macroblog

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The Atlanta Fed's macroblog provides commentary on economic topics including monetary policy, macroeconomic developments, financial issues and Southeast regional trends.

Authors for macroblog are Dave Altig and other Atlanta Fed economists.


June 19, 2015


Will the Elevated Share of Part-Time Workers Last?

There seems to be mounting evidence that at least part of the elevated share of part-time employment in the economy is here to stay. We have some insights to offer based on a recent survey of our business contacts.

Why are we interested? A higher part-time share of employment isn't necessarily a bad thing, if people are doing so voluntarily. Unfortunately, the elevated share is concentrated among people who would prefer to be working full-time. Using the average rate of decline over the past five years, the part-time for economic reasons (PTER) share of employment is projected to reach its prerecession average in about 10 years.

This is significantly slower than the decline in the unemployment rate, whose trajectory suggests a much sooner arrival—in around a year. The deviation raises an important policy question for measuring the amount of slack there is beyond what the unemployment rate suggests, and ultimately the extent to which policy can effectively reduce it.

What are the drivers? Data versus anecdotes
Researchers (here, here, and here) have pointed to factors such as industry shifts in the economy, changing workforce demographics, rising health care costs, and the Affordable Care Act as potentially important drivers of this shift. But we can glean only so much information from data. When a gap develops, we generally turn to our business contacts who are participating members in our Regional Economic Information Network (REIN) to fill in the missing information.

According to our contacts, the relative cost of full-time employees remains the most important reason for having a higher share of part-time employees than before the recession, which is the same response we received in last summer's survey on the same topic. Lack of strong enough sales growth to justify conversion of part-time to full-time workers came in as a close second.

The importance rating for each of the factors was notably similar to last year's survey, with one exception. Technology was rated as somewhat important, reflecting an uptick from the average response we received last year. We've certainly heard anecdotally that scheduling software has enabled firms to better manage their part-time staff, and it seems that this factor has gained in importance over the past year.

The chart below summarizes the reasons our business contacts gave in the July 2014 and the May 2015 surveys. The question was asked only of those who currently have a higher share of part-time workers than they did before the recession. The chart shows the results for all respondents, whether they responded to one or both surveys. When we limited our analysis to only those who responded to both surveys, the results were the same.

Will the elevated share persist?
The results suggest that a return to prerecession levels is unlikely to occur in the near term.

The chart below shows employers' predictions for part-time employment at their firms, relative to before the recession. About 27 percent of respondents believe that in two years, their firms will be more reliant on part-time work compared to before the recession. About 7 percent do not currently have an elevated share of part-time employees but believe they will in two years. About two-thirds believe their share of part-time will be roughly the same as before, while only 8 percent believe they will have less reliance on part-time workers compared to before the recession.

The majority of our contacts believe their share of part-time employment will normalize over the next two years, but some believe it will stay elevated. Still, 2017 does not mean the shift will be permanent. In fact, firms cited a balance of cyclical and structural factors for the higher reliance on part-time. Low sales growth and an ample supply of workers willing to take part-time jobs could both be viewed as cyclical factors that will dissipate as the economy further improves.

Meanwhile, higher compensation costs of full-time relative to part-time employees and the role of technology that enables companies to more easily manage their workforce can be considered structural factors influencing the behavior of firms. Firms that currently have a higher share of part-time employees gave about equal weight to these forces, suggesting that, as other research has found, both cyclical and structural factors are important explanations for the slow decline in the part-time share of employment.


June 19, 2015 in Business Cycles, Employment, Labor Markets, Unemployment | Permalink

Comments

Current technologies are a great enabler, this may not have been the case in the past. But one of the reasons, which needs further study is the fall out of M&A and the impact on payrolls, which makes very little allowance for full-time additions thereafter. The full time additions have been more in the retail space or service area, followed by technology, while we have seen dwindling fortunes in the Oil & Natural Gas sector, the last one has seen a switch to part-time.

Posted by: Procyon Mukherjee | June 21, 2015 at 11:26 PM

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June 05, 2015


Atlanta Fed's Wage Growth Measure Increased Again in April

A measure of 12-month wage growth constructed here at the Atlanta Fed increased by 3.3 percent in April. This rate is up from 3.1 percent in March and at its highest level since March 2009 (see the chart).

