Hawaii's struggling hospitality and leisure sector led the statewide drop in jobs and was partially responsible for pushing up the seasonally adjusted December unemployment rate by one-tenth of a point.

Unemployment rose to 6.9 percent in December even as the labor force shrank from the previous month, according to statistics released yesterday by the state Department of Labor and Industrial Relations. In December the number of people in the labor force fell to 638,150 from 643,500. There were 593,850 employed, down from 599,750 in the previous month, while the number unemployed increased to 44,300 from 43,750.

“;The numbers were actually a little bit better than we had projected,”; said Ryan Markham, DLIR spokesman. “;We were projecting an average of 7.3 percent unemployment for the year, so it's encouraging to see the rate under 7 (last month)—although we obviously hope that it continues to improve.”;

While the state's construction, government and financial activities sectors gained jobs in December, 900 jobs were lost in leisure and hospitality, and some 700 jobs were eliminated in the trade, transportation and utilities sectors. The job count for educational and health services and other services remained stable. For the year, 23,300 jobs were eliminated from the private sector, with the heaviest losses in trade, transportation and utilities; construction; and leisure and hospitality.

“;Everybody is still struggling and these numbers certainly reflect that,”; said Murray Towill, president of the Hawaii Hotel & Lodging Association. “;The challenge on the leisure side is the U.S economy, and the numbers that we've seen this week from the stock market are discouraging.”;

While the hospitality sector hopes to see improvement this summer, most businesses are not expecting to see significant changes, Towill said. With the hospitality sector down, it follows that most other facets of Hawaii's economy will suffer, too, he said.

“;As customers cut back on spending, it affects all sectors,”; Towill said.

Only about a quarter to a third of visitor spending remains in the hotel industry; the balance is out there in the community, he said.

That said, Hawaii's labor market has not ground to a halt, said David Bower, director of business development for Altres, which screens an average of 20,000 job applicants annually.

“;Regardless of the trends, there are always industries that are hiring,”; Bower said. “;We are filling permanent job orders and putting temporary workers out there.”;

Fewer job seekers flocked to the first JobQuest Job Fair of the year than they did at similar fairs in May and September, said Beth Busch, president of Success Advertising Hawaii, which organizes the fairs. Rumblings from Hawaii businesses also suggest that the labor market might be starting to come back from the bottom, Busch said.

“;I see more positives than negatives these days,”; she said. “;The labor market seems stronger than it did four months ago.”;

However, signs of strain are still present in the labor market, Busch said. Many companies are hiring temporary or part-time workers rather than committing to full-time hires. Likewise, salaries and benefits are still down, she said.

“;We won't see employers making better offers until the market improves,”; Busch said. “;Right now there are more applicants than there are jobs. Wages and benefits won't come back until companies feel more competition from other employers.”;