Minnesota’s mid-year employment update offers a clear view into how the state’s labor market has performed from January through June, and what might be ahead.
As we move into the second half of 2025, Minnesota’s labor market remains a mix of strength, strategy, and subtle shifts. While many employment indicators suggest continued resilience, low unemployment, strong labor force participation, and job gains in key sectors, there’s growing evidence that employers are becoming more cautious.
So what does the first half of 2025 really tell us? And what should employers be thinking about as hiring trends evolve across the state?
Here’s a look at the key takeaways from January through June, powered by data from Minnesota DEED, insights from BizJournals, and the latest national labor report released on August 1.
The First Half: A Snapshot of Stability with Subtle Softening
Through the first six months of 2025, Minnesota’s unemployment rate has hovered between 3.1% and 3.4%, consistently outperforming the national average. Labor force participation remains one of the highest in the country, above 68%, compared to just over 62% nationally.
But a deeper look at the quarterly trends reveals a few important shifts:
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Job growth was strong in Q1, led by construction, healthcare, and professional services.
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Q2 brought slower momentum, with smaller month-to-month changes and a slight decline in some private-sector job categories.
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Underemployment and unemployment duration are increasing, indicating that while jobs exist, they may not fully align with candidate skills or expectations.
DEED’s regional and monthly updates suggest that while the overall market is holding, employers are starting to recalibrate.
Sector Trends: Who’s Growing, Who’s Slowing
As revealed in this mid-year employment update, job growth in the first half of 2025 has varied widely by industry.
Growing:
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Healthcare & Social Assistance: A consistent growth engine statewide, particularly in Greater Minnesota where demand continues to outpace supply.
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Construction: Benefiting from public infrastructure investments and seasonal momentum, particularly in early 2025.
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Government: Local and state government job numbers have grown steadily in response to community and education needs.
Slowing:
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Technology & Business Services: Hiring levels plateaued in Q2 after strong gains in 2023 and early 2024.
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Manufacturing: Still stable, but with fewer new job postings and increased investment in automation over headcount.
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Retail & Hospitality: Mixed performance; metro areas have stabilized, but rural regions continue to see slower recovery.
Employer Outlook: Hiring Caution Creeps In
A July report from the Minneapolis/St. Paul Business Journal highlighted a clear shift in CEO sentiment: fewer business leaders are pursuing aggressive hiring strategies, citing economic uncertainty, wage pressures, and softening demand.
That caution is now being echoed by national labor market data. The U.S. jobs report released August 1 revealed that previous hiring numbers were significantly overstated. Downward revisions showed that job gains for May and June were actually 111,000 fewer than initially reported, and the pace of hiring has slowed to its weakest since 2021.
This recalibration is further supported by data in Minnesota. According to DEED’s Business Retention and Expansion (BRE) report:
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Just 26% of Minnesota businesses planned to increase headcount heading into Q3.
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59% still cite hiring as their top challenge, but many are shifting focus to retention and workforce development rather than new additions.
Taken together, these trends, reflected in this year’s mid-year employment update, suggest a more measured approach to hiring, not a pullback, but certainly not a hiring boom either. Employers are increasingly focused on efficiency and stability rather than aggressive growth.
Regional Patterns: Uneven Growth Across the State
DEED’s 2025 Regional Trends Reports show that while the Twin Cities are near full labor market recovery, Greater Minnesota is still experiencing labor force shortages, especially in critical sectors like education, healthcare, and skilled trades.
Highlights include:
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Northwest MN: Leading in both labor force growth and job expansion.
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Southeast MN: Strong in healthcare employment, but flat in other industries.
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Southwest MN: Seeing wage growth and strong employment but fewer new job postings.
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Northeast MN: Slower labor force recovery but consistent employer activity.
This regional nuance matters, especially for businesses competing for talent in outstate areas or exploring expansion or relocation strategies.
What It Means for Employers and Job Seekers
As this mid-year employment update shows, the story of 2025 so far is less about urgency and more about precision.
For employers:
The story of 2025 so far is less about urgency and more about precision. With hiring slowing, now’s the time to fine-tune talent strategies:
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Double down on employee retention and internal mobility
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Invest in reskilling and upskilling
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Strengthen employer brand and candidate experience—especially in competitive sectors
For job seekers:
It’s still a solid market, but expectations should be realistic. The easy hiring days of 2021–2022 are gone. What matters now:
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Being clear on your value and impact
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Building connections with recruiters, mentors, and professional networks
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Staying adaptable as employer needs shift
The Bottom Line: What Minnesota’s Mid-Year Employment Update Means Moving Forward
Minnesota’s labor market remains fundamentally healthy at mid-year, but growth is no longer automatic. The first half of 2025 was a test in resilience. The second half will be a test in strategy.
With national hiring trends cooling and employer sentiment shifting, now is the time for businesses and professionals alike to double down on workforce planning, flexibility, and long-term value creation.