 

As mentioned in an earlier macroblog post, this measure behaves broadly like the wage and salary component of the Employment Cost index (ECI). The ECI data pertain to the last month in the quarter and are published with about a four-week lag. In contrast, the Atlanta Fed measure uses individuals' hourly wage data, 12 months apart, from the Current Population Survey (CPS). The data come from publicly available CPS microdata produced by the U.S. Bureau of Labor Statistics (BLS) and are typically released two or three weeks after the monthly BLS labor report.

Timeliness is one thing, but is it useful? It turns out there is a relatively strong correlation between this wage growth measure and the employment rate (100 minus the unemployment rate) lagged by 12 months (see the chart).

 

At least in terms of this measure of wage growth, it seems that improvement in labor utilization is translating into rising wage growth. This development is something our boss, Atlanta Fed President Dennis Lockhart, has been looking for. We expect to be able to update this wage growth measure with the May CPS data in a few weeks.

Photo of John Robertson
By John Robertson, a senior policy adviser in the Atlanta Fed’s research department

June 5, 2015 in Employment, Labor Markets, Wage Growth | Permalink

Comments

"It turns out there is a relatively strong correlation between this wage growth measure and the employment rate."

Didn't Keynes say this nearly 80 years ago? Of course Keynes is "old school" so his observations are necessarily outdated.

Posted by: Paul Mathis | June 05, 2015 at 05:49 PM

It seems that the improvement in the labor market appears to lag the improvement in wages. You would think that it should be reversed, an increase in employment leads to improved wages

Posted by: Ayelet | June 07, 2015 at 10:18 AM

@Ayelet - I think it shows the increase in wages lags the improvement in the employment rate which is what is expected by theory and gives confidence that the continuing improvement in employment should lead to more increases in wages. Given this data would be interesting to see include labor productivity in the analysis as a perceived problem in both the US and UK recovery has been the lack of productivity gains leading to concerns that the long-term potential growth rate has been reduced

Posted by: Oliver Bunnin | June 09, 2015 at 03:47 AM

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May 01, 2015


Signs of Strengthening Wage Growth?

The average hourly earnings measure for the private sector, reported in the U.S. Bureau of Labor Statistics's Establishment Survey, increased by a meager 2.1 percent in the first quarter (year over year). This increase was barely above the 2.0 percent pace observed in the fourth quarter of last year. However, Thursday's Employment Cost Index report showed a more sizable uptick in the wage and salary growth picture. Year-over-year growth in the first quarter was 2.5 percent, up from 2.1 percent in the fourth quarter of 2014. Another wage measure that we discussed in a February macroblog post also moved notably higher in the first quarter. That measure, which is derived from earnings data in the Current Population Survey, increased from 2.8 percent in the fourth quarter of 2014 to 3.2 percent in the first quarter of this year (see the chart).


This Wall Street Journal article (subscription required) also notes that anecdotal signs suggest a turnaround in wage growth, especially among lower-wage occupations. Overall, we take the evidence to suggest some emerging momentum in wage growth. Rising wage growth is an encouraging sign and is consistent with a tightening labor market.


Photo of John Robertson
By John Robertson, senior policy adviser, and
Photo of Ellie Terry
Ellie Terry, an economic policy analysis specialist, both of the Atlanta Fed's research department

May 1, 2015 in Employment, Labor Markets, Wage Growth | Permalink

Comments

Great chart, thank you. Where can I find the data for CPS median hourly wage (blue line) ?

Posted by: TM | May 05, 2015 at 09:50 AM

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March 06, 2015


Signs of Improvement in Prime-Age Labor Force Participation

This morning's job report provided further evidence of a stabilizing labor force participation (LFP) rate. After falling over 3 percentage points since 2008, LFP has been close to 62.9 percent of the population for the past seven months. Although demographics and behavioral trends explain much of the overall decline (our web page on LFP dynamics gives a full account), there is a cyclical component at work as well. In particular, the labor force attachment of "prime-age" (25 to 54 year olds) individuals to the labor force is something we're watching closely. Federal Reserve Bank of Atlanta President Dennis Lockhart noted as much in a February 6 speech:

Over the last few years, there has been a worrisome outflow of prime-age workers—especially men—from the labor force. I believe some of these people will be enticed back into formal work arrangements if the economy improves further.

There are signs that some of the prime-age individuals who had retreated to the margins of the labor market have been flowing back into the formal labor market.

