Julie Jacobson, File, Associated Press
FILE - In this Sept. 1, 2010, file photo, unemployed people use computers to search for jobs at the Nevada JobConnect Career Center in Las Vegas. State economists say Nevada's jobless rate fell to 12 percent in March, down from 12.3 percent the month earlier. The state Department of Employment, Training and Rehabilitation says Friday, April 20, 2012, that Las Vegas' unemployment rate is 12.1 percent, down from 12.2 in February.

CARSON CITY, Nev. — Nevada's unemployment rate fell to 12 percent in March from 12.3 percent in February, the state employment agency said Friday, but the drop is not solely about job creation in a state that has led the nation in unemployment for nearly two years.

"Unfortunately, most of the decline was attributed to erosion in the labor force, as opposed to outright improvement," said Bill Anderson, chief economist for the Nevada Department of Employment, Training and Rehabilitation. "The drop is partly due to discouraged workers who have simply given up looking for work."

About 163,000 Nevadans remained unemployed in March, down from 168,000 the previous month, the report said. But the total labor force also contracted by about 6,000.

Still, Anderson noted that the labor market is showing some positive signs of recovery, with most regions of the state reporting improved jobless rates.

He said the state added a seasonally adjusted 5,000 jobs from month to month, which is more than expected.

In Las Vegas, the unemployment rate fell to 12.1 percent, down 0.1 percentage point from February.

Northern Nevada also posted slight drops. Reno's jobless rate was 12 percent, down from 12.2 percent, and Carson City's rate fell to 12.4 percent from 12.6 percent.

Only Las Vegas, the state's population hub and economic engine, has gained jobs on a year-over-year basis, reporting 2,100 more jobs last month than in March 2011. In contrast, there are 1,400 fewer jobs in the Reno-Sparks area and 1,000 fewer jobs in Carson City compared with the same month last year.

Nevada's construction industry, which was hammered when the state's once booming house market imploded, continues to struggle. The industry lost 900 jobs in March, the report said.

After peaking at a record 14.9 percent in December 2010, Nevada's unemployment rate has been slowly receding, despite some monthly hiccups. It held steady at 13.4 percent in August through October 2011 before inching down to its current 12 percent mark. But the state's jobless remains significantly higher than the national rate of 8.2 percent, and is more than a percentage point above California's 10.9 percent.

Gov. Brian Sandoval, who has made economic development and job creation a cornerstone of his administration, said he was pleased by Friday's report. Sandoval earlier this year set a goal to create 50,000 jobs by the end of his first term in 2014.

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"The declining unemployment rate, together with signs that state revenues continue to perform at better-than-expected levels, indicate that Nevada is making a steady comeback," Sandoval said.

Anderson said while employment growth in the near term will be slow to moderate, long-term job growth should pick up as long as the national economy improves.

"For the state's modestly improving labor market to continue to strengthen, underlying fundamentals in the U.S. economy must be favorable," Anderson said. "Recent evidence does point to improvements in the national labor market, despite month-to-month volatility."