The U.S. labor market has improved considerably since the depths of the recession in 2009. However, traditional measures of the labor market may not always tell the full story. Despite the recovery, for example, government efforts to strengthen the job market have remained in place. Last week, the Federal Reserve Board announced it would continue keeping interest rates near zero, citing improving, but still weak, labor underutilization.
The traditional unemployment rate does not include all jobless individuals, nor is it a percentage of all the people available for work. It is a measure of jobless working-age Americans actively seeking work as a percentage of the labor force, which is defined as the total number of employed and unemployed workers. To account for people left out of the calculation, the Bureau of Labor Statistics (BLS) provides alternative measures of labor underutilization.
The underemployment rate, also known as U-6, includes the standard unemployed population as well as marginally attached workers and persons employed part-time for economic reasons. Marginally attached workers are neither employed nor looking for work, but those who have indicated their desire for employment. Discouraged workers, a subset of the marginally employed, believe there are no jobs available to them and have given up looking as a result. Finally, the underemployment rate accounts for involuntarily part-time employed workers who could only find part-time work but would like a full-time job.
Martin Kohli, chief regional economist at the BLS, explained there are many reasons jobless individuals might give up looking for work. They might be retired, disabled, full-time students, home-makers, or parents who would like a job but have struggled to find adequate child care.
Based on the underemployment rate, 24/7 Wall St. reviewed the 10 states where finding full-time work is most difficult. Nevada had the highest underemployment rate in the nation at 15.2%. By contrast, North Dakota’s underemployment rate of 5.5% was the lowest in the country. Over the 12 months through the second quarter of this year, the U.S. underemployment rate was 11.3%, down slightly from 12.9% over the previous period.
While the underemployment rate captures significantly more people than the standard unemployment figure, it is not surprising that states with high rates of one measure almost always have high rates of the other measure as well. Eight of the 10 states with the highest underemployment rates were in the top 15 for unemployment as well. The correlation is not 100%, however. Oregon and Michigan had the fifth and ninth highest underemployment rates but each had the 20th highest unemployment rates.
Gross domestic product (GDP) also provides a picture of the weak economic climate in many of these states. In eight of the 10 states with the highest underemployment, GDP has either contracted or grown slower than the national growth rate over the past eight years. In Nevada, the state with the highest underemployment rate, GDP contracted by 11.7% between 2007 and 2014 — by far the worst decline over that period.
Weak economic climates often manifest in labor force contractions. This may be because poor job markets are discouraging people from looking for jobs in these states. While the U.S. labor force rose by 1.8% from 2007 through 2014, the labor force shrank by more than 5% in high-underemployment states Mississippi and Michigan.
Many of these states were also among the hardest-hit during the housing crisis. Nationwide, average home prices were 5.5% lower last year than they were in 2007. In seven of the 10 states, home prices fell faster than the national decline over that period. In Nevada, California, and Arizona, the drop was significantly larger — home prices in each of the three states fell by more than 15%. Kohli said, “if your house is underwater you’re less likely to sell your house and move, so you’re not going to have the labor market adjusting to high unemployment the way you would if people could sell their houses.”
To determine the states where it is hardest to find full-time work, 24/7 Wall St. examined average underemployment rates for the 12 months through the second quarter of this year measured by the BLS. We also considered annual U-3, the conventional measure of unemployment, and annual U-6, the underemployment rate, in each year from 2007 through 2014. Also from the BLS, we reviewed average weekly wages and the size of the labor force from 2007 through 2014. Socioeconomic indicators including poverty rates and educational attainment rates came from the U.S. Census Bureau’s 2013 American Community Survey (ACS). From the Federal Housing Finance Agency (FHFA), we considered the annual purchase-only housing price index. Real GDP figures are from the Bureau of Economic Analysis (BEA).
These are the states where it is hardest to find full-time work.
10. Rhode Island
> Underemployment rate: 12.4%
> June unemployment rate: 5.9% (12th highest)
> GDP growth 2007-2014: 1.6% (11th largest decline)
> Labor force growth 2007-2014: -3.5% (5th largest decline)
Rhode Island’s 2014 unemployment rate of 7.7% was the third highest nationwide. This does not account for jobless individuals no longer looking for work, and part-time employees who would prefer full-time work. When these marginally attached and involuntarily part-time employed workers are considered, the state had an underemployment rate of 12.4% — the 10th highest in the nation. Like other states with the highest underemployment rates, Rhode Island’s economy grew at a slower pace compared to national economic growth from 2007 through 2014. The state’s labor force, too, shrank by 3.5% even as the labor force nationwide grew by 1.8%. Rhode Island was also among the hardest-hit states during the housing crisis. Home prices fell 16.3% from 2007 through last year, one of the largest declines. According to Kohli, poor home equity often prevents individuals from relocating in search of better job prospects, which in turn can prevent the labor market from adjusting.