For one thing, LFP among prime-age individuals stopped declining 16 months ago for women and nine months ago for men. By our estimates, declining LFP in this age category accounts for about one-third of the overall decline in LFP since 2007, so 25- to 54-year-olds' decision to engage in the labor market has a big effect on the overall rate (see the chart). Even with an improving economy, however, a turnaround in LFP among prime-age individuals might not occur.

Labor Force Participation Rate among 25- to 54-Year-Olds

The reason an improving economy might not reverse the LFP trends is that LFP for both prime-age men and women had been on a longer-term downward trend even before the recession began, suggesting that factors other than the recession-induced decline in labor demand have been important. But the decline in the "shadow labor force"—the share of the prime-age population who say they want a job but are not technically counted as unemployed—demonstrates the cyclical nature of the labor market. For the last year and half, the share of these individuals in the labor force has been generally declining (see the chart).

Percent of Prime-Age Individuals Who Want a Job but Are Not Technically Unemployed

Moreover, the job-finding success of the shadow labor force has improved. Although the 12-month flow into the official labor force has remained reasonably close to 50 percent, the likelihood of flowing into unemployment (as opposed to employment) rose during the recession. But during the past two years, that trend appears to be reversing (see the chart).

Share of 25- to 54-Year-Olds Who Want a Job (but Are Not Technically Unemployed) Who Are in the Labor Force One Year Later

The ability of the prime-age shadow labor force to find work is improving at the same time that the LFP rate of the prime-age population is stabilizing. Taken together, this trend is consistent with improving job market opportunities and further absorption of the nation's slack labor resources.

For a more complete analysis of long-term behavioral and demographic effects on LFP for the prime-age and non-prime-age populations, see our Labor Force Participation Dynamics web page, which now includes 2014 data.

March 6, 2015 in Economic conditions, Employment, Labor Markets, Unemployment | Permalink

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February 26, 2015


Are Shifts in Industry Composition Holding Back Wage Growth?

The last payroll employment report from the U.S. Bureau of Labor Statistics (BLS) included some relatively good news on wages. Private average hourly earnings rose an estimated 12 cents in January, the largest increase since June 2007. Even so, earnings were up only 2.2 percent over the last year versus average growth of 3.4 percent in 2007.

What accounts for the sluggish growth in average earnings? The average hourly earnings data for all workers is essentially the sum of the average earnings per hour within an industry weighted by that industry's share of employment. In this piece, Ed Lazear argues that a shift of the U.S. economy away from some high-paying industries to lower-paying industries may have contributed to dampened wage growth. Lazear specifically calls out the reduced share of employment in the relatively high-paying finance industry, at hospitals, and in the information sector as potential culprits. A shift in employment away from relatively high-wage jobs will put downward pressure on the growth in average wages.

To get some idea of the effect of industry composition on wages, I took the 2014 calendar year average wage for each industry group at the two-digit NAICS level and multiplied it by the share of employment in that industry in 2014 (admittedly, two-digit NAICS level of disaggregation is very coarse and masks a lot of potential shifts in job-types within industries). Summing across the industries gives an estimate of total average private hourly earnings in 2014. I then repeated the exercise, but using the 2007 industry shares of employment instead (see the chart).

Comparison of 2014 Wages: 2014 versus 2007 Industry Shares

Would average wages have been higher if we had the same mix of employment across industries as we had before the recession? The answer seems to be yes, but not much higher. If nothing had changed in the economy's industry employment mix since 2007, then average wages would have been about 12 cents higher.

This translates into a 16.8 percent increase in nominal wages between 2007 and 2014 versus a 16.2 percent increase if the actual industry employment shares where used, because the decline in the shares of employment in the relatively high paying industries Lazear cites has not been very large, and some higher-paying industries have seen growth. Moreover, some industries with below-average wages, such as retail trade, have experienced a decline in their share of employment as well.


February 26, 2015 in Employment, Labor Markets | Permalink

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"A shift of the U.S. economy away from some high-paying industries to lower-paying industries may have contributed to dampened wage growth."

"May have?" Are you kidding? A union manufacturing job (offshored to China) compared to a non-union fast-food job?

So don't just go back to pre-recession 2007, go all the way back to the trade deals under Bill Clinton in 1994 (NAFTA) and 2000 (PNTR) --- when 2000 was the year that the employment-to-population ratio and the labor force participation rate began declining.

