The unemployment rate in Lancaster County has been ticking steadily down for more than a year. From a high of 8.1 percent in February 2010, it dipped to 6.7 percent in January 2011 before creeping back to 6.8 percent in February — a turn in the wrong direction, but not big enough to derail the notion that the employment picture here is improving.

But is it?

In a new study put out by the Franklin & Marshall College Local Economy Center, researchers note a second, worrying statistic about the local workforce.

Lancaster County has a significantly higher labor force participation rate than neighboring counties, the state or nation as a whole. That means more people of working age here are in the workforce.

But that percentage has been falling like a rock for two years.

Dr. Antonio Callari, an F&M economics professor and director of the Local Economy Center, said this likely means more countians who lost jobs are exhausting unemployment benefits and dropping out of the workforce entirely, maybe permanently.

"It deflates the 'good' unemployment news," Callari said.

Still, there is plenty of good news in the Local Economy Center's annual Lancaster Economy Report, released last week. Compared to the region, state and nation as a whole, Lancaster County's economy is in decent shape. We have less poverty and have higher credit scores, less debt and a lower rate of food-stamp usage. We've lost good-paying blue-collar jobs, but at a slower pace.

But Callari said some of the most intriguing data to emerge from the report indicates that the middle class in Lancaster County is slipping.

The labor force participation rate is one indicator; so is the fact that "middle class" jobs tend to pay less here than they do elsewhere.

"I think that what is happening is worrisome," Callari said. "The Lancaster economy ... was working well enough to promise stability for some and opportunity for others, [but] there is a danger that it will now switch into a different mode, with continuing stability for some but less opportunities for others.

"And this is dangerous for the social fabric."

The Local Economy Report has been issued annually since 2007. This year's 42-page report was created with the aid of Thomas Scheiding, a visiting scholar from Elizabethtown College; Sandra McPherson, a visiting scholar from Millersville University; research specialist Evan Gentry; and 10 undergraduate senior fellows at the Local Economy Center.

It finds strengths and weaknesses.

The number of service jobs here has gradually increased, while the number of "production" jobs (construction and manufacturing) has fallen. Still, the county has a greater percentage of production jobs than the region (a seven-county area encompassing Berks, Cumberland, Dauphin, Lancaster, Lebanon, Perry and York counties), the state and the nation.

The county's level of educational attainment remains comparably low, with a higher percentage of non-high school graduates than the region and state.

Our spending on libraries has increased, but lags behind the region and state.

The unemployment rate for workers age 20-24 is noticeably lower (at 11.9 percent) than the region, state or country. But the unemployment rate for workers age 65 and up was noticeably higher — 9.4 percent compared to 6 percent for the region, 6.3 percent for Pennsylvania and 6.4 percent for the U.S.

Latinos had a higher median household income in Lancaster County than statewide. White, black and Asian workers all had a lower median household income.

The top 10 percent of households here hold 56.7 percent of all wealth (home equity, stocks, bonds, savings and other assets). The lowest 50 percent of households hold 3.3 percent of the wealth. We have a slightly smaller percentage of people living in poverty than the region, though one in 10 countians is impoverished.

Countians have higher credit scores and fewer overdue bills than the region, state or nation — though we also have a higher percentage of mortgaged homes with a second mortgage or home equity loan.

The report can be found on the Local Economy Center's website at fandm.edu/lec/lancaster-eco....

Callari said he's long been fascinated by Lancaster County's relatively low wages. The percentage of jobs paying $17 an hour or less is comparable here to anywhere else, he said. "Where the wages are lower here ... is for the 40 percent of the labor force that earns more than $17 [per hour], i.e. the middle to upper-middle class.

"I think that the middle class here has been in a weaker position all along. It's not a result of the recession. It's been that way for a while," he said.

As for the drop in the labor force participation rate, research assistant Evan Gentry noted that while the percentage of men age 25-44 in the workforce has plunged, the percentage of women the same age in the local workforce has actually risen — even as the unemployment rate for both has spiked.

Even though women age 24-44 are having difficulty finding work, so many of them are entering the work force that their participation rate has increased.

The participation rate for males age 16-24 also fell sharply; for young males, Callari said, "the foundations for the future have now become more shaky."

Overall, in January 2005, nearly 72 percent of county residents age 16 and above were either working or looking for work. That number fell to 65.8 percent in December 2010, before rebounding slightly to 66.6 percent in January 2011, the latest month included in the report.

The county still has a higher percentage of working-age people in the workforce than the region, state or nation. But as noted in the report, "Lancaster and the region show much steeper drops than the state and nation, especially in the beginning of 2010. ... In the beginning of 2005, the participation rates in Lancaster were close to 8 percent higher than they were in the rest of the state. Now, the difference is only 4 percent, half of what it was before."

Scott Sheely, executive director of the Lancaster County Workforce Investment Board, said his organization — which provides job training and other services to the unemployed — knows all about the drop in the participation rate. "This is all tied to the substantial number of people who have dropped off of unemployment [which accelerated around October 2010] and are no longer counted in the statistics," he said in an email.

"The question of how many of them will eventually come back is a good one," Sheely said. "We know that people have retired or just left the workforce early. With the number of two-income families, some folks are biding their time and living on one wage-earner's wages."

"We do expect to see more and more of these folks filtering back," he said, although "we have heard rumors of hesitancy on the part of employers to hire people who have been unemployed for more than two years."

Callari said that previous editions of the Local Economy Report showed what he calls the "Lancaster employment premium" — the fact that the unemployment rate is lower here, and the labor force participation rate higher than the region, state or nation — has been steadily declining since the late 1990s.

"And we were wondering what would happen after the next recession," Callari said. "Well, the next recession has come — and now it will be interesting to see whether the unemployment rate will continue to be lower than that of the state by as much as it has been."

Gil Smart is associate editor of the Sunday News. Email him at gsmart@lnpnews.com, or phone 291-8817.