> Underemployment rate: 12.5%
> June unemployment rate: 6.1% (9th highest)
> GDP growth 2007-2014: 1.8% (12th largest decline)
> Labor force growth 2007-2014: -1.2% (12th largest decline)
As in most states, Georgia’s underemployment rate has improved in recent years. Similarly, the state’s unemployment rate has declined each year since 2010, when it peaked at 10.5%. As of June, 6.1% of the workforce was unemployed, still higher than the national unemployment rate of 5.3%. The relatively poor job market in Georgia is tied to relatively poor socioeconomic factors. The state had the fifth highest poverty rate in the nation at 19%. On the other hand, while the average weekly wage of $821.57 was lower than the national average, it grew by 3.9% from the previous year, a faster pace than the nationwide growth rate. Georgia was one of just three states on this list where average wages grew faster than the national pace.
> Underemployment rate: 12.6%
> June unemployment rate: 5.5% (tied- 28th highest)
> GDP growth 2007-2014: -0.7% (7th largest decline)
> Labor force growth 2007-2014: -5.2% (the largest decline)
While employment conditions in Michigan remain suboptimal, the labor market has improved somewhat over the past five years. From 2007 through 2009, the Great Lakes state had both the highest unemployment rate and underemployment rate in the United States. Michigan’s average underemployment rate in 2009 was 21.5% — a rate that includes the marginally attached workers. While the underemployment rate has since recovered a great deal to 12.6%, it was still one of the worst in the country. Michigan has suffered from stagnant housing and labor markets for decades, and compared to some other high-underemployment states, large numbers of residents have left the workforce. From 2007 through 2014, Michigan’s labor force shrank by 5.2%, the largest contraction of any state.
7. South Carolina
> Underemployment rate: 12.8%
> June unemployment rate: 6.6% (tied-4th highest)
> GDP growth 2007-2014: 3.4% (17th largest decline)
> Labor force growth 2007-2014: 3.4% (16th largest growth)
Underemployment in South Carolina peaked at 19.6% in 2009, higher than the peak rates in all but three other states. While the state’s underemployment has declined significantly since that time, it remains one of the highest rates nationwide. As was the case in many other states where residents had trouble finding full-time employment, the relatively poor labor market may have contributed to similarly poor socioeconomic conditions. South Carolina’s poverty rate of 18.6%, for example, was the eighth highest in the nation. Like the nation as a whole, the state’s underemployment rate has fallen in recent years, which may have contributed to a growing workforce. South Carolina’s labor force grew by 3.4% from 2007 through last year, one of four states with the highest underemployment rates where labor force growth exceeded the national growth rate.
> Underemployment rate: 12.8%
> June unemployment rate: 6.6% (tied-4th highest)
> GDP growth 2007-2014: 0.0% (8th largest decline)
> Labor force growth 2007-2014: -5.2% (2nd largest decline)
Mississippi had the 18th highest underemployment rate in 2009, and it jumped up to fifth highest this year. The state’s labor force is less skilled than most states and can perhaps be partly behind the high unemployment and underemployment rates. Barely 20% of the state’s adults had a bachelor’s degree, the second lowest rate in the country, ahead only of West Virginia. With such a poor labor market, workers have been giving up looking for a job. While the U.S. labor force grew by 1.8% from 2007 through 2014, Mississippi’s labor force shrank by 5.2%, the second largest contraction of any state.
> Underemployment rate: 12.8%
> June unemployment rate: 5.5% (tied-20th highest)
> GDP growth 2007-2014: 15.3% (3rd largest growth)
> Labor force growth 2007-2014: 1.1% (21st largest decline)
Individuals employed part-time for economic reasons accounted for 5.4 percentage points of Oregon’s underemployment rate of 12.8%, the fourth highest incidence of involuntary part-time employment nationwide. These workers cited seasonal declines in demand, inability to find full-time work, or unfavorable business conditions as reasons for seeking part-time employment. Such high levels of financial stress even among the state’s employed population likely led to greater reliance on government subsidies. Nearly one in five Oregon residents relied on food stamps, the highest proportion nationwide. Many SNAP recipients were likely also part of the underemployed population.