Now Obama wants TPP and TTIP as well.

Posted by: Budf Meyers | February 27, 2015 at 10:46 AM

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February 17, 2015


What's (Not) Up with Wage Growth?

In recent months, there's been plenty of discussion of the surprisingly sluggish growth in hourly wages. It certainly has the attention of our boss, Atlanta Fed President Dennis Lockhart, who in a speech on February 6 noted that

The behavior of wages and prices, in contrast, remains less encouraging, and, frankly, somewhat puzzling in light of recent growth and jobs numbers.

So what's up—or not up—with wage growth? Using samples of matched worker-level wage data from the U.S. Bureau of Labor Statistics' Current Population Survey, chart 1 plots the annual time series of median 12-month growth rates in per-hour wages. Like most wage growth measures, this chart indicates that wage growth has been gradually increasing since the end of the recession, but growth remains quite a bit lower than before the recession began. Prior to the recession, the median growth rate of wages was around 4 percent a year. This growth rate declined to 1.7 percent in 2010 (as the incidence of wage freezes become much more prevalent, as shown in this research) and increased to 2.5 percent in 2014. For comparison, the chart also shows the annual growth in the Employment Cost Index's measure of wages. The trends in the two measures are broadly similar.

150217a

A previous macroblog post discussed details about the method of constructing the median wage growth data.

It's well known that wage growth varies across job characteristics such as occupation, industry, and hours worked as well as across worker characteristics such as education and age. For example, younger workers tend to experience higher hourly wage growth than older workers (even though their hourly wage tends to be lower), and part-time workers tend to have lower wage growth than full-time workers. We thought it might be interesting to look at wage growth for various job and worker characteristics. Are there any bright spots where the median growth in wages has approached prerecession levels?

The answer seems to be no, at least not for the set of characteristics we examined.

The following charts plot the annual time series of the median 12-month growth rate in the wages of workers with a given characteristic (occupation, age, etc.). Chart 2 depicts workers across three broad occupation groups: general-services jobs, production-oriented occupations discussed in our last macroblog post, and a category encompassing managerial, professional, and technical occupations (labeled “professional” in the chart).

150217b

Chart 3 shows the median year-over-year wage growth of workers employed in goods-producing versus service-producing industries.

150217c

Chart 4 shows the median growth in the wages of individuals working full-time versus those working part-time.

150217d

Chart 5 shows the median wage growth of workers with less than an associate degree and those with at least an associate degree.

150217e

Chart 6 shows the median growth in the wages of individuals between 16 and 35 years of age, those 36 to 55 years of age, and those over 55 years of age.

150217f

We can sum up our findings by saying that median wage growth is higher for some characteristics than others, and the recent trend in wage growth is generally positive across characteristics. But none of the characteristic-specific median growth rates we looked at are close to returning to prerecession levels. Lower-than-normal wage growth appears to be a very widespread feature of the labor market since the end of the recession.

February 17, 2015 in Employment, Labor Markets, Wage Growth | Permalink

Comments

I think it is a mistake to look for the pattern only in the relatively recent data. Wages have been falling relative to productivity since about 1970- http://politicsthatwork.com/graphs/wages-as-a-percentage-of-productivity

Posted by: politics that work | February 18, 2015 at 11:09 AM

Why should expected annual "wage growth" continue at all in the new normal of No-Real-Growth?

Posted by: Kreditanstalt | February 18, 2015 at 12:09 PM

These charts are terrific ... can you describe the process by which one may be able to update them?

I think you mention having used 'samples of matched worker-level wage data from the CPS.'

Thank you

Posted by: TM | May 05, 2015 at 10:04 AM

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December 23, 2014


Chances of Finding Full-Time Employment Have Improved

Today's sharp upward revision to the third-quarter GDP reading reinforces the view that the underlying strength of the U.S. economy has been sufficient to support more rapid improvement in the labor market. Last week we noted the solid and broad-based recent improvement in the involuntary part-time work (part-time for economic reasons or PTER) situation over the last year, noting significant declines in the stock of PTER workers across industrial sectors and occupational categories. 

In this post we look at labor market improvement over the last year in terms of worker flows. Because the Current Population Survey is set up as a rotating panel, many of the people in the survey in any given month were in the survey a year earlier as well. This allows us to ask the question: if you were an unemployed prime-age individual (25–54 years old) or working PTER one year ago, what are you doing today? Have your chances of becoming employed full-time improved? Chart 1 shows the distribution of labor market outcomes of prime-age workers who were PTER one year earlier. Chart 2 shows the distribution of outcomes for those who were unemployed one year earlier. The data are 12-month moving averages to smooth out seasonal variation.

