COLUMBUS, Ohio (WOWO) — Ohio is adding jobs and keeping unemployment relatively low, but economists say the state faces a growing challenge that could have major consequences for businesses and the economy: there aren’t enough workers entering or remaining in the labor force.

The latest federal data shows Ohio’s labor force fell to about 5.91 million people in July, down from roughly 6 million a year earlier.

At the same time, Ohio’s unemployment rate dropped significantly, from 4.9% to 3.4%.

That combination can make the state’s economy appear particularly strong at first glance. But the shrinking labor force tells a more complicated story.

The labor force includes people who are employed as well as people who are unemployed but actively looking for work. Someone who retires, stops looking for a job or otherwise leaves the workforce is no longer included in that measurement.

Greg Lawson, a senior research fellow with the Buckeye Institute, says that’s why looking only at the unemployment rate can give an incomplete picture.

“It used to be that unemployment was the only number you ever looked at if you were an economist,” Lawson said. “Nowadays, I think the labor force is one of the most important numbers because the unemployment can give you a little bit of a misleading [picture].”

The issue is also showing up in Northwest Ohio.

In the Toledo metropolitan area, the labor force declined by roughly 7,000 people over the past year, falling from approximately 296,000 workers to about 289,000.

But the smaller labor pool isn’t necessarily the result of businesses pulling back.

Manufacturing employment in the Toledo area increased 3.7% over the past year, according to Bureau of Labor Statistics data. Employment in construction, mining and logging increased even more, rising 7.6%.

Lawson says that creates a difficult situation for employers.

“Businesses are saying, ‘Hey, I’ve got jobs. I’m having a hard time filling them,'” he said.

In other words, the challenge facing Ohio may be less about creating jobs and more about finding people with the skills needed to fill those jobs.

Demographics are a major part of the problem.

Ohio has an aging population, meaning more workers are reaching retirement age. At the same time, the state isn’t seeing the same growth in the number of younger people entering the workforce.

“Ohio is an older state, so we have a lot of people that are retiring,” Lawson said. “We’re not having as many children.”

That demographic shift could become increasingly important as Ohio continues to attract manufacturing investment and other business development.

Northwest Ohio, in particular, has seen continued investment in manufacturing, providing opportunities for workers but also increasing the need for skilled employees.

Lawson says Ohio’s ability to maintain that economic momentum will depend in part on whether the state can keep young people from leaving and convince workers from other states to move here.

“We not only need to keep the young folks that we have in Ohio, but we need to also be able to find ways to bring them in from other states,” Lawson said.

That could put an even greater emphasis on workforce development, including training for skilled trades.

For years, students have often been encouraged to pursue four-year college degrees as the traditional path to a successful career. Lawson says that approach is changing as employers struggle to find workers in fields that don’t necessarily require a bachelor’s degree.

“It’s always been, ‘Hey, you got to go get that four-year degree,'” Lawson said. “It still can be, but it’s not necessarily that guaranteed golden ticket anymore.”

He says Ohio has a “mass need” for skilled trades workers as new manufacturing projects and other investments create additional demand.

That means community colleges, trade schools, universities and employers could play an increasingly important role in preparing people for jobs that are available now and those expected to be created in the future.

Childcare is another factor affecting the size of the workforce.

Lawson says some parents, particularly women, face significant barriers to returning to work because childcare can be expensive and difficult to find.

“It is increasingly expensive to raise children,” Lawson said. “Daycare itself is very expensive and frankly there’s not enough slots.”

For Ohio employers, that means addressing the workforce shortage could require more than simply offering additional jobs.

The state may need to tackle several issues at once: an aging population, worker retention, migration, childcare availability and training for occupations where demand is strongest.

Despite those challenges, Lawson says Ohio’s overall economic outlook remains positive.

Manufacturing growth, new investment and a relatively low unemployment rate provide reasons for optimism. But maintaining that momentum could depend on whether Ohio can produce, attract and retain enough workers to meet the demand created by that growth.

“I think it’s a cautiously optimistic situation that we’re in these days,” Lawson said. “There’s an opportunity to continue to go in the right direction.”

For Ohio, the numbers illustrate an unusual economic challenge: the state can continue adding jobs while simultaneously losing people from the labor force.

And as more Ohioans retire, the question for employers may become less about whether jobs are available and increasingly about who will be available to fill them.