Traditional indicators describe a Minnesota labor market that’s continuing to cool relative to the hot conditions of 2022 and 2023. Similarly, some statistics tracking household financial stress have worsened in recent years. Community contacts paint a starker picture. What can data points like these tell us about the experiences of low-income households in today’s economy?
The Federal Reserve Bank of Minneapolis researches economic conditions within the Ninth Federal Reserve District and beyond to inform community leaders, practitioners, and policymakers. The work is part of our mission to pursue a growing economy and stable financial system that work for all of us. Understanding how changing labor markets and shifting prices impact lower-income households is crucial to that mission and is a focus of our work in the Minneapolis Fed’s Community Development and Engagement division.
For the first time in a long time, Minnesota’s labor market falls behind
The unemployment rate in Minnesota has grown to a seasonally adjusted 4.4 percent, as shown in Figure 1—a rate not seen since 2014, outside of the peak years of the COVID-19 pandemic in 2020–2021. In 2026, for the first time since 2007, Minnesota’s unemployment rate is higher than the national rate. Numbers of unemployment insurance claims, meanwhile, remain low by historical standards. This suggests that the increase in the unemployment rate may be coming from a slowdown in hiring rather than an increase in the number of people who have been laid off.
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Interviews suggest that labor market conditions for low- and moderate-income communities could be weaker than we see in the headline data. In late 2025 and through the spring of 2026, we talked to leaders at more than 25 organizations that help people find and keep jobs. Many said they felt their lower-income working clients had job stability. Reports on lower-income job seekerswere more pessimistic
“I’m a glass-half-full eternal optimist. But 2025 has been a wild year. Our participants are hurting. There’s more fear about staying afloat than we’ve ever seen.”
—A nonprofit executive
Nearly every interviewee told us things were harder for lower-income job seekers than they were in 2024. There’s a shrinking number of entry-level and low-wage jobs, they said, as employers cut back such posts for reasons ranging from adoption of artificial intelligence to caution over general economic uncertainty
“Businesses are very engaged with us but have stepped back in terms of providing entry-level positions that allow new hires to build experience,” explained one rural interviewee. “We used to see 40 to 50 opportunities that provided on-the-job training per year. Now we see hardly any.”
Some have observed an increase in competition for such openings by higher-skilled job seekers. Community contacts told us that workers across the wage spectrum were getting increasingly desperate
“I’m a glass-half-full eternal optimist,” one nonprofit executive told us. “But 2025 has been a wild year. Our participants are hurting. There’s more fear about staying afloat than we’ve ever seen.”
Policy supports fade and income growth slows
Average hourly earningsdeclined from $39.83 an hour in July 2025, when they hit their non-inflation-adjusted peak, to $38.66 an hour in June 2026. Adjusted for inflation, June 2026 real earnings are near 2018 levels
Average monthly SNAP benefits declined from $230 in 2023 to $188 in 2025, and reduced health insurance subsidies led to higher monthly premiums for many households.
Households’ overall economic resources aren’t just determined by their wages. Tax and social-safety-net policies also play a role. In the early days of the COVID-19 pandemic, federal and state governments sent historic levels of cash benefits to families across the income spectrum. These included increases to unemployment insurance, Supplemental Nutrition Assistance Program (SNAP) payments, and refundable tax credits. More people were also made eligible for many of these programs and tax credits.
These temporary increases in cash transfers were brief, ending between 2021 and 2023. More recently, federal policy has trended toward decreased benefit levels and narrowed eligibility for safety-net programs. For example, average monthly SNAP benefits declined from $230 in 2023 to $188 in 2025, and reduced health insurance subsidies led to higher monthly premiums for many households
The U.S. Census Bureau’s Current Population Survey provides estimates of households’ total income after taxes. Reflecting federal tax-policy changes and slowed wage growth, the estimates indicate many households had less inflation-adjusted, post-tax income to spend in 2024 than they did in 2020. The Congressional Budget Office estimated that tax and safety net changes implemented recently could decrease the resources available to lower-income households, while increasing them for households above the fortieth income percentile.
Inflation’s unequal impact
Changes in hiring, wages, and public policy have accompanied a period when inflation has been higher than the Federal Reserve’s 2 percent target. Inflation was 3.5 percent year-over-year in June 2026, as measured by the Consumer Price Index. While this commonly used measure published by the Bureau of Labor Statistics (BLS) tells us how prices have increased over time, it doesn’t tell us how the impact of price increases varies across income groups
“I supposedly make a good living. I’m making almost $50,000 before taxes, and I’m still living on food giveaways.”