Macroblog_2014-12-23_chart1

Macroblog_2014-12-23_chart2

For both PTER workers and the unemployed, the chances of becoming employed full-time are up from a year earlier (and the chances of being unemployed are down). In November 2013 there was about a 45 percent chance of someone who was PTER a year earlier having a full-time job. In November 2014 that had improved to about a 48 percent chance. This full-time employment flow rate is still much lower than the prerecession average of around 55 percent, and the improvement appears to have stalled a bit in recent months, but it is a notable improvement from a year earlier nonetheless. For PTER workers, the picture along other dimensions is more mixed. The chances of becoming unemployed appear to have returned to around prerecession levels, which is good, but the likelihood of remaining PTER is still quite elevated.

For the unemployed, there has been an even more marked improvement in the full-time finding rate over the last year. In November 2013 there was around a 32 percent chance of someone who was unemployed a year earlier having a full-time job. In November 2014 the chances improved to close to 36 percent. Moreover, the improvement in the rate of finding full-time work is responsible for the similar-sized decline in the chances of remaining unemployed. The only negative here is that the likelihood of an unemployed worker becoming PTER, while low, remains elevated compared with before the recession.

All in all, we think these developments are encouraging and add to the view that the pace of labor market improvement has picked up over the last year.

Happy holidays!

December 23, 2014 in Economic conditions, Employment, Labor Markets | Permalink

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This seems to be good news, but as a job seeker, I can tell you from the trenches that the jobs of 2014 are very different from the jobs of 2006. Jobs that used to have a base+commission+benefits are now fully commissioned and carry "self funded" benefits in the new lingo. Many of the people I know wearing suits and going to work every day are putting in 70 hours per week and not even making minimum wage. And I can further tell you that in the positions I'm applying for, I'm hearing back from HR dept's that they're getting hundreds of applications for any job they post. These are not the signs of a robust economy.

Posted by: Todd G. | December 24, 2014 at 11:16 AM

Within the last 12 months, if you were laid off, you would not be "long-long-term unemployed" — whereas several million other jobless Americans would be — and a significant number (who still want jobs) are no longer in the labor force. So if you were unemployed less than a year ago, or are currently working a part-time job (when preferring full-time work), then maybe the chance for YOU finding a full-time might have increased somewhat from a year ago. But if you were laid off in 2008, 2009, 2010, 2011, and 2012 (and still without a job) your chances haven't improved at all.

Posted by: Bud Meyers | December 24, 2014 at 12:22 PM

What happened back then cannot happen today...the jobs back then are different from now even if they are the same

Posted by: Tan | February 16, 2015 at 08:10 AM

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December 19, 2014


Exploring the Increasingly Widespread Decline in Involuntary Part-Time Work

We at the Atlanta Fed have been arguing for some time that the unusually large number and share of workers employed part-time but wanting full-time work (counted in the Current Population Survey as part-time for economic reasons, or PTER) partly reflects slack in the labor market that is not reflected in the official unemployment statistics. We are in good company. Chair Yellen reiterated this view in her prepared remarks during Wednesday’s Federal Open Market Committee press conference. The good news is that the stock of PTER workers has declined by around 900,000 during the last year compared with a decline of fewer than 200,000 in 2013. Moreover, the CPS data suggest the decline is primarily because these workers have either found full-time work or are no longer wanting full-time work (that is, are working part-time for noneconomic reasons), and not because they have become unemployed or have joined the ranks of the discouraged outside of the formal labor market. Even better news is that the recent decline has been very broad based (see the charts).

Number of People Working Part-Time for Economic Reasons by Occupational Skill Category (Goods-Producing Industries)

Number of People Working Part-Time for Economic Reasons by Occupational Skill Category (Services-Producing Industries)

Up until about a year ago, the overall decline in the number of PTER workers was driven primarily by those in middle-skill occupations in goods-producing industries and, to a lesser extent, in services-producing industries. But during 2014, the decline is also evident in services-producing industries among PTER workers in both low- and high-skill occupations—two categories that had not seen any material decline in their PTER ranks since the end of the recession. (A previous macroblog post discussed the various occupational skill categories.) There is still a ways to go, but these developments are very encouraging.

