Minnesota's labor market during the pandemic recession

Terry Davis

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MINNEAPOLIS, MN — The pandemic recession is unlike any other recession the US has encountered. This is especially true in the labor market, as the pattern of job loss and gain is substantially different from what is observed in the past.

Job losses were significantly more severe and widespread than in previous recessions. However, job creation has likewise been more rapid.

Minnesota will be just 61,000 jobs short of pre-pandemic employment by March 2022, according to employment projections. Furthermore, according to the most recent data available, Minnesota's GDP was extremely close to pre-pandemic levels by the third quarter of 2020.

On the other hand, less than a year after the recession began, the state's labor market has been tight for the first four months of 2021. Job openings remained plentiful, unemployment fell swiftly, and earnings began to rise. At this point in the recovery, it appears that the limits on employment growth are more on the supply side than the demand side.

However, most individuals who left the workforce during the epidemic will return in the next six months. Furthermore, the ample job prospects should attract new workers, particularly teens who are entering the economy for the first time.

Because the industries most impacted have the biggest percentages of low pay workers and workers of color, the pandemic recession hit low-wage and Black, Indigenous, and People of Color (BIPOC) workers the hardest.

As these industries begin to rebuild, these individuals were among the first to be laid off and, in many circumstances, will be among the last to be rehired.

Employers in all industries must be innovative and adaptable when recruiting and training to find the talent they need among people who previously worked in other industries or occupations.

The pandemic's consequences were most visible in April 2020, when the state lost 362,496 jobs (12.4%) in one month. It was the single-worst employment loss in the history of the Current Employment Statistics series. The second-largest loss was in September 2009, during the Great Recession, when employment fell by 5%.

Following the state's catastrophic job losses in April 2020, employment began to recover in 2020 and the first months of 2021 steadily. Except for two months in late 2020 due to a late fall spike in COVID-19 cases, OTY job losses decreased steadily throughout the year. Annual losses had dropped to 5.8% by March 2021, with practically every supersector showing gradual improvement.

This is the only recession in which there are a lot of job openings and a lot of people looking for work at the same time. According to the Minnesota Job Vacancy Survey, Minnesota had 111,800 unfilled job positions in the second quarter of 2020, barely 24% lower than the previous year.

Minnesota's lack of labor force growth was likely holding the state back from more fast job growth as of the mid-second quarter of 2021. However, as vaccination rates rise and people's lives return to normal, labor supply constraints on job creation are likely to lessen in the following months.

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