The Full-Time Jobs Deficit

Although the economy has recovered from the depths of the recession of 2007-2009, there are 4.25 million fewer payroll employees than there were in September 2007 according to the Bureau of Labor Statistics (BLS).  It is more troubling that there are 6.05 million fewer people working full-time than in September 2007 according to the BLS household survey.  There are over 8 million people working part-time for economic reasons, most of them due to slack work.   The deficit in full-time jobs relative to the pre-recession economy is a symptom of a weak economic recovery.

No group has seen a bigger shift to part-time employment than young adults age 20 to 24.  In the past five years young adults in this age group have seen a 23.3% decrease in full-time employment and a 22.4% increase in part-time employment (relative to population).  The following chart shows that 37.6% of employed adults age 20 to 24 now work part-time.  This is the highest fraction since the BLS began reporting these figures.  Between 1994 and 2007 the share of part-time work increased from 27.4% to 28.4% for this age group.  Since the recession the part-time employment rate has risen dramatically.

The increase in part-time employment relative to full-time employment over the past decade is attributable to many factors including the weak recovery, rising cost of health care benefits, economic uncertainty, and the changing demographics of the U.S. labor force.  One of the main reasons why adults age 20-24 are working part-time in record numbers is that new graduates are struggling to find jobs in their fields.  Thus young workers are settling for part-time work as they wait for the economy to improve so they can pursue their careers.  Fewer full-time jobs results in lower tax revenue, higher deficits and slower household formation.  When new college graduates end up in part-time jobs and move back in with their parents it is bad news for the housing market and construction sector.

Vanishing Full-Time Jobs for Young Adults

According to the latest figures from the Bureau of Labor Statistics, more and more young adults are taking part-time rather than full-time jobs.  While the number of young adults age 20-24 has increased by 6.78% over the past four years, full-time employment has plunged by 17.1%.  In contrast, part-time employment for young adults has increased by 37.2% over the past four years.  Put somewhat differently, in May of 2008 71.7% of employed young adults had full-time jobs.  In just four years the fraction of employed young adults with full-time jobs is 60.4%.

It’s not clear what has caused this sharp shift from full-time to part-time work for young adults.  One possibility, that requires further investigation, is that college and junior college students are delaying their graduation because they face such a weak labor market after graduation.  These students may be staying in school, taking a few more courses while working part-time jobs, rather than starting their post-college careers.

Higher Education and the Labor Market Recovery

The February jobs report generated a lot of buzz: employment increased by almost 2.6 million in the past twelve months according to the household survey.  Unfortunately a more careful examination of the data indicates that there has been no recovery for workers with a high school diploma or GED, or for high-school dropouts.  The jobs gap for less educated workers is a structural, not cyclical, labor market problem.  Moreover, the fastest grow segment of the labor market is part-time employment for adults age 20-24, most of whom are enrolled in a two-year or four-year college.  One out of five jobs added in the past year were part-time jobs for college-age young adults. 

There are three groups of workers that account for all of the employment gains in the past twelve months: adults with a college degree, adults with some college education, and part-time workers between the age of 20 and 24. 

Here is how employment has increased in the past twelve months:

• An increase of 3.0% (1.31 million) for college graduates age 25 and above.
• An increase 2.2% (753,000) for adults age 25 and above with some college education.
• An increase of 10.7% (527,000) in part-time employment of adults age 20-24.
• No change in employment for the rest of the labor force.

Almost all of the employment gains in the recovery have accrued to college graduates, part-time workers who are college students, or adults who previously attended college.  About 51% of job gains in the past year were achieved by college graduates, 29% by adults who attended college but did not receive a bachelor’s degree, and the remaining 20% by part-time jobs for adults in their early 20s, the majority of whom are college or community college students.  The remaining 40% of the workforce have seen no net new jobs in the past year.

It is quite remarkable that college-age workers in part-time jobs are responsible for 20% of employment growth in the past year even though they are less than 4% of the workforce.  Many students have delayed college completion and took a part-time job, because of the weak labor market.  These students want full-time employment that will allow them to utilize their education and training, move out of their parents’ homes, and repay their student loan debt.  The growth in part-time employment of college students is an indication of the labor market’s underlying weakness.

Part-Time Recovery

The unemployment rate and the monthly change in total payroll employment are clearly the most widely watched labor market indicators.  Neither of these statistics measures an important consequence of the 2008 recession: adult men are working part-time at record rates.  As the labor market turns the corner in 2012 the most important leading indicator may be the fraction of adult men employed in part-time jobs.

The following figure shows that the fraction of employed men who work part-time nearly doubled between 1986 and 2011.   By 2011 about one third of employed men age 20-24 worked part-time, and 7.4% of employed men age 25-54 held part-time jobs.  About 80% of the increase in part-time work for the 25-54 age group occurred during the 2008 recession.  About 2.5 million full-time jobs were lost during the recession for men in the 20-24 and 25-54 age groups.  It is less well known that the recession caused about 1.5 million adult men in these age groups to switch from full-time to part-time work.  The patterns are somewhat different for women, but I will leave that for another post.

The following chart shows that the overall employment to population ratio dropped by 11.4% for men age 20-24 and 6.7% for men age 25-54 between January 2008 and January 2010.  These large employment declines understate the depth of the downturn because they treat all jobs the same, whether they are part-time or full-time.  The full-time employment to population ratio dropped by 13.8% for men age 20-24 and 8.9% for men age 25-54.  These precipitous drops in full-time employment rates were accompanied by increases in part-time employment rates of just over 2%.

The labor market has been slowly recovering since January of 2010.  The following chart shows that the overall employment to population ratio for men age 20-24 grew by 4% over the past two years.  The length of the workweek did not change much for these younger men because about two thirds work full-time, and full-time employment growth was about double part-time employment growth.

The employment to population ratio of men age 25-54 has grown by 1.5% since January of 2010.  The full-time employment rate increased by 2% while there was a slight decrease of 0.5% in the part-time employment rate.  The length of the average workweek increased slightly over the past two years these men as some part-time jobs were replaced by full-time employment.

A necessary component of a solid recovery is the transition to full-time work for the (at least) 1.5 million adult men who work part-time jobs because of the weak economy.  This change will not appear as an increase in payroll employment or a reduction in the unemployment rate.  A key leading indicator that that the economic recovery is finally gaining strength will be more substantial decreases in the fraction of adult men who work part-time.