In July, the state’s employment growth hit the pause button when parts of California had to slow reopening plans to prevent the spread of COVID-19. While jobs grew and unemployment fell—both good signs—both were at a slower rate than previous months. A closer look suggests challenges that go beyond official labor market statistics, with many workers underemployed including some who have given up on finding work.

California added 140,000 jobs in July, about a quarter of the rate in June and with hard-hit sectors growing more slowly than over the past three months. Although the unemployment rate fell from 14.9 in June to 13.3 in July, the decline in part reflects workers exiting the labor force. That is, while the number of unemployed Californians fell by about 320,000, employed numbers grew by only half as much.

Some of the missing half may be discouraged workers who abandoned job searches. Further, many employed Californians are underemployed because they are working less than they would like to: from May through July, almost 9% of those counted as “employed” were working part-time when they would rather be working full-time, according to our calculations of Bureau of Labor Statistics data.

Counting discouraged workers as underemployed and adding unemployed workers to this total paints a more severe picture of the economic distress in California. Overall, about 23% of Californians were un- or underemployed in the last three months.  Month-to-month changes suggest that the state passed a peak during April, but pandemic un- and underemployment still exceeds levels from any point during the Great Recession.

The cumulative rate of un- and underemployment is highest among sectors and groups with the highest rate of unemployment. However, workers with reduced hours (working part-time when one prefers full-time, for instance) or who are discouraged about employment prospects are not counted in official unemployment statistics. These statistics understate the extent to which workers in the hardest-hit sectors and groups may be struggling to find or keep work.

In the hardest hit sectors—including accommodation and food services; arts and entertainment; and other services—the total un- and underemployment rate is estimated at about 42%, compared to about 30% for unemployment alone.  For least-affected sectors the total rate is about 14%.

Differences across income groups are stark: 44% of workers in families earning less than $30,000 are un- or underemployed, an income level that roughly equates to the average poverty line for a family of four, according to the California Poverty Measure. At the other end of the spectrum, 14% of workers in high- income families are un- or underemployed.

Young workers have the highest share of underemployed across age categories, and older workers seem to be faring worse than mid-career ones. Just over 25% of Latino and African American workers, 22% of Asian and Pacific Islanders, and 20% of white workers are either un- or underemployed.

For now, controlling the spread of COVID is the top priority for a sustained economic recovery. And while business activity is still limited in many parts of the state, affected workers need continued support. But over the longer term, policymakers must look beyond employment levels to consider the hours, wages, and earnings of workers to ensure a robust and equitable recovery.