Island County labor force growth outpaces state

Published 1:30 am Thursday, July 2, 2026

Island County’s economy continued to grow in 2026, with the labor force expanding faster than the statewide average even as unemployment edged upward.

Regional labor economist Toby Paterson said the overall picture from May 2025 to May 2026 shows an economy benefiting from population and workforce growth while continuing to be bolstered by Oak Harbor’s military presence. He noted, however, that the pace of growth has slowed in recent years.

Island County’s labor force expanded far faster than Washington state’s over the past year, creating an unusual dynamic in the local employment picture, he said. With an additional 486 workers, the county is up 1.4% in 2026, while the state gained less than 1%.

The unemployment rate rose slightly, increasing 0.2 percentage points over the past year to 4.7%. By comparison, Washington’s unemployment rate climbed 0.5 percentage points to 4.8%.

Several factors could be contributing to the labor force growth. Although military personnel are not counted in civilian labor statistics, Paterson suggested increased military activity could be attracting civilian workers who support those operations. He said the higher unemployment rate could reflect more people moving to Island County, including retirees, or increased civilian hiring associated with military activity. He also said it may simply reflect broader population growth.

Although the unemployment rate and labor force increased simultaneously, a combination that can appear contradictory, Paterson explained that Island County’s relatively small workforce makes even small changes more noticeable.

Construction in Island County also showed encouraging signs. Employment in the sector grew nearly 10% in 2026. Additionally, in the first quarter of this year, single-family home sales increased 20%, in contrast to their 14% decrease in 2025. At the same time, leisure and hospitality industries continue to lag 7.5% behind last year’s levels despite an uptick of 2.5% from April to May. The reason why, Paterson said, is “hard to say.”

He noted that border communities such as Island, Whatcom, San Juan and Jefferson counties may feel similar effects as Canadian tourism decreases.

“The prices of things are obviously higher than we’ve seen in a long time. So that may be a detractor from Canadians coming across the border,” Paterson said.

Business activity in Island County, however, has remained relatively steady. The number of firms operating in the county has changed little over recent months, suggesting the labor force increase is being driven more by people moving into the area than by a surge in new employers, Paterson said. Still, not all of these workers are finding jobs immediately, he added.

Other notable industry changes, Paterson said, include durable goods manufacturing, which is up 1.9% in the county this year. Additionally, wholesale trade has jumped 10% since 2025. Financial activities increased 4.6% this May, but it still sits 2.9% below last year.

Looking ahead, Toby stopped short of making predictions, describing the economy as difficult to forecast but fundamentally steady.

“We have a very resilient economy,” he said. “Not to say that we can’t see some negative trajectory here and there, but right now it looks pretty stable.”