Gov’t Shutdown Ups July Unemployment Rate to 7.2%

Minnesota lost 19,800 jobs last month, prompting the unemployment rate to rise; however, the July jobless rate was calculated during the period when 22,000 state workers were out of work as a result of the government shutdown-so the figure is distorted.

The Minnesota government shutdown, which put 22,000 state employees out of work last month, contributed to an increase in July's unemployment rate.

The state unemployment rate rose 0.4 percent to a seasonally adjusted 7.2 percent last month-still well below the national rate of 9.1 percent, according to data released Thursday by the Minnesota Department of Employment and Economic Development (DEED).

On the whole, Minnesota lost 19,800 jobs in July, due largely to the government shutdown, the agency said. According to DEED, 28,000 government and school jobs were lost last month thanks to the 20-day shutdown and schools being closed during the summer.

However, laid-off government workers returned to work on July 21 after Governor Mark Dayton and the Republican-controlled Legislature agreed on a budget for the next two years. Employment figures used in official unemployment calculations are taken from earlier in the month-so the 28,000 figure and the 7.2 percent unemployment rate don't account for the fact that 22,000 state workers returned to their jobs later in July, Labor Market Information Office Director Steve Hine told Twin Cities Business.

He added that last year, the federal government changed its methodology for computing state unemployment rates-and the new method removes some job volatility and essentially “smoothes out” the employment rate over time. Consequently, it lessens the impact of major employment events, like the temporary loss of 22,000 state workers. Hine would put the actual jobless rate in July at 7.6 percent, although that figure is based on the period during which those state employees were out of work.

Hine said given the “smoothing” that occurs in jobless rate calcualtions, state projections indicate that Minnesota's unemployment rate will continue to rise at least over the next couple of months.

Still, DEED Commissioner Mark Phillips pointed to some positive signs in the job market.

“We're encouraged by the gain of 8,200 private-sector jobs in July,” he said in a statement. “While the numbers are temporarily distorted by the state government shutdown, Minnesota's job growth continues to improve incrementally and actually shows signs of strength in a number of sectors.”

The unemployment rate for June, which DEED last month put at 6.7 percent, was just revised up 6.8 percent-and the June rate for the United States as a whole was 9.2 percent. The state's construction industry, the hardest hit in recent years amid the economic downturn, added 4,800 jobs in June; DEED previously indicated that it lost 2,200 jobs.

Manufacturing led all industry sectors within Minnesota in July, having gained 3,500 jobs. Other gains occurred in professional and business services (up 3,000), financial activities (up 1,900), education and health services (up 1,300), other services (up 1,000), trade, transportation, and activities (up 200), and logging and mining (up 100).

In addition to job losses in government, others sectors that experienced declines last month include construction, which lost 2,000 jobs; information, which lost 700; and leisure and hospitality, which lost 100.

Within the past year, Minnesota's non-farm employment has grown 0.5 percent while national non-farm employment has increased 1 percent. In terms of sectors, leisure and hospitality has boasted the largest increase, having added 14,378 jobs. Education and health services falls close behind, having added 12,937 jobs.

Among the state's major metropolitan areas, Minneapolis-St. Paul posted the largest year-over-year gain, having grown employment by 6,153 jobs. Rochester followed with 2,545 jobs gained. St. Cloud, meanwhile, grew by 1,366 jobs; Duluth-Superior grew by 1,122 jobs; and Mankato grew by 1,041 jobs.