Iowa's unemployment rate in June returned to its pre-pandemic level for the first time since the sharp recession that followed the March 2020 lockdowns, another sign that the state's labor market is continuing to recover.

Led by hiring in restaurants and local governments, payrolls in the state increased  5,100 from May to June, according to the U.S. Bureau of Labor Statistics' monthly survey of employers released Thursday.

The strong showing dropped Iowa's unemployment rate to 2.6% from 2.7% in May. The rate is now back to where it stood in February 2020, weeks before government-enforced shutdowns.

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“Iowa’s continued unemployment rate decline is proof yet again that our state’s efforts to focus on reemployment are successful and that our state is resilient and strong,” Gov. Kim Reynolds said in a statement Thursday. “We’ve created an environment where employers want to hire and move past the challenges of the past two years, and where more employable Iowans are eagerly joining the workforce."

Despite the recovery in the unemployment rate, Iowa payrolls in June were still about 17,700 workers shy of their pre-pandemic level. The state's economic recovery has been slower than the nation's over the last two years. While the United States has recovered about 98% of lost jobs since April 2020, Iowa has recovered about 90%.

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Still, the June report captured an unusual month for Iowa's labor market, which grew faster than the nation's for just the eighth time in the last 26 months.

Restaurants led the way in June, with the accommodation and food services sector adding 4,500 jobs. Local governments, meanwhile, added 2,400 jobs.

Employers in the arts, entertainment and recreation sector offset some of that growth, cutting about 2,500 jobs from May to June.

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Ben Ayers, a senior economist at Nationwide Mutual Insurance Co., said Thursday that the jobs report for the country and Iowa both show that businesses are hiring even as investors expect an economic slowdown this year. With earnings at major companies decreasing and the Federal Reserve raising interest rates to slow inflation, the Standard & Poor's 500 Index has dropped 17% this year.

"If you're looking for any recession signs, you're not seeing them in your labor market data," Ayers said.

Unemployment remains at record lows, job openings at record highs

According to a household survey released Thursday, the number of unemployed Iowans dropped in June to 43,900 from 46,800 the month before. The drop brings the number of unemployed workers in the state down to a level not seen since April 2019, a little under a year before the pandemic.

The drop also comes as a record low number of Iowans are collecting unemployment benefits. Before this year, according to U.S. Department of Labor statistics that date to 1987, the state had never reported fewer than 8,000 workers receiving continuing unemployment benefits in a single week.

But starting at the beginning of May, the state reported fewer than 8,000 continuing claims for 10 straight weeks. The streak ended last week, when 8,220 Iowans filed continuing claims.

Beginning in March, the number of workers filing continuing claims fell much faster in Iowa than it did in the country overall. That isn’t a particularly uncommon occurrence for Iowa, where the arrival of spring brings back to work construction and other outdoor workers idled during the state's harsh winters.

But even by Iowa’s standards, this year has seen an unusual drop. As of the end of June, about 36% fewer workers were filing continuing unemployment claims in Iowa than at the start of the year. Since 2015 — excluding the record number of unemployed workers during the 2020 pandemic year — claims in Iowa fell by about 48% from January through June.

The drop occurred before a new state law that cut off unemployment benefits to some workers took effect at the beginning of July. Iowa Workforce Development spokesperson Jesse Dougherty said the low number of claims may be the result of the pandemic's impact on the economy "tapering off."

"Otherwise," he said, "we have no insight other than the obvious — that an active hiring market with many open jobs makes it easier to rebound from any unemployment."

Iowa companies reported 120,000 job openings in May, according to the U.S. Bureau of Labor Statistics. Before the pandemic, the highest number of Iowa job openings on record came in December 2018, when businesses reported 84,000 unfilled positions.

Ayers, the Nationwide economist, said Iowa simply doesn’t have enough people. With an already tight market for workers, Iowa’s labor force has decreased by about 30,000 since the pandemic. Ayers estimates that the state would have added 20,000 workers over the last few years if the pandemic had not occurred.

“It’s hard to make a hire if you can’t find a worker,” he said. “I think the markets are just a little looser in other states.”

Health care jobs continue to lag in Iowa

The health care and social assistance sector continues to be the biggest drag on the labor market, with about 10,100 fewer workers employed in Iowa than there were before the pandemic. Payrolls in that sector have dropped by 5% in Iowa compared to 1%  across the country.

The Bureau of Labor Statistics does not release more specific data on the drop in Iowa. But Ayers suspects that, as with the country overall, the decline is in part driven by people who left nursing jobs during the pandemic.

Other sectors that are still dragging down Iowa’s labor market include durable goods manufacturing; arts, entertainment and recreation; educational services; and state government.

Ayers said many of these sectors are struggling because the market is so tight, with jobs in better-paying industries available.

“People are just finding better opportunities,” he said.

Payrolls in the nondurable goods manufacturing sector, largely driven by food companies, are up 5,300 compared to before the pandemic. And about 3,200 more Iowans are working in transportation than in February 2020.

Tyler Jett covers jobs and the economy for the Des Moines Register. Reach him at tjett@registermedia.com, 515-284-8215, or on Twitter at @LetsJett.

This article originally appeared on Des Moines Register: Iowa's unemployment rate drops to pre-COVID low, job openings high