While the labor market has improved significantly since the depths of the recession in 2009, high underemployment may be an indication that the economy is still struggling. As of the first quarter of 2014, 13.4% of the nation’s labor force was considered underemployed, meaning they were unemployed, were working only part-time despite wanting full-time jobs or would like a job but had given up on actively looking.
The underemployment rate has dropped from its peak of 16.7% in 2010, which indicates that the labor market has improved. However, underemployment is still well above its pre-recession levels. Based on underemployment data for the first quarter of 2014, we identified the states where it is hardest to find full-time work.
High underemployment is not unusual for many of these states. Even prior to the recession, five of the states where it is hardest to find full-time work had underemployment rates at or above the national rate of 8.3%.
In many cases, high underemployment rates do not mean that people are losing their jobs. According to Martin Kohli, chief regional economist with the Bureau of Labor Statistics (BLS), rather than making large-scale cuts, “employers in retail or hospitality sectors cut people’s hours back so people who had been working full-time were cut back to part-time.”
In many of the states with high underemployment, the labor force has contracted. As the number of workers falls, the underemployment rate might be expected to fall as well, since fewer people would be looking for jobs. However, in most of the states where it’s hardest to find full-time work, underemployment rates are rising. Between 2007 and 2014, five of the states on this list saw their labor forces grow by less than 1%. This may be because poor job markets are discouraging many people from looking for jobs in these states.
Kohli added that the situation is especially bad when job seekers struggle to find work, despite a shrinking pool of applicants. “If your labor force is shrinking and your unemployment rate is going up … that’s really a bad sign,” Kohli told 24/7 Wall St.
The gross domestic product (GDP) also provides a picture of the weak economic climate in many of these states. All but one state on this list had annualized GDP growth below the national average between 2007 and 2013. In Nevada, the state with the highest underemployment rate, GDP grew at an annualized rate of 0.8% over the same period. Kohli noted that a state’s economic output is a major component of underemployment rates.
Additionally, states that rely heavily on housing and construction sectors continue to feel the effects of the housing crisis. For example, in four states — Arizona, Nevada, Florida and California — construction employment contracted more than 30% from its pre-recession peak through June 2014. According to Kohli, depressed housing markets can have a big effect on the economy. “Lots of people’s wealth was largely tied up in their homes.” As a result, “people in these areas are not going to be spending as much money as they otherwise would.”
To determine the states where it is hardest to find full-time work, 24/7 Wall St. examined the first quarter underemployment rate measured by the BLS. We also considered U-3, the conventional measure of unemployment, and U-6, the underemployment rate, from 2007 through the first quarter of 2014. The underemployment adds part-time and marginally attached workers to the traditional unemployment rate. Also from the BLS, we reviewed average weekly wage growth, and labor force growth from 2007 to 2013. Housing data are for the second quarter of each year from 2007 through 2013 and are from the Federal Housing Finance Agency (FHFA). GDP growth figures are from the Bureau of Economic Analysis, and are not adjusted for inflation.
These are the states where it’s hardest to find full-time work.