Unemployment falls to 7.4%

July numbers also show a record 97,500 drop in labor force

For three months the number of unemployed workers in Colorado has remained stubbornly above 300,000, up from only 80,300 before the pandemic hit. When the U.S. unemployment rate fell in June, it actually rose in Colorado, raising concerns something was broken in the state economy.

July’s job report provided some answers: The number of unemployed workers dropped by 108,000, an unprecedented decline, taking the unemployment rate down with it.

Colorado’s seasonally adjusted unemployment rate fell sharply in July to 7.4% from a revised 10.6% in June, which tied with Illinois for the third-biggest decline of any state last month, according to a report Friday from the Colorado Department of Labor and Employment.

“I was pleasantly surprised by the drop in the unemployment rate, especially compared to the Great Recession,” said Broomfield economist Gary Horvath.

From a low of 2.5% in February, the state’s unemployment surged to a high of 12.2% in April, with 373,600 people out of work, mostly because of the pandemic. The number of unemployed workers is down to 228,300. That’s still elevated, but after Colorado unemployment peaked at 8.9% in September 2010 during the Great Recession, it took until January 2013 for it to fall back to 7.4%, July’s rate, Horvath said.

Colorado covered that ground in three months, although it is not entirely clear what happened in July.

To be considered unemployed, someone must have been looking for work actively in the past month. If they weren’t, they are viewed as detached from the labor force. Two out of three adults in Colorado are working or actively looking for work, similar to the rate seen in May, even with the big drop in unemployment. That would suggest more people are on the sidelines, not a good thing.

A survey of Colorado households found that the number of individuals describing themselves as employed in July rose by 11,100 to 2.85 million. But 108,600 fewer respondents met the definition of unemployed in July than in June. The state’s labor force actually decreased by 97,500 in July to 3.08 million, a decline unmatched in records going back nearly 30 years.

That raises the question of where did all those people go? One explanation is that unemployed workers gave up looking for a job, although they risked forfeiting their unemployment benefits if they did so, including the extra $600 a week in federal benefits that were still available in mid-July when the survey was taken.

Ryan Gedney, a senior labor economist with CDLE, offered other possible explanations on a news call Friday morning. Older workers may be retiring in larger numbers and parents may be choosing to stay at home to look after children. Graduates might be delaying their job searches.

And statistical volatility can be an issue in the monthly survey of households. The state’s labor force surged by 108,000 in June, only to give much of that back in July. Gedney suggests June’s report might be the aberration, not July. June probably should have shown a decline in unemployment, and July captured it.

“I’m not sure we saw people who were unemployed that actively gave up because they were discouraged. We will see volatility in the monthly numbers. You have to take each month at a time,” Gedney said.

For the state’s labor force to suffer a decline month over month is not that common and typically associated with a recession. For the labor force to decline while the number of unemployed also declines is really an outlier. Prior to July, it has happened only three times in Colorado in records going back to 1991.

Colorado’s 3.1% monthly decline in the labor force combined with a 30.2% decline in the number of unemployed in July is one for the record books.

The counties with the highest unemployment rates in July were Gilpin, 12%; Summit, 10.1%; Huerfano, 9.9%; and Pitkin and Eagle, both at 9.4%. Among the state’s major metro areas, Denver-Aurora-Lakewood was at a 7.8% unemployment rate in July, Boulder at 6.6%, and Colorado Springs and Grand Junction both at 6.9%.

County and metro rates are not seasonally adjusted and compare to Colorado’s unadjusted rate of 7.4%.

Horvath notes that the July report showed a slowing in hiring, which he called disappointing but not unexpected. Colorado private-sector employers added 82,800 jobs in May, 62,400 in June, but only 23,400 in July.

“We seemed to have reached a logjam in industries such as tourism and travel, where people are not comfortable traveling. In many industries, businesses, such as restaurants and doctors, are being forced to operate under business models that will be difficult to sustain. Costs are higher and opportunities to generate revenue are restricted,” he said.

A separate survey of employers in Colorado found they added 6,200 nonfarm payroll jobs in July from June, with a gain of 23,400 jobs in the private sector and a loss of 17,200 jobs in government. Gedney said the government job losses mostly were concentrated in education and reflected a shift of when the school year ended and the timing of employment.

Since May, the state has gained back 134,200 of the 342,000 nonfarm jobs lost between February and April, which represents a recovery rate of 39.2%. Nationally, the recovery rate is 41.9%.

July’s biggest job gains came in sectors bouncing back from the shutdown. Leisure and hospitality gained 11,800 jobs on the month; trade, transportation and utilities gained 6,800; professional and business services gained 2,200; education and health services gained 1,200 and other services, which includes jobs such as hairstylist and nail salon worker, gained 1,200 jobs.

Over the past year, nonfarm payroll jobs remain down 186,200, a 6.7% decline, with the private sector losing 146,900 jobs and the public sector down 39,300 jobs. Leisure and hospitality remain down 77,200 jobs from July 2019. Trade, transportation, and utilities employers have 23,600 fewer payroll positions, while education and health services job counts are down 15,100.

Between June and July, the U.S. unemployment rate declined nine-tenths of a percentage point to 10.2%. Colorado’s rebound last month was so strong it moved the state from the 35th-lowest unemployment rate in June to 15th-lowest in July, Gedney said.