Hawaii’s unemployment rate dropped sharply in December to a 21-month low of 5.7% as the state’s economy continued making significant strides in recovering from the nearly 2-year-old pandemic.

The state’s seasonally adjusted jobless rate, which during the early stages of the pandemic spiked to a record 21.9%, declined for the 11th straight month and dropped below 6% for the first time since hitting 2.1% in March 2020 when COVID-19 was in its infancy, according to data released Monday by the state Department of Business, Economic Development and Tourism. The rate in November was 6.0%.

“The declining unemployment rate indicates that Hawaii labor market conditions continue to improve due to the opening of tourism and increased consumption of local residents,” DBEDT chief economist Eugene Tian said in an email. “While the unemployment rate in the nation has already reached the natural unemployment rate (4.5%), Hawaii’s unemployment rate is still significantly higher than the natural rate (3.0%).”

Tian said he expect the tourism recovery to accelerate in the second quarter and lead to the unemployment rate in Hawaii falling to about 5% for the year.

“More people are returning to work whether as a payroll worker or as self-­employed,” Tian said. “In December 2021, the total number of people employed reached 610,350, the highest since March 2020 and 92.5% of the December 2019 level. The number of people unemployed but still looking for jobs was 37,050 in December 2021, the lowest since March 2020. The improvement is significant, but the number of people unemployed is still about 2.7 times the December 2019 level.”

Hawaii’s labor force, which includes those who are employed, those who are unemployed but actively seeking work and those who are self-employed, edged up to 647,450 in December from 646,550 in November.

Tian said the Federal Reserve’s plan to raise interest rates to control inflation should have minimal effect on Hawaii’s economy.

“To control inflation, the Fed would increase interest rates and cool down the economic growth, and thus employment will have a downward pressure,” Tian said. “With the economy still recovering in Hawaii, the impact to the state economy is not going to be significant. Hawaii’s inflation (3.8%) is lower than the U.S. (4.7%).”

Nonfarm payroll jobs, which are the best measure of job growth, increased in the state by 1,900, with the leisure and hospitality sector showing the largest increase with 1,100 additional positions.

Over the past year, nonfarm payroll jobs increased by 38,400, or 7.1%.

Nonfarm payroll jobs are calculated from a mail survey of employers and are considered a better indicator of job growth due to a larger sample size than the labor force data, which is compiled from a telephone survey of households. In the payroll count, one person might be counted multiple times if that person has multiple jobs.

The jobless rate fell in the state’s four major counties in December from November. State and national labor force data is adjusted for seasonal factors, but the county jobs data does not take into account variations such as the winter holiday and summer vacation seasons.

Honolulu County’s jobless rate fell to 4.6% from 5.0%, Hawaii County’s rate dropped to 4.9% from 5.3%, Kauai County’s rate decreased to 6.7% from 7.2% and Maui County’s rate sank to 6.3% from 6.9%. In Maui County, Maui’s rate fell to 6.3% from 6.8%, Molokai’s rate declined to 9.1% from 11.8% and Lanai’s rate dropped to 4.8% from 6.0%.