December 19, 2014 in Economic conditions, Employment, Labor Markets | Permalink

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November 24, 2014


And the Winner Is...Full-Time Jobs!

Each month, the U.S. Census Bureau for the U.S. Bureau of Labor Statistics (BLS) surveys about 60,000 households and asks people 15 years and older whether they are employed and, if so, if they are working full-time or part-time. The BLS defines full-time employment as working at least 35 hours per week. This survey, referred to as both the Current Population Survey and the Household Survey, is what produces the monthly unemployment rate, labor force participation rate, and other statistics related to activities and characteristics of the U.S. population.

For many months after the official end of the Great Recession in June 2009, the Household Survey produced less-than-happy news about the labor market. The unemployment rate didn't start to decline until October 2009, and nonfarm payroll job growth didn't emerge confidently from negative territory until October 2010. Now that the unemployment rate has fallen to 5.8 percent—much faster than most would have expected even a year ago—the attention has turned to the quality, rather than quantity, of jobs. This scrutiny is driven by a stubbornly high rate of people employed part-time "for economic reasons" (PTER). These are folks who are working part-time but would like a full-time job. Several of my colleagues here at the Atlanta Fed have looked at this phenomenon from many angles (here, here, here, here, and here).

The elevated share of PTER has left some to conclude that, yes, the economy is creating a significant number of jobs (an average of more than 228,000 nonfarm payroll jobs each month in 2014), but these are low-quality, part-time jobs. Several headlines have popped up over the past year or so claiming that "...most new jobs have been part-time since Obamacare became law," "Most 2013 job growth is in part-time work," "75 Percent Of Jobs Created This Year [2013] Were Part-Time," "Part-time jobs account for 97% of 2013 job growth," and as recently as July of this year, "...Jobs Report Is Great for Part-time Workers, Not So Much for Full-Time."

However, a more careful look at the postrecession data illustrates that since October 2010, with the exception of four months (November 2010 and May–July 2011), the growth in the number of people employed full-time has dominated growth in the number of people employed part-time. Of the additional 8.2 million people employed since October 2010, 7.8 million (95 percent) are employed full-time (see the charts).

The pair of charts illustrates the contribution of the growth in part-time and full-time jobs to the year-over-year change in total employment between January 2000 and October 2014. By zooming in, we can see the same thing from October 2010 (when payroll job growth entered consistently positive territory) to October 2014. Job growth from one month to the next, even using seasonally adjusted data, is very volatile.

To get a better idea of the underlying stable trends in the data, it is useful to compare outcomes in the same month from one year to the next, which is the comparison that the charts make. The black line depicts the change in the number of people employed each month compared to the number employed in the same month the previous year. The green bars show the change in the number of full-time employed, and the purple bars show the change in the number of part-time employed.

During the Great Recession (until about October 2010), the growth in part-time employment clearly exceeded growth in full-time employment, which was deep in negative territory. The current high level of PTER employment is likely to reflect this extended period of time in which growth in part-time employment exceeded that of full-time employment. But in every month since August 2011, the increase in the number of full-time employed from the year before has far exceeded the increase in the number of part-time employed. This phenomenon includes all of the months of 2013, in spite of what some of the headlines above would have you believe.

So, in the post-Great Recession era, the growth in full-employment is, without a doubt, way out ahead.

Author's note: The data used in this post, which are the same data used to generate the headlines linked above, reflect either full-time or part-time employment (total hours of work at least or less than 35 per week, respectively). They do not necessarily reflect employment in a single job.

November 24, 2014 in Data Releases, Economic conditions, Employment, Labor Markets | Permalink

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November 20, 2014


For Middle-Skill Occupations, Where Have All the Workers Gone?

Considerable discussion in recent years has concerned the “hollowing out of the middle class.” Part of that story revolves around the loss of the types of jobs that traditionally have been the core of the U.S. economy: so-called middle-skill jobs.

These jobs, based on the methodology of David Autor, consist of office and administrative occupations; sales jobs; operators, fabricators, and laborers; and production, craft, and repair personnel (many of whom work in the manufacturing industry). In this post, we don't examine why the decline in middle-skill jobs has occurred, just how those workers have weathered the most recent recession. But our Atlanta Fed colleague Federico Mandelman offers an explanation of why this has occurred.

