The Buffalo Niagara unemployment rate keeps dropping – and it’s getting close to where it was before the pandemic hit.
The region’s jobless rate dropped to 4.2% during November, well down from 6.5% a year ago and within range of the 3.8% unemployment rate in November 2019, before the pandemic began.
But the unemployment rate’s decline masks some underlying weaknesses within the region’s job market.
While unemployment is low, it’s mostly because fewer people are working or actively looking for jobs, not because more workers are employed or the region has expanded its jobs base.
The region’s workforce, which normally would grow at a time when jobs are plentiful and companies are hiring, is instead shrinking. The number of people holding jobs is down 2% from before the pandemic.
While help wanted signs are plentiful, the number of people who are actively looking for a job but can’t find one is down from last year’s elevated levels, but still is almost 9% above pre-pandemic norms.
“Kids are back in school,” said Timothy Glass, the State Labor Department’s regional economist in Buffalo. “I think people are starting to figure out child care to a certain extent.”
The tight job market, coupled with the steady increase in the minimum wage in recent years, has narrowed the gap between the lowest-paying jobs in the market and entry-level positions in manufacturing and construction that traditionally paid moderately higher wages.
Fast food jobs now command a $15 an hour minimum wage, and the minimum for all workers will rise to $13.20 at the end of the year. That squeezes other businesses, that could offer a comfortably higher wage of around $16 to $18 when the minimum wage was lower, but now the gap between that starting wage and the minimum is narrower.
That increases the competition for workers at the lower end of the wage scale.
The result is a job market where workers feel more confident than they have in years about quitting their jobs, potentially with the belief that they can find one that they like better or pays more.
Underlying it all is a pool of available workers across the Buffalo Niagara region that is smaller than it’s been in decades. Even before the pandemic, the supply of workers was shrinking as baby boomers headed into retirement. The pandemic hastened those departures, especially among older workers who are retiring early in larger numbers than before Covid.
“In a place like upstate New York or Buffalo, the supply side of the labor market was a big contributor even before the the pandemic hit,” said Jaison Abel, an economist at the Federal Reserve Bank of New York in Buffalo.
The local labor force has 2% fewer people than it did before the pandemic – and it’s 10% below what it was in 2008 – a loss of 58,000 workers. In the last two years alone, nearly 10,000 people have left the labor force.