A new economic report shows fewer people were on the job in Kentucky at the beginning of 2026.

The Kentucky Center for statistics reports the state's labor force declined by more than 11,000 people in the first two months of the year, and January, the state was down by more than 5400 workers and almost 6000 in February, also declining during that time, the state's unemployment rate.

We hear now from Mike Clark, the director of the University of Kentucky Center for Business and Economic Research, on what may be behind the decline and what it could mean for the state.

These estimates come from the US Bureau of Labor Statistics.

And what they basically do is they survey households and they answer.

They ask the households that they're surveying about their employment situation, and based on a number of questions, they group individuals into basically three buckets.

The first is if you're working, you're considered to be employed as you're working for what, you know, for, for some type of wage.

If you're not working at a job, but you're actively been searching for a job over the last four weeks, then you're considered unemployed.

And to be actively searching, you actually have to go out and, apply for a job or go on interviews or, you know, put some effort into actually trying to find a job.

Over the last four weeks, those individuals are considered unemployed.

Those two groups are what we call the labor force.

So the labor force is people who are employed, people who would like to be employed and are trying to find a job.

The other group you have is what we call not in the labor force.

And these are individuals that have a lot of difference in a lot of different situations.

This could be an individual who is, in school full time and therefore not working because they're focused on their, education.

Excuse me, individuals who retired and left the labor force.

Or this could be somebody who's maybe taking care of their kids.

Their parents, are in the labor force for some other reason.

But it can also be individuals who are are in a situation where they'd like to work.

Maybe they need to work, but they haven't been able to find a job.

And so maybe they have kind of stepped out of the labor force and stopped looking for a job.

They want to work.

They may need to work, but, and most people might consider them to be unemployed, but because they're not actively searching for work, they are not counted as unemployed.

And the official statistics, if you look at the estimates we have for 2026 and they cover January, in February, we did see the labor force decline.

This suggests that maybe the market situation is starting to change.

So while the unemployment rate has continued to decline, it's not so much because we see more people working.

It's because people seem to be leaving the labor market.

It now appears that, we're seeing fewer people reporting that they are looking for work, fewer people reporting that they are employed.

So employment has actually gone down.

And it's a situation where the unemployment rate has continued to fall, in January.

Well, I'm sorry, February, I think it was 4.2%, but the decrease in the unemployment rate really had to do with the fact that a lot of people who maybe I've been looking for a job in the past have stepped away from the labor market again.

So if you look at the number of people employed, the number of people employed have actually gone down over the last couple of months.

So suggesting that we're in a bit of a different situation now than what we were seeing throughout much of 2025, what it may be is, is reflecting the fact that the economy seems to be slowing down.

So individuals who maybe were trying to find a job, maybe, experiencing some challenges in terms of finding work.

And so as a result of that, they seem to be stepping out of the labor force, maybe to come back when the labor force or the labor market improves.

But, you know, a lot of what we're seeing in terms of the numbers for January and February suggest that people have left the labor force.

What I want to be a little bit careful about, labeling this a trend, at this point.

So, so these are all just estimates, and these estimates have margins of error, and they will be revised over time as more data comes in.

So when I see a change in one month, I don't get terribly excited or concerned, that I saw that change, because next month it might just reverse, and or it might get just simply revised as more data comes out.

And so the story may seem to change, with two months of the labor force decline that we've seen here so far, that's starting to get my attention.

I don't know that I want to necessarily label it a trend at this point, but it is suggesting that, you know, again, maybe the economy is slowing and workers are having more challenges finding a job.

And so this seems to be consistent with kind of our expectations that the economy would tend to slow, in 2026.

But it is something for us to watch over the next few months to see whether or not this is just kind of a, you know, a couple of months, or, you know, will we actually see, this materialize for, for a longer period?

That's for the impacts to a little bit.

Hard to say.

You know, we're seeing a bit of a slowdown in both in terms of the demand for workers, but also the supply of workers.

You know, I think some of the implications of this is, again, you know, relatively fewer people working, earning wages, that'll be harder in some households.

They may have to, be careful about, you know, their spending.

And that can also place, or put a bit of a drag on certain aspects of the economy.

According to the Kentucky Center for statistics and the U.S.

Bureau of Labor Statistics, the job sectors in Kentucky showing the decline are manufacturing, trade, government and transportation jobs, sectors showing growth, education, health care, professional and businesses.