Shrinking labor pool leads to LI's lowest unemployment rate on record 

Long Island's unemployment rate has hit a record low, and while that's good news for job seekers who can command higher wages, it's not good news for the region's overall economic health.

The unemployment rate fell last month to the lowest level in more than 30 years, but the historic decline is the result of a shrinking labor force rather than a booming economy.

The Island’s jobless rate fell to 2.6% in December, down from 3.5% in November and less than half the 5.8% rate recorded a year ago, state Labor Department data released Tuesday shows. The rate is the lowest since the state began tracking those figures in 1990.

"The unemployment rate can be somewhat misleading, but this is the first time I can remember where it’s been incredibly misleading," said John Rizzo, economist and professor at Stony Brook University.

Fewer workers in the market means that jobseekers should have more leverage in negotiating wages. On the other hand, it exasperates an existing labor shortage, which could have ramifications on further job creation and inflation rates, Rizzo said.

Upward pressure on wages "is going to have implications on inflation, which is already the highest it’s been in decades," he said. "A labor force that’s smaller than it’s been in a quarter century is certainly bad news for the labor shortage and inflation."

The region’s labor force — the sum of all employed Long Islanders and those out of work but looking for jobs — totaled 1,419,200 last month, down 35,700 people from December 2020.

Shital Patel, labor market analyst for the Labor Department’s Hicksville office, said the last time the Island’s jobless rate was even close to this low was in the late ‘90s.

"If you look at the number of jobs on Long Island, we have more jobs than we did back then," she said. "But the issue right now is that our labor force is the lowest it’s been since 1997. So, we have more jobs and the pool of people to fill those jobs is smaller."

Observers say a number of factors are causing tens of thousands of area residents to leave their jobs or stop looking for work, including lack of access to child care, continued concerns over omicron, and retirements — sometimes earlier than planned.

Intermittent school closures resulting in remote learning have prevented many parents — mostly women — from returning to the workforce, while access to affordable child care is hampering parents with younger children, Patel said.

Older workers, who make up a larger percentage of the Island’s workforce than in other parts of the state or country, may be retiring earlier than expected, also contributing to the shrinking labor pool.

"Many of these people who had a cushion in their retirement savings between record-high stock market values and real estate values have decided to retire, possibly earlier than they had planned to," Patel said.

With the pandemic entering its third year, even those who may not have a strong financial safety net may be choosing to retire early because of concerns over COVID, she said.