Unemployment rate too low?
Colorado’s jobless numbers enter uncharted waters.
Colorado’s unemployment rate crossed into uncharted waters in April, dropping to a record-low 2.3 percent, a mark visited only four other times by any state in recent U.S. history.
The rate is so low, it is acting like an anchor on the state’s economy, leaving thousands of jobs unfilled and hurting the ability of businesses to meet customer demands, economists warned.
“This is saying that Colorado has one of the most inefficient economies in the country. Colorado companies cannot find workers, much less qualified workers,” said Gary Horvath, a Broomfield economist.
Finding the service worse when you go out to eat or having a hard time hiring someone to do that home remodeling project? Blame the low unemployment rate, Horvath said.
Colorado’s annual pace of job growth ran at 1.8 percent in April, still ahead of the U.S. job growth rate
of 1.6 percent. But coming out of the recession, job growth topped 3 percent and has run above 2 percent in recent years.
And unemployment is falling sharply despite a slow start to hiring this year. Colorado added 45,700 nonfarm jobs on a seasonally adjusted basis the past year, but only 6,400 the past three months. April payroll counts are up 1,800 from March, but revisions show March down by about 300 jobs from February.
“When we get to unemployment rates this low, you can’t sustain the pace of job growth,” said Ryan Gedney, a labor economist with the Colorado Department of Labor and Employment.
Gedney estimates Colorado has about 60,000 unfilled jobs, nearly one each for the 68,300 unemployed people counted in the state last month. Coming out of the most recent recession, there were six or seven unemployed workers chasing every opening.
Leisure and hospitality, a sector that covers hotels, restaurants and tourism related jobs, contributed the most new jobs in April and over the past year.
Over the past three months, the state has added 6,400 jobs. Restaurants alone have added 5,400 net new jobs in that period. But those jobs pay below the state average, keeping a cap on wage gains.
Another contributor to job gains is the other services sector, a catchall category that covers repair providers such as mechanics, as well as dry cleaners and other laundry services. It added 1,200 jobs in April.
Employers in retail, trans- portation and utilities were also in hiring mode, adding 1,400 jobs last month.
Several sectors lost jobs on a seasonally adjusted basis last month, led by education and health services; construction; government; mining and financial activities.
Payroll counts come from a survey of employers, while the number of people who are employed or unemployed comes from a smaller household survey.
Someone is considered unemployed if they don’t have a job, but have actively looked for work in the past month. By that definition, the number of unemployed in Colorado fell from 75,700 in March to 68,300 in April, an unusually large drop. A year earlier, there were 96,400 unemployed people in the state labor force.
The number of people active in the labor force rose by 12,100 over the month to 2,945,300 and the number of people reporting themselves as employed increased by 19,500 from March to 2,876,900. Self employment may explain why more people are describing themselves as employed given the pace of hiring.
In another sign of Colorado’s tightening labor market, the average hours of work a week for all nonfarm employees in the private sector rose from 33.2 hours to 33.6 percent and the average hourly pay rose from $27.42 to $27.72.
Nationally, the unemployment rate was 4.4 percent in April, down from 4.5 percent in March. Colorado, for the second consecutive month, had the lowest unemployment rate of any U.S. state, according to the U.S. Bureau of Labor Statistics. The next closest were Hawaii and North Dakota at 2.7 percent.
To understand how unusually low Colorado’s unemployment rate is, only four other states have reached unemployment rates of 2.3 percent in records going back to 1976.
New Hampshire had a 12month run in 1987 and 1988 with unemployment rates at 2.2 percent and 2.3 percent. Nebraska had a sevenmonth stretch at 2.3 percent in 1990.
Connecticut had a sixmonth run at 2.3 percent and 2.2 percent in 2000 during the height of the tech and telecom boom. Virginia reached a 2.3 percent rate in May 2000 and got as low as 2.1 percent in October and November of that year.
By contrast, more than a dozen states have never seen their seasonally adjusted unemployment rates get below 4 percent in the past four decades.
Colorado’s unemployment rate is so low, Gedney questions whether it will stand up to revision. But even if it is revised higher, he said the state’s labor market is super-tight.