Berkeley’s unemployment rate has reached pre-pandemic lows, according to a statement from Berkeley Mayor Jesse Arreguín.

The unemployment nationwide had decreased to 3.5 % in July with job growth in multiple sectors, according to an Employment Situation Summary from the U.S. Bureau of Labor Statistics. The unemployment rate in California is down to 4.2%, which is around the same as it was when statewide quarantines began in 2020, according to Arreguín.

At the height of the pandemic’s economic downturn, California unemployment reached 16.1% in May 2020.

“The unemployment rate has decreased because the labor market has gradually recovered from the COVID crisis,” said Jesse Rothstein, professor of public policy and economics at UC Berkeley, in an email. “On top of that, consumers have a lot of money, due to a combination of not being able to spend during lockdown and policy to support consumers’ balance sheets.”

Berkeley’s unemployment rate as of June 2022 was 2.8% and, according to Arreguín’s statement, this is the exact same as February 2020. Arreguín added that the city’s unemployment had peaked during May 2020 at 10.1%.

Throughout the pandemic, staffing shortages were the most severe in industries with lower wages and benefits such as retail and hospitality sectors, Arreguín noted. According to the summary, the hospitality, professional and business services and health care industries have seen the highest gains of employment.

The decrease in unemployment has been reflected by an increase in jobs, Rothstein said, not an increase in discouraged workers — people who aren’t actively seeking employment. According to Rothstein, last month 500,000 jobs were added to the economy.

“At the same time, there has been a reduction in labor force participation,” Rothstein said in an email.

According to Rothstein, this trend is not fully understood, but it may be a combination of multiple factors including health concerns. Rothstein added that decreased participation may be caused by an understanding among workers that within this market, individuals will be able to find a job if they want to.

Another misunderstood factor, according to Arreguín, is the impact an anticipated recession will have on current employment levels.

Despite the uncertainty around the impact a recession may have, Berkeley has taken precautions to help protect small businesses during times of economic hardship. Arreguín said the city has worked to improve the permitting process, increase outreach and education programs and provide support for businesses becoming worker cooperatives.

“In a tight labor market, employers should be having to work to find workers — they may need to pay more than they want to, or search harder,” Rothstein said in an email. “That’s great; the alternative is one where there is excess unemployment so there is always a line for any job application.”