Ed Dolan's Econ Blog

Part-Time Work is Increasingly by Choice as U.S. Labor Market Strengthens

The U.S. labor market continued to strengthen in June, according to the latest data from the Bureau of Labor Statistics. Strong June data and upward revisions for April and May put payroll job gains for the second quarter of 2013 ahead of those for the first three months of the year. The unemployment rate remained unchanged as both the labor force and the number of employed workers grew. Involuntary part-time work fell to its lowest level since early 2009, and long-term unemployment also fell to a low for the recovery.

The economy gained 202,000 private-sector payroll jobs in June. Most of those came in the service sector, although goods-producing industries also gained slightly. The government sector as a whole lost 7,000 jobs, but trends differed strongly by level of government. The federal government lost 5,000 jobs, continuing a long decline. State governments reduced payroll employment by 15,000 jobs, but that was almost fully offset by a gain of 13,000 jobs in local government.

As the following chart shows, payroll job gains were revised upward from data first reported for April and May. The revisions raise the total number of payroll jobs added in Q2 2013 to 535,000, significantly more than the 481,000 added in the first quarter. The good quarterly job data provide a reason for optimism regarding Q2 GDP, for which the first estimate is due at the end of the month.

The unemployment rate for June remained steady at 7.6 percent, near its low for the recovery. The unemployment rate is the ratio of unemployed persons to the civilian labor force. The labor force grew by 177,000 in the month, the number of employed by 160,000 and the number of unemployed by 17,000. These data are based on a separate household survey that does not always agree with the survey of employers on which the payroll jobs data are based. The two differ partly because of sampling error and partly because the payroll jobs data exclude farm workers and the self-employed. The BLS also publishes a broader measure of unemployment and underemployment, U-6, which includes discouraged workers and involuntary part-time workers. Despite otherwise healthy job numbers, U-6 rose to 14.3 percent in June.  Both the standard and broad measures of unemployment are shown in the next chart.

The duration of unemployment offers still another perspective on labor market conditions. Long-term unemployment, which has been unusually high over the past five years, has finally started to come down. As the next chart shows, the number of workers out of a job for 27 weeks or more fell to 36.7 percent of all unemployed, the lowest level of the recovery, although still very high by historical standards. The mean and median duration of unemployment also fell for the month.

Finally, the BLS report includes some interesting data on part-time work. The BLS divides part-time workers into two categories. About two-thirds of all people who work from 1 to 34 hours per week do so voluntarily, for example, because they are retired, are studying, or have family obligations. The rest are working part-time for economic reasons, that is, either because they can’t find full-time work or because their employer has cut their hours. Those are popularly known as “involuntary” part-time workers. During a recession, the number of involuntary part-time workers tends to increase, and then falls again during the recovery. The behavior of voluntary part-time employment is just the reverse—it falls during a recession and rises again during the recovery.

Both trends are evident in the next chart, which shows that involuntary part-time work fell to a low for the recovery in June. Meanwhile, the trend of voluntary part-time unemployment has been upward. Both trends appear somewhat more pronounced than during previous recessions.

Some labor-market observers expect the number of part-time workers to rise sharply next year when the Affordable Care Act comes into effect. When fully implemented, the ACA will require employers to provide healthcare coverage for full-time workers or pay a penalty. At the same time, it will make it easier for workers who are not covered at work to buy individual health insurance privately through insurance exchanges. That will be especially important for people with pre-existing health conditions, who now often find it impossible to buy individual coverage, and for low-wage workers, who will receive subsidies when they buy insurance through exchanges.

As a result of these various incentives, the ACA may have the paradoxical effect of increasing both voluntary and involuntary part-time work. Voluntary part-time work may rise because, at present, some people who would prefer to work fewer hours reluctantly work full time solely because that is the least expensive way, perhaps the only way, to get health insurance. On the other hand, some employers may cut hours or replace full-time positions with part-time positions in order to lower healthcare costs or avoid penalties. That may make full-time work harder to find for many who want it. It will be interesting to watch the trends of part-time employment as more provisions of the ACA come into effect at the first of the year.

15 Responses to “Part-Time Work is Increasingly by Choice as U.S. Labor Market Strengthens”

Rudy HaugenederJuly 5th, 2013 at 3:10 pm

The latest American jobs report — and your interpretation — is like trying to turn sewage water into top quality whiskey by using a paper cup.

Most of the jobs created in June were part-time jobs, says financial analyst Michael Lombardi, a DOW bear. The number of people working part-time in the U.S. jobs market rose by 322,000 to 8.2 million.

"These people aren't working part-time because they want to—it's because they can't find full-time work," he adds.

Lombardi says "of the jobs created in June, 60% were in low-paying positions: 75,000 jobs were created in the leisure and hospitality sector, and 37,000 jobs were created in the retail sector! Low-paying jobs do not create economic growth."

But good-paying jobs aren't the future. Once a manufacturing giant, many USA sectors are just a tiny fraction of what they were with many others having disappeared altogether. Fini.

Just for your information, the United States imports, by value and weight, more food than it exports. Not the sign of a reemerging giant. Soon, if not already, the United States will be borrowing internationally to buy food.

Ed Dolan EdDolanJuly 5th, 2013 at 6:48 pm

""These people aren't working part-time because they want to—it's because they can't find full-time work"

I am not quite sure where Michael Lombardi is getting his data. I can't easily reconcile it with the BLS jobs data. Here is what the BLS says:

Total jobs created in the last year: 1,017,000
Total part-time jobs created in the last year: 235,000
of which
Increase in voluntary part-time jobs: 219,000
Increase in part-time jobs "for economic reasons": 16,000

Percent of all part-time jobs that are voluntary ("not for economic reasons"): 69.8%

Bryan WillmanJuly 5th, 2013 at 8:29 pm

Either just before or just after this, the administration announced it won't enforce the employer mandate until 2015. Various reasons are given, various debates about the legality. But "it won't work" and "political backlash" both seem powerful factors.

