Raleigh, N.C. — North Carolina’s unemployment rate dropped under 10 percent for the first time in more than a year to 9.8 percent in July.

However, the state’s Employment Security Commission also reported Friday that the number of non-farm jobs in the state decreased by nearly 30,000.

“Overall, the July state employment report was not good.,” N.C. State economist Dr. Michael Walden said.

 “Although the unemployment rate dropped, this was entirely due to over 35,000 people dropping out of the labor force,” he said. “Some of this may have been college kids leaving summer jobs early, and therefore may not have been accounted for by seasonal adjustments. But, the number of employed workers fell in both the household and employer surveys.”

The government uses surveys to determine job totals.

The unemployment rate is based on people working or seeking work and those receiving unemployment benefits.

People no longer seeking work are not included in the jobless rate.

The jobless rate was 10 percent in June. A year ago it was 11 percent.

The last time North Carolina’s jobless rate was lass than double digits was 9.8 percent in February 2009.

The U.S. unemployment rate is 9.5 percent.

“Job growth across all sectors continues to be a challenge,” said ESC Chairman Lynn R. Holmes in a statement. “We experienced job growth in some sectors but had a large loss in government due mostly to declines in local school employment.

“We would like to see more consistent growth throughout all job sectors,” she added.

The seasonably adjusted employment number, based on surveys of employers, showed a drop of 29,800 jobs. Of those, 27,300 were government positions.

The transportation and utility sector reported a net gain of 2,800 jobs.

Walden said private sector numbers were encouraging but added that the public sector is now taking hits in employment.

“On the plus side, four private sectors added jobs - manufacturing, trade, information, and financial services. In total, private sector employment fell by 2,500,” Walden explained.

“The big drop in employment was for local government, which shed 26,500 jobs. These are not [part-time] Census jobs,” he stressed. “This reduction in local government employment suggests city and county governments - which have seen their revenues drop - have being forced to adjust by paring their workforce. So the big job losses may have shifted from the private sector to the public sector.”

Some tech-related segments did report job growth. Financial activities jobs increased by 600 from June.

Over the past year, information jobs are up 900, and professional and business services have climbed by 19,700. That’s the largest sector of jobs growth over the past 12 months.

Walden stood by his earlier predictions that North Carolina will add jobs this year, albeit slowly.

“Going forward, I still predict we will add jobs in North Carolina over the rest of the year, but the pace of improvement will be slow,” he said. “Most forecasters have revised downward their predictions for economic growth in the second half of 2010 and early 2011.

“The key to economic recovery is households repairing their financial balance sheets by reducing debt and increasing saving. Households are doing this, but this means consumer spending will barely increase. And since 70 percent of the national economy is based on consumer spending, a frugal consumer means a slow economy.”