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TOM ROBERTSON: There have been a few large, high-profile factory layoffs in the Bemidji area. But the city's jobless rate soared because of smaller layoffs as well, where businesses cut jobs just one or two at a time. It wasn't news when Mike Mohler lost his job as a radio advertising salesman back in May of 2008. Since then, Mohler has filled out applications at close to 100 businesses. Sitting at his home computer, Mohler reads from his latest rejection letter.

MIKE MOHLER: "You were not selected. Good luck in future endeavors." And then the publisher signed off on it. And that's-- I've got a stack of those, [CHUCKLES] those kind of responses.

TOM ROBERTSON: Mohler is 56 years old. He and his wife have lost their health insurance. His unemployment benefits come to an end in December, unless there's an extension. Mohler says, despite a degree from Bemidji State University and years of sales experience, no one will hire him.

MIKE MOHLER: I grew up here. I have so many business contacts, and personal contacts. And I just can't crack the ice. I just can't get through to anybody. It's frustrating.

TOM ROBERTSON: Many of the area's small-scale layoffs have been in the construction industry, one of the state's hardest hit sectors. New home construction in the Bemidji area has withered to well less than half of what it was in 2006. Howie Zetah owns a mid-sized construction company that a few years ago employed close to 25 people. Zetah says now it's about half that.

HOWIE ZETAH: We're tightening our belt. I've had to lay some people off. I've got very good people, and it hurts to lay someone off. You're dealing with families here.

TOM ROBERTSON: In good times, Zetah's company would build half a dozen custom homes a year. Now, Zetah and other contractors are taking smaller jobs, like remodeling or even minor carpentry repair jobs, just to keep busy. Zetah says people are scared to spend money.

HOWIE ZETAH: I think people have the ability to spend money and to build and to do things that they've wanted to do. They're just unsure. And their confidence in our economy and where we're going to be a year from now isn't there.

TOM ROBERTSON: But there may be signs that's changing. Zetah just found out a home-building project that had been canceled is back on again. And while Zetah wonders if that's the start of a turnaround, other businesses are booming.

[BACKGROUND CHATTER]

At this neighborhood bar and grill on Bemidji's south side, waitress Laurie Thomas is making a lot more money in tips these days. Thomas says business has nearly doubled since oil pipeline workers started showing up.

LAURIE THOMAS: It has been a tremendous change. Once they came to town, it's just been packed here every night. And they'll buy rounds for everyone and not really worry about the money at all. [LAUGHS]

TOM ROBERTSON: Late this summer, Enbridge Energy began building a crude oil pipeline from Canada across Northern Minnesota to Superior, Wisconsin. The Bemidji area alone saw an influx of close to 800 well-paid pipeline workers. Some were hired locally, and some came from across the country.

The pipeliners have gobbled up rental housing and motel rooms. John Billingsley is a welder who came all the way from Texarkana, Arkansas. He says pipeline workers are buying everything from big-screen TVs to cookware.

JOHN BILLINGSLEY: Clothes, tires, automotive parts, just everything, beds, chairs, crock pots, skillets, you name it. I mean, they're buying everything.

TOM ROBERTSON: Pipeline workers will spend millions of dollars in the Bemidji area over the next eight to 10 months. And there's another project stimulating the local economy. The City of Bemidji is building a $33 million facility that includes a hockey arena for Bemidji State University. By winter, the project will put 250 people to work. Some of those workers say without it, they'd probably be unemployed.

Bemidji's jobless rate has fallen dramatically since it peaked in February. It's now down around 11%, but that's still way above normal. The problem is Bemidji's boom in commercial construction hasn't spread to other parts of the area's economy.

Northern Minnesota's important timber industry is still on its knees because of the bust in new home construction. Late last year, Ainsworth Lumber Company permanently shut down its plant in Bemidji and laid off 140 workers. That, in turn, put some loggers and haulers in the region out of business. Economists say the shutdown took $90 million out of the region's economy.

But it doesn't end there. Factories producing machine parts, electrical wiring, and drapery fabrics have cut hundreds of jobs, too. Even as the recession appears to be over, first-time claims for jobless benefits in September jumped 18% over the same period last year. The jobless rate in the overall Bemidji region is lower than in the city itself. But for both areas, unemployment remains well above average for this time of year.

In the eyes of Dave Hengel, the Bemidji area's economy is tenuous at best. Hengel heads economic development at the Headwaters Regional Development Commission in Bemidji.

DAVE HENGEL: I don't think the pain is done yet. I think there's still some businesses that are struggling. Is there a light at the end of the tunnel? I sure hope so, and I think so. But at this point, it's the most difficult economy I've been in in the 22 years I've been here.

TOM ROBERTSON: Some economic experts say this recession is likely to reshape the area's economy. The timber industry, for example, has been devastated. But some lumber mills survived by reducing costs and finding new niches for wood products. That includes a growing interest in tapping timber for green energy biofuels.

Another sign of that transformation is that unemployed workers are heading back to school. Post-secondary schools in Bemidji saw some of the highest enrollment increases in the state. Here at Northwest Technical College, enrollment jumped by nearly 17%. Those new students include people like 51-year-old Chris Kuzel. She was part of 100 layoffs last winter at a wiring manufacturer in Bemidji, where she worked for 15 years.

CHRIS KUZEL: When I got laid off, I had no education or anything to fall back on. So here I am, going back to school now to get that education that I should have gotten years ago.

TOM ROBERTSON: Kuzel qualifies for the state's dislocated worker program, which pays for up to two years of school. She's hoping to get into health care, one of the state's most stable industries. Kuzel is studying to be a pharmaceutical technician.

CHRIS KUZEL: It's hard. School is hard after being out for 30 years. It's been tough. I'm doing it because I have to, but it's not the easy way out.

It would be a lot easier going and taking a lesser paying job. And-- but I decided after 15 years I was going to come out of this with something to fall back on next time.

TOM ROBERTSON: The question now is whether there will be enough of a recovery to create jobs for Kuzel and others getting retrained. So far, the signs are mixed at best. Tom Robertson, Minnesota Public Radio News, Bemidji.