drop. Only Construction had a bigger than average job loss among the Goods-Producing industries. Meanwhile, Mining (-7.8%), Manufacturing (-6.7%) and especially Agriculture, Forestry and Fishing (-3.6%) did better.

Several industries did well, with the ability to quickly shift personnel to telework. Management, Public Administration, Utilities and Professional, Scientific and Technical Services all had larger percentages of educated workers, which has been linked to increased telework usage during the pandemic.

The industries that were hit hardest were also the ones that paid the least. Only two out of seven companies with higher year-over-year job losses paid above-average compensation. Construction job losses were around average, and employment in the Information sector had been declining for a long time before the epidemic.

Only two out of thirteen sectors that did better than average paid below average wages: Retail Trade and Agriculture, Forestry, Fishing and Hunting. The retail sector was able to adapt through growing e-commerce, which helped to limit losses. Meanwhile, the socially distant and outdoor aspect in Agriculture, Forestry, Fishing and Hunting helped to protect them from pandemic effects as well.

While everyone has been impacted in some way, the pandemic's economic effects have been notably felt by Black, Indigenous and People of Color (BIPOC) residents in Northeast Minnesota, as well as low-wage earners, those with less education, the elderly, and women.

DEED's Unemployment Insurance Statistics give the most up-to-date and clear picture of the widespread losses that began in the spring of 2020 and are expected to continue throughout 2021.

Even as late as April, the number of Unemployment Insurance (UI) claims submitted by Black or African American workers was three times higher than their share of the labor force. Native workers, as well as Hispanic or Latino workers, were overrepresented on UI.

The pandemic worsened the inequities for BIPOC workers. Even as total jobless claims reduce, gaps between Black or African-American and Native employees in the region have begun to increase again in 2021.

The story for female employees was turned upside down. Men, in general, file UI claims at a significantly higher rate than women. Women were more than twice as likely to make claims throughout the summer and fall of last year as they were before March because of the pandemic. Workers aged 65 and older filed a higher percentage of claims (6.7%) than their share of the labor force (5.3% ).

Finally, workers with a high school diploma were the most likely to make a claim in 2020, followed by those with a high school diploma and those with a college or associate degree. Workers with a bachelor's degree or higher were half as likely to make a UI claim as other workers.

So far in 2021, these gaps have gotten worse. In the first three months of 2021, workers with less than a high school graduation accounted for 6.3% of UI claims, but making just 3.3% of the working force. Those with a high school diploma, on the other hand, accounted for 41.8% of UI claims but just 23.1% of the labor force.

Only 11.9 percent of claims were filed by those with a bachelor's degree or higher, although they made up over a third of the labor force in Northeast Minnesota.

While there are many signs of an economic recovery in Northeast Minnesota, the results have not yet reached all employees.

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