State’s unemployment rate drops; valley’s rate up slightly

Nevada's labor market ended 2011 on the rise, though a glut of unemployed, underemployed and discouraged workers continues to cast a shadow over the state's recovery.

A Monday report from the state Department of Employment, Training and Rehabilitation showed that Nevada's unemployment rate fell from 13 percent in November to 12.6 percent in December, though the Las Vegas rate ticked up from 12.4 percent to 12.7 percent in the same period (the department doesn't seasonally adjust local rates, so state and city trends can differ).

The Silver State also posted its first calendar-year gain in jobs since 2007, with 2,100 new net positions in 2011. What's more, 2011's unemployment rate averaged 13.1 percent, well below 2010's 14.9 percent. That was the first year-over-year decline in the average rate since 2006. Local joblessness also fell, averaging 13.3 percent in 2011, compared with 15.2 percent in 2010.

"It appears we've turned a corner and are on a slightly upward trajectory," said Bill Anderson, chief economist for the employment department.

Yet, Anderson called the report only "fairly encouraging."

Steve Brown, director of the Center for Business and Economic Research at the University of Nevada, Las Vegas, pointed to widespread December job losses in industries ranging from retail to construction, and said the local economy was moving "sideways" -- a direction that

he called below expectations for recovery.

And analysts with Union Gaming Group in Las Vegas sounded a cautious note. The research company said in a Monday note to investors that the drop in unemployment was encouraging, though analysts traced most of the improvement back to a declining workforce. Despite a 4.4 percent increase in local visitor volumes through November and a 5.2 percent gain in gaming revenue, the job picture in Las Vegas "continues to be lackluster," the report said.

That's because there's an offset for each improvement in the report.

First, the unemployment rate is dropping partly because the labor force continues to shrink, though certainly not at the rate it contracted in early 2011. In the first half of the year, the labor force dwindled by 2 percent to 3 percent year over year as discouraged workers quit looking for jobs here. That year-over-year shrinkage rate fell to around 1 percent in the second half of 2011. From June to December, the state's labor force actually added about 8,000 people. The fact that unemployment still dropped toward year's end signals that job growth has replaced a waning labor force as the bigger factor in falling joblessness.

"What paved the way for those (unemployment) declines in November and December was modest job growth coupled with a stable labor force," Anderson said.

Calling the year's job growth "modest" puts it mildly. The 2,100-job gain in 2011 was a fraction of the 60,000-job average annual growth pre-recession.

Education and health services, leisure and hospitality, mining and professional and business services all added jobs in the year, but employment declines in construction, manufacturing, financial activities and government canceled out many of those gains. The employment department also recorded an unexpectedly steep decline of 9,800 jobs from November to December. Anderson said his department will look in coming months at why so many jobs disappeared in the month, but it looks like losses might have come at least partly from retail, where hiring appears to have flattened in the last month of 2011.

Chasing the state's weak annual job growth are vast numbers of jobless Nevadans, both counted and uncounted.

Start with the counted: Nearly 163,000 Nevadans, including 119,500 Las Vegans, were out of work and looking for jobs in December. That number nearly doubles if you throw in discouraged workers who are no longer seeking jobs, and underemployed part-timers who'd prefer full-time work. The federal Bureau of Labor Statistics is scheduled to release updated figures in the next two weeks, but through the third quarter, the state averaged around 23 percent unemployment among actively looking, discouraged and underemployed workers.

Nor is there evidence those who've given up job hunts are leaving.

The state doesn't track whether workers are abandoning Nevada.

"But looking at the total picture, including our labor force numbers and population estimates from the state demographer's office, I think it's fair to say the broadly defined population picture has stabilized," Anderson said.

And with weak nationwide employment growth, particularly in construction, there's little reason to believe Nevadans are fleeing, Brown said.

Still, despite its employment malaise, the state is finally posting job growth after years of declines, Anderson said.

Plus, unemployment figures come not from counting people on unemployment benefits, but from household and business surveys, Brown said. That's important because job seekers and employers report a local lull every December in job-hunting and hiring -- a lull that isn't accounted for because local data are not seasonally adjusted. If economists could seasonally adjust Las Vegas jobs numbers, the city would likely have shown a drop in unemployment, as did the state, Brown said.

"The fact that the unemployment rate ticked up in December isn't something to actually be concerned about. It doesn't reflect the underlying strength of the economy," he said.

It's also normal for jobs numbers to bounce around as recovery begins.

"I think the overall attitude here in the valley is more optimistic, but it's just not going to show up in employment data every month," Brown said.

Nevada's December jobless rate remained well above the national rate of 8.5 percent. The Silver State has led the nation in unemployment since May 2010.