Columbus unemployment reaches new modern low

Driving the news: The U.S. Bureau of Labor Statistics recently released its latest preliminary employment data, measuring the area's workforce.

By the numbers: May's 2.7% unemployment rate, if confirmed, would be the lowest since at least 1990, per available data.

• That's down from 4.2% last May.

The big picture: Of all U.S. metro areas with at least 1 million people, Columbus' May unemployment rate was lower than all but Honolulu's.

• We were tied for second lowest with Nashville.
• Cleveland and Cincinnati were both at 3.1%.

Reality check: Unemployment has declined, but so has our workforce.

• May's count of about 1.17 million workers is down over 17,000 from the previous year.
• That's a trend consistent with Ohio's dwindling workforce.

Between the lines: The construction industry is carrying Columbus' employment numbers.

• Nearly every industry in Columbus has seen modest year-over-year employment changes except construction, which has grown 10.6% since last June.
• Nearly 69,000 are employed in construction, a number that has increased every June since 2010, aside from the 2020 pandemic year.

What they're saying: In statements to Axios, Mayor Andrew Ginther and Council member Nick Bankston said low unemployment and growth in construction are positive signs of investment in Columbus.

• "Most important is to continue to ensure that our success as a community is shared equitably, and every neighbor has an opportunity to benefit from our continued success," Ginther wrote.
• One Columbus president Jonas Peterson tells Axios the data "reflects what we're seeing across the Columbus region," saying construction activity "shows businesses are investing in our future."

What's next: Construction jobs are likely to continue increasing.

• Ginther is pushing the region to build 200,000 housing units by 2035.
• Although they're meeting resistance, data center construction has been a massive — if short-term — job creator statewide.

The downside of low unemployment

It's good that most Columbus residents have jobs, but an unemployment rate this low is "starting to indicate a very tight labor market," OSU Fisher College of Business professor Ben Campbell tells Axios.

Threat level: "Zero unemployment sounds good in theory, but that's actually a big problem for the economy," he says.

• "We need to have some people be unemployed in order to make it easy for employers to find new people and hire them."
• Campbell says economists don't have a hard line for where "bad" low unemployment begins, but it's typically somewhere between 2% and 4%.

How it works: Two factors typically contribute to low unemployment rates: available jobs growing faster than available workers, or people giving up job searches and opting out of the labor market.

• Campbell suspects Columbus is seeing "a bit of both."

What he's watching: Basic economics suggests employers will respond either by paying higher wages (reducing profit or passing expenses along to consumers) or by shifting away from human labor.

State of play: The latter is an alarming possibility.

• "AI is coming quickly and threatening a lot of jobs," Campbell says.
• "If unemployment is low, that really increases the incentive for employers to invest more in AI and replace jobs that would have existed with AI."

The bottom line: This batch of data is neither a great success nor an apocalyptic indicator — but it could be a notable inflection point.

• What comes next will determine whether it's a good or bad sign.
• "To an economist, the answer to everything is, 'It depends.'"