People leaving the work force drives down jobless rate

It's a bump in the road that may mean little on the journey toward economic recovery.

State and local jobless levels fell significantly in February, with unemployment dipping to 12.3 percent in Nevada and 12.2 percent in the Las Vegas Valley, the state Department of Education, Training and Rehabilitation said Friday. That was down from 12.7 percent statewide and 13 percent locally in January.

But declines came from a shrinking workforce, not a growing jobs base. Nearly 7,000 people left the state's labor pool in February, as the local workforce fell by more than 2,000. Employment statewide shrank by a seasonally adjusted 400 jobs.

Still, experts say not to fret.

That workforce contraction could even out as new data are added in coming months, and so many other indicators are pointing up that it's tough to dismiss broader moves toward recovery. Even the latest jobless decline, despite factors behind it, is somewhat positive, said Bill Anderson, the employment department's chief economist. The newest numbers make for six straight months of unemployment declines, including job growth-driven drops in late 2011.

"While some softness is evident in the February report, which will merit monitoring in the months ahead, it is important to keep in mind that it comes on the heels of several months of more encouraging news," Anderson said.

Plus, that workforce number could change in late 2012 or early 2013.

Start with how public agencies tabulate the figure. State employment departments use numbers from the U.S. Department of Labor, which gathers jobs data through surveys of households and businesses. Throw in first-time unemployment benefits claims and plug it all into statistical models for national and state estimates, and you have your workforce participation estimates. But they're just that: estimates. They can change as the federal government revises figures late in the year. That's what happened earlier in March, when more complete numbers showed a stable Nevada workforce, and not the declining one that statistics estimated all through 2011.

"It's possible, given the model, that survey results this month could be more of an outlier," Anderson said.

Also, job creation can be underreported until revisions months later because small and startup businesses are underrepresented in federal phone surveys, noted Steve Brown, director of the Center for Business and Economic Research at the University of Nevada, Las Vegas.

None of that's to say February's report wasn't at all worrisome.

Jeremy Aguero, a principal in local research firm Applied Analysis, called the findings "a step back," and said they reflect a slowdown in growth trends of the last six months.

Only mining and leisure and hospitality added jobs in February. Nevada's construction sector posted its 64th straight month of job losses, and manufacturing employment hit lows not seen since the mid-1990s. The financial sector and business and professional services made cuts, too. Employment declines in education and health services were especially disconcerting, Aguero said, because that was the only category to expand steadily through the recession.

Aguero traced the slowdown in hiring to an "overcorrection" that meant bigger job gains in late 2011.

"The economy was showing some improvement, and people who needed to add jobs did," Aguero said. "The growth we're seeing now is predicated more on increased demand, and that has been somewhat modest. We haven't seen substantial increases in incomes, and consumers are still dealing with a host of issues, not the least of which is debt, household and otherwise."

In the long run, though, experts agree February's numbers won't hold back the economy's steady drive toward revival.

"Is our economy all of a sudden shifting into reverse? No, because the tourism industry is showing fairly substantial strength," Aguero said. "That industry represents 20 percent of our direct employment (in Las Vegas), and nearly 40 percent of indirect employment. That will continue to have positive impacts on the balance of the economy."

Just look at gains in other indicators, Anderson said. State taxable sales have risen 19 months in a row. Gaming win, though volatile, is trending up. Las Vegas enjoyed its second-best year ever in 2011 for visitor volumes. And despite February's weakness, the state had 14,000 more jobs in the first two months of 2012 than in the same period in 2011.

"When you put the whole picture together, we are looking at an economy and labor market slowly on the mend, but not with enough underlying strength for uninterrupted improvement every month," Anderson said. "There are always monthly fluctuations, especially early in a recovery, but the overall trend is one of moderate improvement."

The U.S. jobless rate averaged 8.3 percent in February. Nevada has led the nation in unemployment since May 2010.

Contact reporter Jennifer Robison at
jrobison@reviewjournal.com or 702-380-4512.
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