Note: The Skinny blog is written by Rick Smith, editor and co-founder of Local Tech Wire and business editor of WRAL.com.

RESEARCH TRIANGLE PARK, N.C. – North Carolina’s unemployment rate for the first time since February 2009 in July, yet 35,000 fewer people were part of the state’s work force. So how is it that the jobless rate declined?

And what is the jobless rate if factors such as “discouraged workers” – the term used by the U.S. Bureau of Labor Statistics to define people no longer looking for work – or are underemployed are counted? Also added to this group are what the BLS calls “marginally attached” workers – people who are neither working nor seeking work but hope to get a job and have worked within the past year.

As of June 30, that rate as 17.8 percent.

The U.S. rate was 16.8 percent. ( The national rate dipped in July to 16.5 percent. For July national stats, )

The rates are based on U.S. Bureau of Labor Statistics data. They numbers are drawn from different surveys and sources.

“North Carolina’s unemployment rate is 9.8 for July 2010,” Larry Parker, a spokesperson for the N.C. Employment Security Commission told WRAL.com when asked what the “true rate” really was.

The work force number that determines the employment rate is based on the number of people working or actively seeking jobs.

People who have given up or are not looking for work are not included in the work force.

Geithner warns jobless rate could worsen

U.S. Treasury Secretary Timothy Geithner referenced the “discouraged workers” factor in recent comments about the economy when he said the unemployment rate is likely to increase as the economy improves.

How so? Because more people are optimistic and return to the “work force” number because they begin looking for a job.

The work force number increases and the jobless rate rises – unless, of course, job growth exceeds the demand.

(Nationwide, the number of “discouraged workers” soared by nearly 390,000 in July, by the way.)

Parker explained how the work force numbers are determined:

“The Labor Force Estimates and the Nonfarm Jobs are estimated separately from two different surveys.

“The Current Population Survey (‘the household survey’) is the major input into the Labor Force Estimates. These are estimates of the employment status of people. For July, the number of individuals in the Labor Force declined by 35,612; the number of employed individuals declined by 19,442; and the number of unemployed individuals declined by 16,170.

“The Number of Nonfarm Jobs are estimated from the Current Employment Statistics survey which is a survey of employers. This is a measure of jobs. The number of jobs declined by 29,800 in July.

“North Carolina’s pattern was similar to the Nation. For July, the number of Total Nonfarm jobs in the United states declined by 131,000. The number of unemployed individuals declined by 24,000; the number of employed individuals declined by 159,000; and the Civilian Labor Force declined by 181,000.”

The “Alternative Measures”

Now, let’s talk about jobless rates when other factors are considered.

Based on what the BLS describes as “Alternative Measures,” North Carolina’s overall “labor underutilization” rate was 17.8 percent as of June 30. These statistics are compiled by the BLS on a quarterly basis.

Here are the rates based on six different categories:

• U-1, persons unemployed 15 weeks or longer, as a percent of the civilian labor force: 6.5 percent

• U-2, job losers and persons who completed temporary jobs, as a percent of the civilian labor force: 6.5 percent

• U-3, total unemployed, as a percent of the civilian labor force (this is the definition used for the official unemployment rate): 10.6 percent

• U-4, total unemployed plus discouraged workers, as a percent of the civilian labor force plus discouraged workers: 11.2 percent

• U-5, total unemployed, plus discouraged workers, plus all other marginally attached workers, as a percent of the civilian labor force plus all marginally attached workers: 11.9 percent

• U-6, total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers: 17.8 percent

The BLS definitions for these categories:

“Persons marginally attached to the labor force are those who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the past 12 months.”

“Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not currently looking for work.”

“Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule.”

Grim, not good

So what is true state of employment?

As NCSU Economist Dr. Michael Walden wrote me when I queried him about the July N.C. jobs report:

“Not good.”

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