July 19, 2013

Part-Time Jobs Increase, Full-time jobs decrease.

July 19, 2013

Part-Time Jobs Increase, Full-time jobs decrease.

Part-Time Jobs Increase, Full-time jobs decrease.

I have been writing a detailed analysis of the monthly BLS Employment Situation Report each month. Since the data always comes out on Friday and I create the newsletter the same day I have not addressed all of the issues evident in the BLS report. I think that my most glaring oversight recently has been not addressing the fact that full-time jobs have seen near-zero growth, and almost all of the nominal growth recently has been in part-time jobs. Below is a graph of part-time jobs from 1955 to the present. This is maintained by the St. Louis Federal Reserve.





Several thing are noticeable:

1) there has long been a continuous upward trend in part-time jobs. The spike upwards after the Great Recession is large. Recently I have read opinions that this is the result of the Patient Protection and the Affordable Care Act (Obamacare), but the fact is that the sharp increase in part-time jobs happened at the time of the Great Recession. The graph from the St. Louis Fed shows that recessions (the grey vertical bars) increase part-time jobs.

2) Full time jobs are barely increasing. Since the start of 2013, 557,000 of the 753,000 more people working are part-time employees. That’s an increase of 196,000 full-time jobs in 6 months.

3) job growth, be it full-time or part-time, is just barely keeping pace with population growth since the recovery started. To keep constant the ratio of those employed to the population we need to be constantly adding about 120,000 jobs/month.

3) The most recent jobs report shows that 19.5% of jobs are part-time. When the Lehman BK occurred about 17.0% of jobs were part-time.

There are currently 5.5 million fewer people working full-time then there were when the Great Recession started (December 2007). In that time there are 3.2 million more people working part-time.

Some definitions from BLS:

1) you are employed if you worked at least 1 hour a week and got paid. 2) you are employed if you work for your own business even if you paid yourself nothing. 3) you are employed if you worked without pay at least 15 hours in a family business. 4) A full time worker is someone who works 35 or more hours a week. Distinguish this from the employer mandate of Obamacare which necessitates health care for anyone who works 30 hours of more.

People are not working part-time by choice. Almost all of the increase in part-time workers has been among those working few hours because of either a) slack business conditions or b) their inability to find a full-time job. BLS refers to these folks as working part-time “for economic reasons.” This number was up 322,000 in the most recent BLS report which means that with a total gain of 195,000 we lost 127,000 full time jobs in June. Yet the media touted this as a good report.

Obamacare did not start the trend to part-time jobs but it’s hard to see how it is not a deterrent to either increasing a company’s staff to or above 50, or allowing someone to work more than 30 hours a week. I don’t believe that someone who is interested in building a successful business is simply going to stop hiring at 49 but there may be companies which don’t see much to be gained by growing just above 50 if the cost of medical coverage is added. That is simply the economics of it.

The “Affordable Care Act” requires employers with 50 or more full-time equivalent employees – to either provide “qualified” health coverage for all of their full-time employees, or pay an annual penalty of $2,000 per full-time employee (after the first 30) if they don’t provide such coverage. If they do provide coverage but it’s not “affordable” the penalty is $3,000 per employee who finds it “unaffordable” (with a cap at the penalty they’d pay for not offering coverage at all).

I am not implying that working more than 30 hours a week constitutes nirvana. I am saying that working less than that when you need to work more hours than that to “make ends meet” or get ahead is not good. If workers choose part-time jobs of their own volition that is fine. If workers who want full-time jobs can only get part-time jobs, that is not a sign of economic health. Of the 195,000 new payroll jobs in the report for June, 75,000 were in restaurants and bars, where the average weekly paycheck is about $351. While I suppose that this is good if you eat lunch in a restaurant because you should get better service, I don’t see this as benefiting the economy. Those people with $351 paychecks are not going to be buying houses or new cars.

The worst thing is that the increase in part-time jobs makes the BLS report less meaningful than it once was. If an employer chooses to hire 2 people for 20 hours each rather that 1 person for 40 hours then the effect if the creation of 1 more jobs with zero gain in the total amount of compensation. According to BLS there were 283,000 more multiple jobs holders in June 2013 than there were in June 2012. According to the Household Survey there were 1,610,000 more people employed in June 2013 than June 2012 but 18% of that gain is from more people with second jobs.

The cheering over the increase in jobs in June 2013 had no basis. This is a bogus increase in jobs. We used to associate any increase in jobs in BLS as positive because this was an indication that GDP would grow as those workers spent money. Because the economic media are biased toward “things are OK, keep your money in the market” the public got the impression that the latest BLS report indicated that the economy was doing fine. It is not.

If someone has 2 jobs they are counted twice in the Establishment Survey. The Establishment Survey is a count of jobs, not people. If your hours were cut and you sought a second job, the Establishment Survey would show one more job even if your total compensation did not increase.

For someone making near minimum wage the employer cannot reduce their compensation to pay for their health care so the effect will likely be that their hours are decrease to avoid paying for either their health care premium, or the penalty for not paying their health care premium.

Looking at the graph above, one can clearly see that recessions cause upspikes in part-time jobs which, as things get better, turn into full-time jobs. A valid concern at present is that the Affordable Care Act will stop the normal cycle of turning part-time to full-time jobs. It could even turn one full-time job into two part-time jobs.

So far, this recovery is at best pathetic in terms of job creation and GDP growth. Worse yet, is that the government had tried Keynesian stimulus and the Fed has had mega-accomodative monetary policy but these have produced minimal results.

As we go forward let’s pay attention not merely to the BLS headline but to how many new jobs are full-time.