—A focus group participant
At one point in time, the BLS put out a measure that accounts for differences in how households spend their money across different income levels. Using this measure, between January 2005 and June 2023 the cumulative impact of inflation on the lowest-income households’ spending power was 11 percentage points greater than it was for the highest-income households
Since 2022, we’ve met periodically with focus groups made up of people from low- to moderate-income households and asked them about price changes, the labor market, and other economic conditions in the Ninth Federal Reserve District. In these household focus groups, we’ve heard many individual stories that reflect the broader data. The price of necessities like food and housing is nearly always the first thing people mention when we ask about their biggest economic concerns
These concerns are often tied to a perceived disconnect between the wages that available jobs pay and the cost of basic necessities. “I supposedly make a good living,” one single mother of two in a small city told us. “I’m making almost $50,000 before taxes, and I’m still living on food giveaways.” The number of visits to food shelves in Minnesota more than doubled from 2021 to 2025
Separately, in our interviews with our workforce development contacts, we ask what reften tell us that flexible re plan for a cell phone, can have a big impact. According to some interviewees, requests for these reent years
“Before, we used our flexible funds to help people get interview clothes,” explained one program manager in a rural area. “Now we’re paying those people’s rents. It’s a different focus—people are struggling more with basic survival.”
Loan delinquencies rise
When we started our focus group discussions in 2022, most participants said they were experiencing financial strains of the early pandemic era. But we also occasionally heard stories from people who’d leveraged pandemic aid to build their savings or pay off debt. By contrast, in our most recent focus groups, held in August 2025, when we asked people whether they’d saved any money over the past year, several of the groups erupted in laughter
“I try to save, but in reality there’s always a bill that needs paying,” one working mother told us after the laughter in her group died down. “You can’t even save five dollars. It’s like the universe says, ‘Oh, she’s trying to get better, let me go and do something over here.’ You turn around and the car needs to be filled up, your kid goes through a growth spurt and needs new clothes.”
“I try to save, but in reality there’s always a bill that needs paying. You can’t even save five dollars.”
—A focus group participant
In the absence of savings, people may turn to credit to make ends meet. The level of debt Minnesotans hold right now is roughly consistent with pre-pandemic levels. For example, in Minnesota’s lowest-income communities, median credit card debt after adjusting for inflation was $1,521 in the fourth quarter of 2019 and $1,145 in the first quarter of 2026
However, the share of credit accounts that are severely delinquent (that is, 90 days or more past due), which dipped during the early years of the pandemic, is now higher than it was in pre-pandemic times. As shown in Figure 2, in the fourth quarter of 2019, 7.7 percent of Minnesota borrowers had at least one severely delinquent loan (excluding student loans).* In the first quarter of 2026, that number was 9.2 percent. For Minnesota borrowers residing in low- to moderate-income census tracts, severe delinquency rates were higher to begin with and had larger increases. In the fourth quarter of 2019, these rates were 15.6 and 9.6 percent, respectively. In the first quarter of 2026, they were 18.0 and 11.6 percent.
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Share of severely delinquent loan holders by income level in Minnesota
Percent of borrowers with at least one loan that is 90+ days past due, in collections, or severely derogatory
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Note: Authors’ calculations are based on a nationally representative 5 percent random sample of all individuals with a Social Security Number and a credit report. Severely delinquent loans are tradelines 90+ days past due, in collections, or severely derogatory (including repossession, charge-off, or foreclosure). All loan types includes auto finance, auto bank, credit card, consumer finance, first mortgage, home equity (installment and revolving), retail, and other loans. Student loans are excluded. Low- and moderate-income refers to borrowers residing in census tracts where the median family income (MFI) is less than 80 percent of the MFI in the associated metropolitan statistical area (MSA), metropolitan division (MD), or non-MSA counties in the state, as determined using 2015 Federal Financial Institutions Examination Council (FFIEC) MSA/MD median family income estimates and 2015 American Community Survey 5-Year Estimates of median family income.
Sources: FRBNY Consumer Credit Panel/Equifax, American Community Survey 5-Year Estimate Tables, and the FFIEC.
