Low unemployment rate worsens staff shortages and inflation

MANKATO, Minn. (KEYC) — Minnesota’s unemployment rate is the lowest in more than 20 years.

“That number, that sounds really good, but it’s really a tough number for our state,” said Ryan Vesey, director of economic development and research at Greater Mankato Growth.

The Ministry of Jobs and Economic Development announced on Thursday that it fell to just 2.7% thanks to an increase in labor force participation.

But it does lead some people to wonder why many businesses still struggle to find help.

“We’re getting to a point where we just don’t have enough staff,” Vesey added.

The pandemic has pushed many Minnesotans out of work.

More than 70% of the lost jobs have since been recovered, according to DEED.

The state has also gained about 120,000 jobs over the past year, and the population just can’t keep up.

“That difficulty in hiring has now made its way to employers who don’t have as many staff and haven’t had difficulty hiring in the past,” Vesey explained. “That’s why you’re seeing more and more ‘hiring now’ signs.”

With fewer people looking for jobs, companies attract workers with higher wages, which can then cause prices to spike.

GMG said the ideal unemployment rate is around 4%.

“When we go below that, we start to see inflation. Not just wage inflation, but inflation across the board,” Vesey said.

To raise the rate, employers may need to find new ways to move operations forward.

“There is the refugee and immigrant community, there are people with disabilities. Finding jobs for formerly incarcerated,” Vesey said.

GMG is also encouraging companies to consider using more automation.

“When employers start implementing automation and unemployment is this low, it means there will be new opportunities for people in low-wage jobs that are frequently automated. They can now find opportunities with higher paying jobs,” Vesey explained.