So how have workers in middle-skill occupations fared during the last recession and recovery? Let's examine a few facts from the Current Population Survey from the U.S. Bureau of Labor Statistics.

Only employment in middle-skill occupations remains below prerecession levels
Chart 1 shows employment levels by skill category (using 12-month moving averages to smooth out the seasonal variation). From the end of 2007 to the end of 2009, the overall number of people working declined by more than 8 million. Middle-skill jobs were hit the hardest, declining about 10 percent from 2007 to 2009. As of September 2014, the level was still about 9 percent below the 2007 level. In contrast, employment in low-skill occupations is 7 percent above prerecession levels, and employment in high-skill occupations is about 8 percent higher than before the recession.

Chart 1: Employment by Occupation Skill Category

For full-time workers (working at least 35 hours a week at all jobs) the decline in middle-skill occupations is even more dramatic. From 2007 to 2009, the number of full-time workers whose main job was a middle-skill occupation fell more than 15 percent from 2007 to 2009 and is still about 11 percent below the level at the end of 2007.

Those in middle-skilled occupations were most likely to become unemployed
In the 2001 recession, the chances of being unemployed after one year were similar for those working full-time in middle- and low-skill occupations. During the most recent recession, the likelihood of becoming unemployed rose sharply for everyone, but much more sharply for those working in middle-skill occupations. At the recession's trough, almost 6 percent of people who were employed in middle-skill occupations one year earlier were unemployed, compared with about 3 percent of workers in high-skill occupations and 3.5 percent of workers in lower-skill occupations (see chart 2).

Chart 2: Percent Unemployed by Type of Job Held a Year Earlier

Underemployment has improved only slowly at all skill levels
The share of people who are working part-time involuntarily about doubled for workers in low-, middle-, and high-skill occupations. For middle-skill occupations, the share rose from around 1.7 percent to 4.3 percent and is currently around 2.4 percent. For low-skill occupations, involuntary part-time employment increased from 2.4 percent to 5 percent and was still 3.8 percent as of September 2014. And for those in high-skill occupations, the chances of becoming involuntarily part-time rose from 0.8 percent to 1.8 percent and are now back to about 1 percent (see chart 3).

Chart 3: Percent Working Part-time for Economic Reasons by Type of Job Held One Year Earlier

Ready for some good news?

Those who held middle-skill jobs are more likely to obtain high-skill jobs than before the recession
Currently, of those in middle-skill occupations who remain in a full-time job, about 83 percent are still working in a middle-skill job one year later (see chart 4). What types of jobs are the other 17 percent getting? Mostly high-skill jobs; and that transition rate has been rising. The percent going from a middle-skill job to a high-skill job is close to 13 percent: up about 1 percent relative to before the recession. The percent transitioning into low-skill positions is lower: about 3.4 percent, up about 0.3 percentage point compared to before the recession. This transition to a high-skill occupation tends to translate to an average wage increase of about 27 percent (compared to those who stayed in middle-skill jobs). In contrast, those who transition into lower-skill occupations earned an average of around 24 percent less.

Chart 4: Employment Outcomes of Those Working in Middle-Skill Occupations One Year Earlier

In summary, the number of middle-skill jobs declined substantially during the last recession, and that decline has been persistent—especially for full-time workers. Many of the workers leaving full-time, middle-skill jobs became unemployed, and some of that decline is the result of an increase in part-time employment. But others gained full-time work in other types of occupations. In particular, they are more likely than in the past to transition to higher-skill occupations. Further, the transition rate to high-skill occupations has gradually risen and doesn't appear directly tied to the last recession.


Authors' note: The middle-skill category of jobs consists of office and administrative occupations; sales; operators, fabricators, and laborers; and production, craft, and repair personnel. The other two broad categories of occupations are labeled high-skill and low-skill. High-skill occupations consist of managers, technicians, and professionals. Low-skill occupations are defined as those involving food preparation, building and grounds cleaning, personal care and personal services, and protective services.


November 20, 2014 in Employment, Labor Markets, Unemployment | Permalink

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Two Questions

1) How many middle skill workers have given up looking for work?

2) Ignoring percentages (since the workforce as a percent of the adult population is smaller) how many middle skill worker jobs are gone that were not replaced by high skill worker jobs

Thanks!

-Frank

Posted by: Frank Kelly | November 30, 2014 at 09:33 AM

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