Star Tribune, April 13, 2008: Jobless claims show weakness in state economy

Posted on

By MIKE MEYERS, Star Tribune

April 13, 2008

Amid alarms of recession, applications for Minnesota unemployment benefits have been falling. In March, initial claims were down 8.3 percent from a year ago.

So the numbers are showing signs of hope. Right?


“I’m always looking for signs of optimism, but this recent decline isn’t particularly large or persistent,” said Steve Hine, director of labor market information at the Minnesota Department of Employment and Economic Development.

In a more troubling sign, the number of Minnesotans exhausting their 26 weeks of benefits after failing to snag new jobs has been on the rise.

And over the last 12 months, initial claims fell 5.7 percent, but the number due to permanent layoffs rose 11.9 percent, Hine said.

“It shows that not only are more people losing their jobs, but they’re staying unemployed longer and having trouble finding new jobs,” said John Budd, a University of Minnesota economist.

“It’s really a double whammy,” he said.

Almost seven out of 10 Minnesota unemployment insurance claims in March were tied to permanent layoffs, up from 50 percent a year earlier and 43 percent in March 2006.

“Our continuing unemployment claims [number] is looking more and more dismal,” Minnesota state economist Tom Stinson said.

“People aren’t being laid off in Minnesota much faster, on average, than they were a year ago,” he said. “But, once you’re laid off, it’s harder to find a job. It takes longer to find a job.”

Even initial claims are affected by the trend. In the construction business, where seasonal layoffs are routine, last winter many carpenters, electricians, plumbers and others in the industry worked so little that they no longer qualify to file fresh employment claims, Hine said.

“This year, there just hasn’t been much of an opportunity to return to work temporarily during the winter,” he said.

Initial claims for Minnesota construction workers in March fell nearly 25 percent from the same month a year ago. Among large industries, manufacturing showed a similar trend, with initial claims last month falling 21 percent compared with March 2007.

Initial claims varied sharply by age. For Minnesotans 22 to 29, new claims fell 10 percent last month, compared with a year earlier. In the same period, initial claims for those 65 and over rose 21 percent.

Education didn’t rescue Minnesotans from the unemployment line. In March, initial claims from people who had completed more than three years of college rose 12 percent, while new claims for workers with a high school education fell 17 percent.

Scott Anderson, senior economist at Wells Fargo & Co., has a theory about what’s driving the trend toward lower initial claims, as more and more jobless Minnesotans exhaust their unemployment insurance.

The Minnesota labor market has been relatively weak since the last recession in 2001, he said.

“We just haven’t added the same number of jobs as we normally see in an expansion,” Anderson said. “That means there’s less to cut.”

Toby Madden, regional economist at the Federal Reserve Bank of Minneapolis, sees nothing alarming in the unemployment insurance figures, however.

Changes in initial jobless claims are exactly where you’d expect to see them, he said. They’re on the rise in retail trade and categories such as arts, entertainment and recreation and in information — all arenas of discretionary spending.

He said the numbers, compared with past recessions, don’t seem disturbing.

“Even if the unemployment rate stayed the same, initial claims should increase with population,” Madden said. “But it’s been down to flat over time.”

Nevertheless, not everyone shares his optimism.

“We just started to see an increase in the unemployment rate last month,” Anderson said.

“I think we’re already three or four months into this recession and will see unemployment insurance initial claims go up.”

Mike Meyers • 612-673-1746

« Back to News