Unemployment rate jumps in Minnesota, highest in five years

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(The Center Square) – Minnesota’s unemployment rate rose in January to its highest level in five years, as job growth stalled and state leaders pointed to economic disruptions tied to recent federal immigration operations.

The state’s unemployment rate increased 0.2% to 4.4%, the highest since early 2021 and slightly above the national rate of 4.3%, which dropped 0.1% in January.

The increase comes as officials say Operation Metro Surge had measurable economic impacts across the state.

"To the extent that federal actions related to immigration and tariffs have contributed to this, I think it’s very fair to say Minnesota has borne more than its share of those impacts," said state Department of Employment and Economic Development Commissioner Matt Varilek during a virtual news conference on Thursday.

According to the most-recent data, which was released by the state on Thursday, Minnesota’s labor force shrank by 4,562 people to just over 3.17 million. Employment fell by 9,381 workers, while the number of unemployed residents rose by 4,819. The labor force participation rate edged down to 68.2%.

Job growth in the state was effectively flat, with a gain of just 100 jobs in January on a seasonally-adjusted basis. Nationally, total non-farm employment increased by 130,000 jobs.

Private sector employment in Minnesota declined by 900 jobs, while government employment rose by 1,000.

Several sectors posted job gains, led by educational and health services, which added 5,000 jobs. Construction also saw strong growth, adding 3,700 jobs, while other services gained 1,100 jobs. Government employment increased by 1,000 jobs, and mining and logging added 100.

At the same time, key consumer-facing industries showed sharper declines—particularly sectors closely tied to tourism.

Leisure and hospitality employment fell by 4,000 jobs, or 1.5%, in January, marking the steepest proportional decline of any supersector in the state. Losses were split across both major components, with arts, entertainment and recreation down 700 jobs and accommodation and food services down 3,300.

On a yearly basis, the sector has shed more than 6,200 jobs in Minnesota, a 2.4% decline, even as the same sector posted slight growth nationally.

State leaders have increasingly tied the economic slowdown in Minnesota to the fallout from Operation Metro Surge and a related federal immigration effort, Operation PARRIS.

Last week, Minnesota Gov. Tim Walz signed an executive order creating a council to document the impacts of those operations, saying many Minnesotans’ experiences have yet to be fully recorded.

“Minnesotans know what happened in their communities, but too many stories have yet to be heard, documented, and shared,” Walz said.

Walz also emphasized the broader disruption caused during the operations.

“For months, families lived in fear, children were separated from their parents, and our neighbors were subjected to racial profiling and unlawful detentions,” he said.

State officials have said the operations also caused widespread economic disruption.

State Auditor Julie Blaha previously told The Center Square the enforcement surge was already creating ripple effects for local governments and economies.

“All of that chaos together does hit local governments,” Blaha said, adding her office was already seeing it "anecdotally."

Local officials have reported significant economic losses during the height of the operation. In Minneapolis alone, city officials estimated a $203.1 million hit to the local economy in January, including tens of millions in lost wages, reduced small business revenue and hotel cancellations.

Walz said the newly created council will help document both the harm and the state’s response, adding that communities also showed “compassion, courage, and resilience” during the disruption.

Looking at broader trends, Minnesota’s recent job growth has also slowed. The state added 800 jobs from November through January, a 0.03% increase, trailing the national growth rate of 0.11% over the same period.