Serving Northern St. Louis County, Minnesota

Economic boom or workforce woes?

Marshall Helmberger
Posted 8/22/18

REGIONAL— The tightening labor market and recent declines in unemployment on the Iron Range have been heralded as signs that the region’s economy is finally hit the good times again.

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Economic boom or workforce woes?

Posted

REGIONAL— The tightening labor market and recent declines in unemployment on the Iron Range have been heralded as signs that the region’s economy is finally hit the good times again.

Since President Trump’s imposition of tariffs on steel and aluminum in March, the administration has touted a steel industry that is experiencing a new boom, and that’s brought a perception that the steel sector is growing, including in northeastern Minnesota. Recent news reports from the region have bolstered that perception, suggesting that a sudden boom in mining is behind the decline in unemployment on the Iron Range.

There is little doubt that unemployment is down on the Range, with joblessness currently around 4 percent, much better than the 7.8 percent rate a year and a half ago. But has growth in the mining sector really accounted for the improvement in the employment situation? State data suggest otherwise, and federal unemployment numbers may well offer a misleading picture of the employment situation in St. Louis County.

Mining

employment largely unchanged

Mining employment has increased marginally since the first quarter of 2017, when state payroll records showed 3,285 people working in the mining sector in St. Louis County. As of the first quarter of this year, which is the most recent data available from employers’ payroll records, a total of 3,400 people worked in mining in the county, an increase of 115 jobs, or 3.5 percent year-to-year. Other state data, which is based on surveys of employers, suggests that just 21 jobs in the mining and logging sector (which are a combined category for some employment statistics) have been added in the past year, from July 2017 to July 2018.

Employer survey data suggests that the number of workers in the mining sector remains well below the level of mid-2015, which was before the most recent mining downturn. According to survey data from the Department of Employment and Economic Development, mining and logging employment statewide hit 7,610 workers as of July 2015. But shutdowns of several mining operations in late 2015 took a toll on mine workers in the region. While some operations, such as Keetac, reopened in March 2017, scram mining operations on the West Range and Mesabi Nugget near Hoyt Lakes remain shuttered.

Last month, a full three years after the downturn began, that same state employment survey found 6,799 workers in the mining and logging sector, an 11-percent decline over the period, representing 811 jobs. Other data show a more stable picture. State payroll records, which can zero in on mining jobs alone, show little change in mining employment in St. Louis County since the first quarter of 2015, when 3,345 employees worked in mining. Those numbers dipped to 2,900 in 2016, mostly as a result of layoffs at Keetac and Northshore, but those workers have since been called back, which has returned mining employment to 3,400, or roughly pre-downturn levels. Still, there’s no evidence of a boom in mining on the Iron Range. Rather the data points to normal recovery in the wake of the 2015 downturn.

So, if there are few, if any, additional miners at work on the Iron Range today as three years ago, what accounts for the improving employment picture on the Iron Range?

Unemployment rate may be

misleading

Turns out, there is likely more than one factor at play in the seeming improvement in employment in the region. “Sometimes the unemployment rate isn’t the full picture,” said Erik White, an employment analyst for the Department of Employment and Economic Development, based in Duluth.

The unemployment rate, it turns out, is based on a phone survey, conducted by the Bureau of Labor Statistics, which asks individuals whether they are employed. It also asks whether they are actively seeking work. Those who are no longer in the workforce, because they have retired, have become disabled or disenchanted with their job prospects, are not included among the number of people considered unemployed.

And that may be a significant factor behind the recent decline in the unemployment rate on the Iron Range. “The Bureau of Labor Statistics numbers are tricky,” said Mark Phillips, Commissioner of the IRRRB. “Unemployment doesn’t count people who are not looking for work,” he said. And several factors may be boosting the number of people who are leaving the workforce, including the ongoing transition of the region’s sizable population of baby boomers into retirement. “We’ve also had a population decline,” noted Phillips, another factor that eliminates people from the region’s workforce.

At the same time, other issues, such as the lack of affordable childcare, are posing a roadblock to employment for some residents. “We’re working on the childcare issue,” said Phillips, “because we know that’s an issue.” For now, the IRRRB is focused on funding for infrastructure for childcare facilities, rather than operational support. “We’re not a social service agency, so we can’t help in the long-term,” he added.

Employer payroll data suggests that across St. Louis County, in all economic sectors, there are very few additional workers on the job today compared to last year, or even three years ago. In fact, as of the first quarter of 2018, state records show that 96,268 people were actively employed in St. Louis County in all sectors of the economy. That’s actually down slightly from the 96,376 who were on the job at the same period last year, although it’s up marginally from the 95,163 who were working at the same period in 2015.

Some sectors have experienced relatively robust job growth in the region in recent years, but those gains have frequently been offset by losses in other sectors.

Over the past three years, the leisure and hospitality sector has hired over 900 new workers in the county, including 500 in just the past year. The health care sector has added nearly 600 jobs since 2015, while manufacturers in the county have added 300. An additional 210 construction workers are also on the job compared to last year. Those sectors combined have added over 2,000 jobs in the county over the past three years, which has helped to offset job losses in some sectors, including professional and business services and retail trade, which have lost a combined 1,200 jobs since 2015.

Workforce struggles

The available data suggest that recent reductions in the unemployment rate in the region is more a reflection of a drop in the number of people actively seeking employment than growth in the number of people on the job. And it’s that decline or lack of growth in the workforce that is continuing to plague employers in the region as they struggle to fill job openings.

According to Erik White, from DEED, the current job vacancy rate of one-to-one, which means one job opening for every available worker, is highly unusual and reflects the current tightness of the region’s job market. A few years ago, notes White, there were 10 available workers for every job opening.

For White, the wave of baby boomer retirements is behind much of the trend. “We have an aging workforce,” he said. “It definitely shows there’s room for improvement.”

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Negativity is not a good thing

I was thrilled to receive a 5K bonus from my dirty mining job for the last quarter. Fully expect another maximum bonus next quarter. Thank you Donald Trump!

Thursday, August 23, 2018