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More Part-Timers; Wages Stagnant

July 8, 2014

Despite employment gains in June, the labor force participation rate remains at 62.8 percent, unchanged from the previous two months and near its lowest level in 36 years. Labor force participation is down 0.7 percentage points compared to June 2013. The labor market remains weaker than the last time we had an unemployment rate of 6.1 percent, in September 2008. The difference is “shadow unemployment,” people who want a job but have stopped looking, or are working part time but want a full-time job.

labor force participation rate

Real Unemployment

The “real” number of unemployed Americans is 19.0 million. These are people who are unemployed (9.5 million), want work but have stopped searching for a job (2.0 million), or are working part time because they cannot find full time employment (7.5 million). The “real” unemployment, or U-6, rate is 12.1 percent, down 0.1 percentage point from May.

Rise in Part-Time Employment

According to the Labor Department, the economy lost 523,000 full-time jobs in June while gaining 799,000 part-time jobs. This is the largest jump in part-time employment in two decades. The number of people working part time but wanting full-time employment jumped by 275,000 to 7.5 million. In March, Federal Reserve Chair Janet Yellen expressed concern with the consistent number of Americans working part time for economic reasons.

part time for econ reasons

A similar spike in part-time employment occurred between April and July 2013, when employers were anticipating a January 2014 Obamacare requirement that they provide health insurance. The President delayed the employer mandate last July, and subsequently part-time employment fell by nearly one million. Earlier this year, the administration marked July 1, 2014, as the last day for companies to begin their assessment to determine whether the employer mandate applied to them. If Obamacare is causing a shift in employment, there likely will be further increases in the number of part-time workers. 

The White House has suggested that one way to test Obamacare’s effect on the work week is to look at whether there has been a shift in the ratio of workers employed 31 to 34 hours per week – above the amount requiring insurance coverage – compared to those working 25 to 29 hours –below the Obamacare threshold. A stable or rising ratio would indicate that Obamacare was not impacting work hours. But that ratio has fallen to its lowest level in nearly 14 years.

Since the fourth quarter of 2012, the number of people working 31 to 34 hours a week in their primary job has fallen by 157,000 or 6.4 percent. The number working 25 to 29 hours per week has risen by 375,000 or 10.8 percent. 

Negligible Wage Growth

This apparent move to part-time employment has contributed to wage gains that have been far too low for many Americans. Over the past 12 months, average hourly earnings have risen by just two percent, leaving workers struggling just to keep up with rising costs.

The policies of the Obama administration have done too little to help middle-class American families, and have prolonged the weak recovery from a recession that ended five years ago.