The unemployment rate in the Buffalo Niagara region dropped to 5.7 percent in September – just the second time in the last six years that jobless levels locally have dipped below the 6 percent mark – as a surging tide of workers dropped out of the labor pool.
The drop in the unemployment rate comes as the region’s job market is being shaped by two forces helping to reduce jobless levels – a slow pickup in hiring, coupled with a 3 percent decline in the labor pool as older workers retire and others become discouraged and stop looking for jobs.
But local economists were surprised by the size of the decline in the labor pool over the last year, raising questions about whether the September drop in unemployment, as reported by the state Labor Department on Tuesday, might be a statistical blip.
“The drop in the labor pool in September is pretty stunning, and it’s accelerating,” said Gary D. Keith, M&T Bank’s regional economist in Buffalo. “Where did these folks go? I know there’s retirement and things, but I’m concerned that the numbers don’t jibe with the employment survey,” which shows a modest uptick in job growth.
John Slenker, the Labor Department’s regional economist in Buffalo, said the big drop in the labor pool during September could have been accentuated by the timing of students giving up their summer jobs and returning to school. He cautioned against reading too much into a single month’s numbers, which can be subject to seasonal swings and are subject to revision.
“One month does not a trend make,” he said.
Instead, he said a better way to gauge the health of the local job market is to look at longer-term trends, and those show a steady improvement, both in slowly strengthening job growth and in steadily declining unemployment.
“The overall picture has been one of continuous improvement.”
Two major trends are shaping the local labor market. First, the region is adding jobs at a modest pace, albeit one that lags well behind the growth rates both statewide and nationally. Buffalo Niagara had 2,600 more jobs in September than it did in September 2013 – a 0.5 percent annual increase that was just a quarter of the U.S. job-growth rate of 2 percent.
Second, the local labor market is shrinking, as older workers retire and drop out of the labor pool. In addition, economists note that fewer Americans are participating in the labor force, possibly because they have grown discouraged with their job hunts and stopped looking for work, pushing labor participation rates to their lowest levels in 40 years. The local labor force shrunk by 3 percent in the last year, with 17,100 workers dropping out of the job market over the last 12 months.
Together, those two factors are shrinking the size of the local labor force, which helps push unemployment rates sharply lower as hiring picks up, even modestly.
The 5.7 percent unemployment rate in September was down from 7 percent in September 2013 and an even greater improvement from the 8 percent jobless rate of September 2012.
The September jobless rate was the lowest for any September since it stood at 5.7 percent in 2008, as the recession was beginning to take a toll on the local job market. Since then, the unemployment rate has dipped below 6 percent during only two months – October 2008 and April 2014.
The local labor force, which is 5 percent smaller than it was at its peak in September 2008, has lost 31,300 people in the last six years due to the combination of the aging population in Western New York and the nationwide trend toward lower participation in the labor market.
As the labor force shrinks, so has the number of people who are employed. The region had 8,600 fewer people who were employed during September 2014, down by 1.6 percent from last year. The number of people employed in Buffalo Niagara currently is at its lowest point in at least 24 years and has declined by 5.4 percent from its September 2008 peak, according to Labor Department data.
At the same time, far fewer local workers are unemployed. The number of unemployed workers plunged by 21 percent, or 8,500 people, during the last year. The number of unemployed people, which stands at its lowest point for any September since 2007, has plummeted by a third, or 16,000 people, since its recession high in September 2009.
The local unemployment rate, which is not adjusted for seasonal factors, was slightly higher than the statewide rate of 5.6 percent and the 5.5 percent jobless rate across upstate New York.
Jobless levels in Buffalo Niagara were tied with Syracuse for the eighth-highest among the state’s 14 major metropolitan areas. Below them, with higher unemployment rates, were Kingston, Utica, Binghamton, Elmira and New York City.