Part Time Employment Crisis

Written By Brian Hicks

Posted July 22, 2013

According to the Wall Street Journal, June saw 195,000 net new hires. Even better, the data for April and May bounced upward by a combined 70,000 new hires. Considering that the monthly average for 2012 was 182,000, the new average of 200,000—established over the past three months—is pretty good news.

If we look a little closer, though, some interesting things emerge. First, the number of “long-time” unemployed people dropped again—it’s decreased by 1 million over the past 12 months. Second, June saw the low labor participation rate rise slightly—from 63.4 percent to 63.5 percent. And the average hourly wage increased by 10 cents to $24.

part time jobNonetheless, the number of “discouraged workers” increased to 247,000 (that’s not a good thing, though this may be an outlier for the month).

The real problem I want to focus on is the rise in the number of people who sought full-time employment but had to settle for part-time work. In a single month, this figure reached 8.23 million, or a rise of 322,000. And total part-time employment rose by 432,000, or more than twice the number of total new jobs.

Now, if we’re thinking of unemployment inclusive of “discouraged” workers and those who, for financial reasons, cannot secure a full-time job, that rate is now 14.3 percent. That’s an increase upward from 13.8 percent. Not good at all.

Considering that we’ve seen several significant indicators of the economy rise in the recent past, we should actually be seeing an increase in the number of full-time hires and a corresponding decrease in the number of part-time hires. Yet we’re seeing a rise in the part-time workforce.

The Wall Street Journal identifies retail and leisure/hospitality businesses as the sectors that accounted for more than half of all the new jobs added through June. However, it notes that the average hours for retail work have actually dropped from 31.6 to 31.4 per week over the past 12 months. The figure for hospitality jobs has remained at 26.1 hours per week.

Affordable Care Act: A Bane for Businesses?

Could the Affordable Care Act be a possible driver of this contrarian trend? After all, the new laws do insist that all employers with more than 50 employees either provide health insurance or pay a fine of $2,000 per worker. And under the law, a full-time job is one that covers 30 hours per week.

If you’re a small business owner, you may very well find yourself caught between a rock and a hard place—and the solution may very well be to increase your number of part-time workers. In fact, businesses that were going to hire more full-time workers as the great financial crisis faded might now have to reconsider their moves and hire more part-timers instead so as to remain profitable. This isn’t an ideal situation at all.

On the other hand, the Treasury recently declared it would be putting off that employer mandate until 2015. It’s possible that the postponement could entice businesses to make their full-time hires while they can.

Still, it’s just a year—businesses typically have a longer vision than that. As the Washington Post notes, the number of part-time workers across the nation today rivals the population of the state of Virginia (8.2 million).

This creates a problem for would-be full-time employees and the businesses that would like to hire them but can’t because of how the Act cuts into their bottom line.

Amidst all this, we can’t forget that the U.S. Federal Reserve is muttering about bringing about an end to its asset-buying program—the same program that has largely been responsible for making possible what recovery we currently have in progress. All things considered, it’s not a good sign of things to come.

We’re already expecting something of a shock to the market when the Fed finally announces it’s ending the stimulus, and businesses already seem to be battening down the hatches. If you’re an investor, consider going with businesses that demonstrate the ability to continue hiring full-time employees—they clearly have the funds to afford it.

On the other hand, if this blows up and it becomes clear that the Affordable Care Act really did repress post-recession hiring, history will not be very forgiving of that fact.


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