Monday, July 8, 2013

Putting part-time employment in perspective

Much has been made of late over the fact that the number of people employed part-time for economic reasons has jumped—by more than 300K in June, which is more than the entire gain in employment for the month. In reality, the number of involuntary part-timers has been slowly declining over the past several years, much as it does in every recovery, and the increase in June is similar to other monthly increases in recent years, and thus looks to be more a problem of seasonal adjustment than any sudden change in the dynamics of the labor force or the jobs market. The problem today with part-time employment is not the recent growth in part-timers, but the fact that the number of part-timers remains unusually high relative to what it was in prior business cycles, just as the unemployment rate in general remains unusually high.

As the chart above shows, there was a huge, outsized gain in the number of part-time employed during the Great Recession; far more than anything we have seen in modern times. This can't be blamed on the failings of Obamacare, which wasn't passed until mid-2010 and which creates strong incentives for small and medium-sized businesses to prefer part-time workers over full-time workers in order to minimize their exposure to Obamacare's employer mandate. It should also be clear that last month's rise is not at all unusual: there have been several similar one-month increases in the past several years. The trend in this relatively volatile series remains down, in a fashion similar to what we have seen in prior business cycle expansions.

If there is anything to blame for the unusually high level of part-time employment, it is whatever has caused this recovery to be unusually weak. I think the finger of blame points towards a variety of causes: the uncertainty created by the Fed's Quantitative Easing, the generally high level of risk-aversion to be found in a variety of market indicators, the extremely strong demand for high-quality risk-free assets, the marked expansion of government spending than began in 2008, the rise in marginal tax rates, and the substantial increase in regulatory burdens, including those imposed by Obamacare.


marmico said...

Why didn't you normalize to total nonfarm payroll levels?

FRED is your friend

Normalized, the Great Recession doesn't look that much worse compared to the early 1980s back to back recessions. Slightly lower starting point, slightly lower peak.

Your narrative needs to be amended.

William said...

(Reuters) - Pimco, the manager of the world's largest bond fund, suffered record outflows across its U.S. mutual funds of $14.5 billion in June, investment research firm Morningstar said on Monday.

The total withdrawals include outflows of $9.6 billion from the firm's flagship Pimco Total Return Fund in June, also a monthly record according to Morningstar and reducing the fund's assets to $268 billion.

Benjamin said...

think the finger of blame points towards a variety of causes: the uncertainty created by the Fed's Quantitative Easing--Scott Grannis.

I think this would be better phrased, "The uncertainty caused by the Fed's lack of steadiness and clarity in pursuing a long-range QE plan."

Both John Taylor and Milton Friedman have advocated QE at various points in their careers.

So, if you believe the two best monetarists of all time, then you believe that QE is good policy when warranted.

There is nothing wrong with QE in principle, or morally. It is a matter of timing and degree, according to Friedman and Taylor.

I find it hard to believe that the USA does not need QE, when we face deep and sustained recession and record-low inflation and interest rates.

The problem is the Fed, and its coyness, and lack of resolve in delineating its QE program.

If the Fed would just say, "We will pursue aggressive QE until we see employment back to 2008 levels, or inflation rising to more than 3.5 percent," then the QE program would not cause uncertainty. It would cause jubilation and growth.

This lack of clarity from the Fed goes back to a long held notion that the Fed should be august and mysterious and secretive, which was never a good policy and even less so now.

You know what I always say. KISS.

The Fed should say. "We will buy $100 billion a month in Treasuries until XX and XX targets are hit."

The market will be certain.

BTW, a question: Lots of people say the banks have excess reserves that are inert. But could the recent rises in retail sales be an indication people are taking money out of their bank accounts and spending it?

William McKibbin said...
This comment has been removed by the author.
Hans said...

On the Marco level and over time the argument should be - the bigger the government, the smaller the economy..

The unnatural crowding out of the efficient by the inefficient...

The State of Inefficient, has arrive on the scene for all to marvel at..

When hundreds of thousands of employers, have to employ the strategy of part time hires in order to survive, how in God's name can anyone be Optimistic?

Mr Grannis is correct, that one fine day, CONgress will take a collective dump on CommieCare...

But for those grieving Collectivists, have heart becomes in a decade or two, the subject will be revisited with the introduction of - Village Care...

Ben Jamin, I am disappointed in both Uncle Milton and Herr Taylor's
belief that these kind of remedial action by the Fed works.

We are now on the fifth year of FedZero and still the economy is barely in the green...This is just more proof, that sustainable actions by the Federal Reserves are rather quite limited in scope and in the main unworkable and unwanted...

Jason Villegaz said...

Part time employment is better than unemployment. Some unemployed people rely much on their income protection cover while part time employees have steady incomes.