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.

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.

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