As the economy recovers the unemployment rates drops, albeit slightly, but the real information underneath that declining unemployment isn’t so good for the chronically under-employed. The percentage of part time jobs has increased as full time positions have decreased. And that situation looks like it may be here to stay. Michael Graham examines this new “workscape” and what it means for the economy overall.
Yes we all know that the economy is recovering, limping along on an improving road of job creation, wealth creation, and stability. The Bureau of Labor Statistics (BLS) jobs report for June 2014 indicated that over 288,000 jobs had been created that month alone. But beneath this seemingly compelling good news is the frustration of 7.5 million workers who were in June “employed part-time for economic reasons”. And since no good news can go unpunished (even the qualified good-ish news from June), the August jobs report showed an alarming decrease in unemployment and the lowest job creation rate since January. How can a decrease in unemployment be alarming? Well, it is alarming when it represents 3 million people dropping out of the labor force because they simply don’t believe that jobs are available.
But let’s turn our attention away from unemployment and look at underemployment. In June the jobs report was challenged as biased, or at least misleading, because the jobs gained (or many of them at least) were part time (which further inspired pundits to incorrectly seize upon Obama care as the reason).
But this change in the American “workscape” from full time to part time isn’t new news. And it seems like it may be here to stay. Certainly in past recessions companies have turned to part time and contract workers to temporarily fill employment gaps, but mostly these part time positions converted back to full time as the economy regained momentum. It doesn’t seem to be happening that way this time.
An article published on August 5 in SeekingAlpha brings into stark contrast the changes in the US labor market since the start of the great recession in 2008. The article by Ellen Terry What’s Driving The Part-Time Labor Market? Results From An Atlanta Fed Survey shares this stunning graphic: An article published on August 5 in SeekingAlpha brings into stark contrast the changes.
In this graph the X axis is obviously years (2004-2014). The Y Axis is percentages with 2007 indexed at 100% and the movement of the lines referring to percentage increase (above 100) and decreases (below 100) since that time. This graph shows approximately a 12% increase in part time jobs since 2007 with about a 3% decrease in full time jobs.
Take a magnifying glass to the far right side of the graphic and you can see that full time jobs (the blue line) are increasing, but so too are part time positions (the green line), and this green line has a steeper glide path than the blue one.
In total (and according to the BLS August report) there are just over 146 million American employed with about 27 million of them part-time and as of August 7.3 million of those part timers are “employed part time for economic reasons”. One important thing to note is that the BLS designates part time workers as those employed for less than 35 hours a week.
So that leaves us with the question of what this expansion in part time employment means to America. Clearly we have seen economic growth and a slow but now less rocky recovery. The unfortunate outcome is that we are facing an enormous challenge as the recovery has America’s richest (remember the 1%?) get richer while the 99% aren’t sharing so much in the wealth creation. There are two distinct challenges.
FIRST MANY OF THE 1% ARE FOCUSED ON WEALTH CREATION FOR THEMSELVES RATHER THAN VALUE CREATION FOR THE ECONOMY. Think hedge fund managers who, according to an article in the Harvard Business Review by Roger L. Martin, now make up 31 of the Forbes 400 richest people .
SECOND, THE “TRICKLE DOWN” FROM THESE BILLIONAIRES DOESN’T SEEM TO BE HAPPENING. It is value creation that creates jobs which America’s un- and under-employed desperately need. And not just them but our economy as a whole would recover more quickly and more successfully with a fully employed middle class who have money to spend on products, services, and entertainment.
Yes, we all know this, we have heard it time and again. This is nothing new or revolutionary. But it is critical to our country’s continued prosperity. The dichotomy is growing between the wages of our skilled and unskilled labor. Occupy Wall Street might be old news at this point, but those who were there are still here and without some improvement to the prospects of tens of millions of Americans we would not be surprised to see an “American Spring” of discontent bloom.