For the first time since May of 2007, Minnesota's unemployment rate ticked higher than the nation's, sitting at 4.4 percent in January on a seasonally adjusted basis. The national rate fell slightly that month to 4.3 percent.
That's according to data released today by the Minnesota Department of Employment and Economic Development, or DEED, for the month of January.
The Bureau of Labor Statistics is catching up on report delays stemming from the federal shutdown last fall, so the Minnesota reports are lagging behind the national ones.
Potential ICE impacts
The Minneapolis-Saint Paul Metropolitan Statistical Area lost almost 2,000 jobs in January, a drop of 0.1% compared to a year before.
"All of these annual job figures reflect a very notable deceleration in the American economy over the last year, and 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 DEED Commissioner Matt Varilek.
Varilek said he can’t point to one singular factor to explain the numbers, but “it seems entirely possible to me that the ICE actions influenced our January numbers in a very negative way.”
DEED officials said its CareerForce centers in Minneapolis, which were near areas that had a lot of ICE activity, had fewer job seekers coming looking for help finding employment in January.
But Sara Garbe, who supervises DEED's CareerForce division in St. Paul, said there was an uptick in the number of job seekers in January. A staff survey showed it hasn't been easy for them to land roles.
"Sixty-three percent of the respondents said that the job seekers they've been working with had explained that it had been harder to find employment now than this time one year ago," Garbe said.
Labor market weakness and ways to reverse it
On a year-over-year basis, job growth in the state was up between January 2025 and January 2026, but the increase was slight.
"The data are showing signs of a weaker labor market," said Angelina Nguyen, DEED Labor Market Information director. “We see smaller job growth and a higher unemployment rate than we have in years.”
Educational and health services, as well as construction, posted the strongest seasonally adjusted job growth in January. Meanwhile, areas such as Leisure and Hospitality and Trade, Transportation and Utilities shed jobs.
Laura Kalambokidis, a former state economist who teaches at the University of Minnesota, said the state’s higher January unemployment rate stood out to her.
“We've taken for granted for a while that Minnesota's unemployment rate tends to be below the U.S. unemployment rate,” she said. “Seeing that change for this one data point, which is January of this year, is an unwelcome development but something that could change. It could reverse.”
Kalambokidis stressed that one should not look at a single month or even a single quarter of jobs data but instead study the data over time to see if a concerning trend emerges.
To help reverse any weakness in the labor market, she said the state should continue investing in itself.
"Schools, education, child care, care for elderly people, those are the kinds of things that can free somebody up to work, to participate in the workforce," Kalambokidis said.