Hawai'i's unemployment rate dropped to its lowest level in at least 30 years, prompting some concerns that the tight labor market will add to the state's already high cost of living.

The statewide jobless rate declined to 2 percent in December from the previous month's 2.3 percent, according to the state Department of Labor and Industrial Relations.

The unemployment rate — the lowest since the state began calculating seasonally adjusted employment figures in 1976 — was less than half the national rate of 4.5 percent and was easily the lowest in the country for December.

"From an economics standpoint, this is over employment," said Byron Gangnes, a University of Hawai'i economist.

Gangnes believes the tight labor market could fuel further inflation in Hawai'i. Low unemployment typically results in higher wages, which are eventually passed to consumers, he said.

The inflationary pressures come as Hawai'i residents already pay some of the highest prices in the nation for gasoline, electricity and housing.

"From the standpoint of the worker, this should help drive up wage rates and provide more benefits," Gangnes said.

"But a good fraction of any wage increases gets passed on the consumer. It raises costs of doing business and may cause firms to pull back on some of their expansion plans."

In its monthly report, the Labor Department said the number of nonagricultural jobs grew by 12,000, or 2 percent, from last year because of job gains in the construction, education and health services and manufacturing sectors.

The rates for individual counties also dipped below the 2 percent mark.

Honolulu's unemployment rate for December was 1.6 percent, which was down from the year-earlier's 2.2 percent. The jobless rate for Kaua'i slipped to 1.5 percent from 2.1 percent, and Maui's unemployment rate went from 2.2 percent in December 2005 to 1.5 percent last month.

The Big Island jobless rate was 1.9 percent last month, which compares with December 2005's 2.3 percent.

Reach Rick Daysog at rdaysog@honoluluadvertiser.com.