What really comes of this (and thus its effects on part time work) remains to be seen – if the employer mandate never materializes at all (because it's repealed, say) then what happens to the exchanges? If the exchanges work and provide reasonable costs (yet to be seen) then the number of people choosing part time work might go up – BUT – it might not because today full timer's in effect get a lot of compensation in the form of health insurance, and paying directly might require full time effort anyway.

Bryan WillmanJuly 6th, 2013 at 1:29 am

Economists all seem to agree that the US tax code creates a number of distortions, at least some of which are bad.

I wonder if the various labor market distortions caused by health insurance being provided as an "off the paystub" part of compensation are well understood? One can argue (and I do) that if all businesses were required to pay people only in cash, equity, etc., and people *all* bought their own health insurance, that some distortions would be relieved. But of course, when people see how expensive private insurance is, they don't often think "a pretty comparable amount of money was part of my compensation at Big Corp, but I never saw nor had any control of it"

What this has to do with this post is the nasty compensation leap between FT/PT, which may yet be encoded in law. It implies that working 31hrs per week will in effect have a much higher rate of hourly compensation than working 29hrs per week (at any one employer.) I wonder if this is actually a good policy?

Ed Dolan EdDolanJuly 6th, 2013 at 9:42 am

Yes, the administration's decision could spread the effect over two years. However, the part due to ability of individuals to afford insurance on their own if working part time will still come into effect on schedule next year. That could mean that some people voluntarily switch to part-time work.

kkloudermilkJuly 9th, 2013 at 9:20 am

The health insurance options available to an individual are very limited. Though they are not expensive for very healthy people, as soon as you have a claim your premium will go up or you will be denied coverage. Coverage is svsilsble through the pools but it is very expensive. I am a white healthy 57 year old woman who was denied coverage though I have never been on prescription medication and have had no surgeries. From what I can glean, it was a spate of visits to the chiropractor some years ago that rendered me uninsurable. My coverage through the pool is a major medical plan with a 5000 deductible for which I pay 350/ month. For that, I receive no wellness benefits. Obamacare failed to make Healthcare affordable for me

farmsalmon4everJuly 9th, 2013 at 11:00 am

The US economy today has 6M less jobs than it did in 2007. 4/10 Americans work for less than $10/ hr. The recovery resembles a recession in every way except money printing & massive spending has masked the problem by causing an artificially induced rise in some asset prices (housing, wall street). There is no strength at all in June jobs report- it shows exactly what you would expect from an country that refuses to allow the market to restructure following a government-orchestrated housing bubble.

farmsalmon4everJuly 9th, 2013 at 11:03 am

The real measure of the weakness in USA economy is that the trade deficit continues to be huge-over $500B/ yr. With a deficit of $1T/yr and the housing bubble reflation that has been somewhat accessible thanks to Fed $ printing dumb Americans have resumed overspending borrowed money. This is what you call a recovery?

farmsalmon4everJuly 9th, 2013 at 11:10 am

The number of jobs here is miniscule and presents as a recession. The USA has 6M less people working today than 2007. Please explain how the "voluntariness" of part time job is measured? Polling? I assume no one says they are being forced into working. Why would anyone take a voluntary job or any job if not for economic reasons?

farmsalmon4everJuly 9th, 2013 at 11:38 am

"Despite otherwise healthy job numbers, U-6 rose to 14.3 percent in June."

Nothing healthy about a measely 195K jobs being created. Need 100K just to keep pace with population growth; 6M less jobs in 2013 than in 2007. This anemic job growth is only due to ridiculously low interest rates kept low by printing $85B per month by Fed.

Why are you trying to spin this terrible data in a positive way?

AllanJuly 9th, 2013 at 11:44 pm

…" These data are based on a separate household survey that does not always agree with the survey of employers on which the payroll jobs data are based. The two differ partly because of sampling error and partly because the payroll jobs data exclude farm workers and the self-employed. "…

Would not a person holding 2 or more part time jobs be regarded as a single employed person in the household survey but as 2 or more employed persons in the survey of employers?

Ed Dolan EdDolanJuly 10th, 2013 at 9:34 am

Yes, that's another difference. It is always worthwhile to look at both sets of data. They give rather different pictures of what is going on.

RanjitJuly 11th, 2013 at 8:55 am

Those are the correct y/y numbers, all right, but your post came on the heels of the June employment report, which shows a sharp increase in the number of involuntary part-timers from the previous month: from 7,904,000 to 8,226,000 an increase of 322,000. That's almost three times as large as the increase in part-time employment for noneconomic reasons, 110,000.

If you omit farm workers from the sample, then the numbers are somewhat less dismal, but it's still a ratio of more than 2:1 — 314, 000 new involuntary part-time workers, versus 185,000 "voluntary" part-time workers.

Either way, it's incorrect to say that the current employment report shows an increased trend away from involuntary part-time work and toward voluntary part-time work. The previous few reports maybe, but not this one.

Ed Dolan EdDolanJuly 11th, 2013 at 10:17 am

You are right. On closer inspection, I see that although my text correctly describes the general trends shown in the chart, the last data point shown is for May, not June. As you note, there was an uptick in involuntary unemployment in June.