Are Job Seekers Slackers? DOL Thinks So...

From the Wall Street Journal

California and Nevada are struggling with some of the nation's
highest rates of workers who are looking for jobs or not putting in as
many hours as they would like, new government data show.

The ranks of these individuals aren't reflected in the overall
jobless rate in the U.S. Labor Department's monthly unemployment report.
That report—July's figures will be released Friday—is the best gauge of
the health of the labor market. But the overall jobless rate, which now
stands at 8.2%, doesn't tell the whole story.

For example, the national unemployment rate doesn't take into account
people who want to work but haven't looked for a job in the previous
four weeks because they figured none were available.

The national unemployment rate also
doesn't account for people in part-time jobs who would prefer full-time
work. To get a broader view that encompasses both groups, economists at
the federal Bureau of Labor Statistics track the under-employment, or
U-6, rates for states and the entire country.

According to Labor Department figures released late last week,
California and Nevada are struggling not just with high unemployment,
but also severe under-employment. California's average unemployment rate
from July 2011 through June 2012 was 11.2%, but its broader
under-employment rate was far higher, at 20.3%.

(Government statisticians measure unemployment using "four-quarter
moving averages" when it comes to state data because these tend to rely
on smaller sample sizes. By viewing longer time spans, the government
boosts the reliability of their findings.)

When it comes to one particular type of under-employed citizen—the
part-timer who wants to work full-time—California is the worst offender
nationwide. In economics lingo, California has the biggest gap between
its overall under-employment rate, the U-6, and a slightly narrower U-5
rate that includes discouraged and other workers but not those who work
part-time but would prefer a full-time position.

California's economy is still bruised from the housing bust, while
its jobless rate is the nation's third-highest, after Nevada and Rhode
Island. Officials in four cities—Stockton, Mammoth Lakes, Compton and
San Bernardino—recently sought to file municipal-bankruptcy petitions or
indicated they might do so.

Nevada, another state hit by the housing bust, is worse off than
California when it comes to general under-employment. Its average
unemployment rate is 12.3%, the government says, and its
under-employment rate is 22.1%—a gap of 9.8 percentage points compared
with California's 9.1 percentage-point gap. The U.S., as a whole, has a
6.8 percentage-point difference between its 8.5% average unemployment
rate and 15.3% underemployment rate. Nevada has the nation's worst case
of workers ceasing to look for jobs after getting discouraged.

Some states that are performing near or better than the national
average in general unemployment have bigger under-employment woes. For
example, Massachusetts's 13.5% U-6 rate is more than double its headline
rate of 6.6%.

However, the data contain a spot of good news for the nation as a
whole. The declines in many states' under-employment rates are steeper
than those notched when the government tracked the data a few months
ago. Particularly notable are improvements for the long-term unemployed
and discouraged workers.

Still, California by itself is a huge part of the U.S. economy,
accounting for about 13% of gross domestic product. The bigger picture
from the most recent data reflects workers seeking jobs and hours, while
many companies are too skittish to hire.

Write to Neil Shah at neil.shah@dowjones.com