The price of borrowing has also increased over time, with important ramifications for people who carry a debt balance month to month. For example, from the third quarter of 2012 to the first quarter of 2022, the average annual percentage rate (APR) for a credit card fluctuated between a low of 16.7 percent and a high of 20.4 percent. Rates then began to increase, and by the first quarter of 2026 the average APR was 24.0 percent. At a recent Federal Reserve Bank of Richmond event, a senior economist from Wells Fargo noted that when compared to disposable income, households’ interest costs for non-mortgage debt payments across the country are higher than at “any point since the peak of the financial crisis.”
Early signs of distress in housing data
If we single out mortgage debt in Figure 2 above, we see that severe delinquencies among mortgagors were on the decline before the pandemic. But home loans have since followed a similar trajectory to auto loans and credit card debt. The share of severely delinquent mortgagors in Minnesota reached a low of 0.3 percent in each quarter of 2022. It more than doubled to 0.7 percent in the first quarter of 2026, with even larger levels of increase in low- and moderate-income census tracts. Some of the most recent increases could be a result of programmatic and reporting changes for mortgages insured by the Federal Housing Administration. Today’s overall rate of severely delinquent mortgages remains well below the 4.3 percent seen nationally in the first quarter of 2009, at the height of the Great Recession, but it still reflects a noteworthy increase.
Mortgage delinquencies aren’t the only measures of housing-related financial distress. Eviction rates can reflect stress in the rental market. A statewide moratorium put evictions on hold for most renters in Minnesota from March 2020 through June 2022. Evictions quickly rose in late 2021 and 2022 and were elevated for much of 2023 as property owners and the courts worked through a backlog created by the pause. Statewide, evictions declined in 2024, then surpassed 2023 levels in 2025. Relative to 2025, evictions in the first six months of 2026 were 3.6 percent higher in the seven-county Twin Cities area and 4.7 percent lower in Greater Minnesota.
Data on electric and gas utility payments, meanwhile, show that the share of accounts overdue in the three months ending on May 31, 2026, was similar to pre-pandemic levels, as Figure 3 shows. Compared to pre-pandemic levels, the residential aggregate arrears (amounts overdue) have increased and have remained steadily elevated since 2021. However, the past few years have seen several spikes in utility-disconnection rates. Increased shutoffs may be explained by policy changes that made it procedurally easier for energy providers to disconnect their customers.
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Lower-income household finances are not static
In our interviews with them over the past several years, community contacts have consistently described worsening conditions for their lower-income clients or neighbors
“I’m seeing a lot of the same warning signs now that we saw in 2008,” one executive working in a tribal government told us earlier this year. “We’re seeing increased demand for all kinds of aid—even for burial assistance for loved ones. People just aren’t making enough money to live comfortably anymore and that’s the bottom line.” Such struggles in Minnesota reflect the results from at least one national survey
“We’re seeing increased demand for all kinds of aid—even for burial assistance for loved ones. People just aren’t making enough money to live comfortably anymore and that’s the bottom line.”
—A tribal government executive
In its annual Survey of Household Economics and Decisionmaking, the Board of Governors of the Federal Reserve System asks a nationally representative sample about their financial circumstances. One question asks people how they feel about their current economic situation compared to the previous year. In 2019, 14 percent of respondents felt worse off. By 2022, the share of people who felt worse off had increased to 35 percent. The share declined to 28 percent in 2025—still twice the level of pre-pandemic times. For people with a high school education or less, who tend to earn less money than people with post-secondary educations, the share only declined one percentage point between 2022 and 2025, from 40 to 39 percent.
Comments from our focus groups underscore that price and income changes have real ramifications for people’s overall well-being. One mother told us she’d had to cancel her child’s third birthday party because she couldn’t afford a cake. Several people told us about similarly tough decisions
“The unknown expenses are what worry me,” one person told us. “My aunt and uncle passed away recently. I’m trying to figure out, can I even afford to travel for their funerals to be with my family?”
Monitoring economic conditions in lower-income communities
Over the course of the next few months, staff at the Minneapolis Fed will reconvene our household focus groups, continue to meet with other community contacts, and revisit data on labor markets and household finances in our district. We’ll continue to share what we see in the data and what we hear from the communities we serve. It’s all part of the Minneapolis Fed’s mission to pursue a growing economy and stable financial system that work for all of us
Endnote
* We are not including student loans in our analysis because recent policy changes to pandemic-related pauses on student loan payments and delinquency reporting skew overall trends