4. West Virginia
> Underemployment rate: 13.0%
> June unemployment rate: 7.4% (the highest)
> GDP growth 2007-2014: 9.0% (10th largest growth)
> Labor force growth 2007-2014: -2.6% (6th largest decline)
Many of these states have had some of the highest underemployment rates for several years. However, West Virginia is a new addition to the list this year. According to Kohli, West Virginia is heavily dependent on its energy industry, and the economy has been vulnerable to falling oil prices. Low educational attainment rates likely contributed to West Virginia’s underemployment rate of 13%, which trailed only three other states. Less than 19% of adults in the state had a bachelor’s degree, the lowest college attainment rate in the nation. Low levels of education may have also contributed to lower incomes. While 7.6% of American households earned less than $10,000 annually, 10.5% of West Virginia households earned such low incomes. The state’s labor force contracted 2.6% from 2007 through 2014, the sixth largest decline, and in contrast with the nationwide labor force expansion of 1.8%. While all of these states have among the least healthy job markets, many have managed some improvement in recent years. West Virginia, however, had the highest unemployment rate in June at 7.4%. It was also one of only five states where the underemployment rate went up in 2014.
> Underemployment rate: 13.8%
> June unemployment rate: 5.9% (12th highest)
> GDP growth 2007-2014: -4.5% (3rd largest decline)
> Labor force growth 2007-2014: 1.9% (24th largest growth)
Arizona had the12th highest unemployment rate last year, at 5.9% of the labor force. However, many employed residents could likely use more work. Part-time Arizona workers who would prefer full-time jobs accounted for 5.9 percentage points of the state’s underemployment rate of 13.8%. This was the second highest incidence of involuntary part-time employment in the country. As in a few other states with the highest underemployment rates, Arizona’s housing market was slammed during the recession. Home prices in the state sank 22.9% from 2007 through 2014, a larger drop than in all but two other states — Nevada and Florida. The relatively weak housing market likely hindered job market improvements, because it was harder for residents to relocate.
> Underemployment rate: 14.0%
> June unemployment rate: 6.3% (8th highest)
> GDP growth 2007-2014: 5.6% (22nd largest growth)
> Labor force growth 2007-2014: 5.1% (9th largest growth)
California’s economy is heavily dependent on agricultural production in its Central Valley, which is one of the nation’s largest food sources. Since the industry’s demand for water is high, the state’s ongoing drought has been extremely costly. According to The Atlantic, the agricultural sector lost $2.2 billion in 2014 due to drought. In addition, an estimated 17,000 farmers lost their jobs last year. The state’s GDP grew by nearly 6% from 2007 through last year — just behind the national growth rate — and the severe drought conditions contributed to California’s poor employment figures.
The state’s unemployment rate of 6.3% in June was eighth highest in the nation. When marginally attached workers and those working part-time for economic reasons were considered over the 12 months through June, 14% of workers were underemployed. Full-time work was even more scarce in Los Angeles County, where the underemployment rate was 16.0%. On the other hand, while the labor force in most states grew slower than the nation’s, or even shrank from 2007 through last year, California’s labor force grew 5.1%, the ninth largest growth rate in the country.
> Underemployment rate: 15.2%
> June unemployment rate: 6.9% (2nd highest)
> GDP growth 2007-2014: -13.2% (the largest decline)
> Labor force growth 2007-2014: 4.8% (10th largest growth)
No state’s job market was worse than Nevada’s. The state’s underemployment rate of 15.2% and current unemployment rate of 6.9% were the highest and second highest compared to all states. Part-time workers in the state who would like full-time work accounted for 6.4 percentage points of the underemployment rate, the highest incidence of involuntary part-time employment nationwide. The state’s industry composition may partly account for the concentration of part-time workers. According to Kohli, the entertainment sector tends to employ more part-time workers than other industries.
The housing crisis hit Nevada harder than arguably any other state in the country. As of last year, home prices were 32.2% lower than they were in 2007, the largest drop nationwide. And while average weekly wages increased each year from 2008 through last year across the nation, in Nevada wages declined in 2008, 2009, and 2010. Since then, wages have increased in the state, but at a much slower pace than the nation.