Minnesota’s unemployment rate moved above the national level for the first time in nearly 20 years.

The Minnesota Department of Employment and Economic Development (DEED) said as of January, the state’s estimated labor force was 3,177,704 people. Of that, about 138,915 people were unemployed.

“I mean, the unemployment rate has been slowly rising over the course of the last year, and that’s true in Minnesota and nationally,” said DEED Commissioner Matt Varilek.

“We, for a long time, have had quite a lot tighter labor market than the rest of the country, but now it’s been kind of converging,” said Varilek.

“Then, we believe, with the actions of the federal government through Operation Metro Surge, that probably is what tipped us past the national rate… And we look at a number of indicators that give us that notion.”

Minnesota’s unemployment rate was 4.4% in January, compared with the national rate of 4.3%. University of St. Thomas Associate Professor of Economics and Data Analytics Tyler Schipper said that the rate is still not considered high, but it is relatively high for Minnesota, which has seen rates closer to 2% in recent years.

“2022 and 2023, Minnesota had one of the tightest labor markets in the country,” said Schipper. “So, it’s been in those last couple of years since that we just haven’t created as many jobs as the rest of the country.”

The state did not move above the national average until January. The timing, the hospitality industry being hit hardest, and the unusually concentrated rise in unemployment in the metro led NorthStar Policy Action to blame Operation Metro Surge for “real, measurable damage to Minnesota workers and businesses” in a report presented to state lawmakers this week.

Schipper said, as the report acknowledged, that it is not the only factor, but he said it is significant. He also said the last time Minnesota surpassed the national unemployment rate, a recession followed within a year.

“In most of the past recessions, this has been something that we’ve seen where Minnesota’s unemployment rate is higher than the national average right before that recession happens,” said Schipper.

“And so, I don’t think a recession is a foregone conclusion, but the odds are certainly rising.”

The NorthStar Policy Action report was presented as part of testimony in favor of legislation state lawmakers are considering, which would provide at least $100 million in small business relief, including partially forgivable loans. If passed, DEED would run the program.

“I won’t say solution, because there are just so many factors at work here, but I think it would be a helpful contribution, if we could help more of those small businesses that bore those impacts, because we could all do better when we all do better, and so having that segment of small business owners and workers not be suffering in the way that they have been would be good,” said Varilek.

Schipper said that relief would help. Whether it can pass the Legislature is another question. He said the key, longer term, is using tax dollars to make more people and businesses want to move and work in Minnesota.

“Regardless of what hand we’re dealt federally, we will do all that we can here in Minnesota,” said Varilek.

Varilek pointed to existing help for Minnesotans, including the Minnesota Unemployment Insurance (UI) Program and the CareerForce network.

“Folks can walk in the door and get assistance with their resume. They can get assistance with interviewing skills as they’re pursuing that next job, where they can find out where there are training opportunities to potentially upgrade their skills and land even higher-value jobs,” said Varilek.

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