The Real Reason 8 Million Americans Can't Find Real Jobs
The numbers are clear: since January 2009, the U.S. job market has added a paltry net total of 270,000 full-time jobs, compared to a whopping 1.9 million part-time jobs. The data, reported by the House Ways and Means Committee, shows that since 2009, the American economy has created seven times more part-time jobs than full-time jobs.
It is certainly a remarkable trend, and one can't help but wonder what's behind this dramatic upsurge of part-time workers. For some, the culprit is the Affordable Care Act of 2010 that will simply make hiring full-time workers too costly relative to hiring part-time workers. For others, the change is linked to a cultural paradigm shift of a generation that simply-job hops more than in the past, epitomized in the motto temporary is the new permanent. But the truth is that the main reason behind this increase in part-time work is still the Great Recession. Five years after Lehman Brothers crashed, investment confident levels have not yet been rebuilt. As a result, the preference for employment prudence lingers on.
Consider the raw available data on part-time employment, published by the Bureau of Labor Statistics. In December 2007, the number of part-time employees for economic reason was at approximately 4.5 million. In December 2008, that number had swelled to 8 million. The number of part-time employees for economic reasons peaked in September 2010 at 9.2 million, and has since then been vacillating, albeit on a noticeably downward trend, reaching 7.6 million in March of this year but rising again to 8.2 million last month.
Considering these figures, a few observations come to mind. The first is that the increase in part-time employment seems to have spurred before the passing of the Affordable Care Act. This means that linking the dramatic increase of part-time workers to Obamacare is not entirely justifiable. What is justifiable is linking some of the increase. It is indicative, for instance, that the number of part-time jobs had been on the decline since its peak in September 2010, but started to increase again this year, when the Act is supposed to come into effect. Indeed, the causal mechanism behind this makes sense: full-time workers simply cost more to companies than part-time workers. Since Obamacare is going to make this difference more prominent, it comes as no surprise that companies should change some of their hiring structure to include more part-time and less full-time employees.
The second takeaway is that linking the increase in part-time employment to a cultural shift may be a bit of a hasty conclusion. Taking employment figures back to 1990, it is clear that the increase in part-time employment to today's levels came exclusively after the Great Recession. Before then, part-time employment had in fact been on the decline since the early 1990's, and only started slightly increasing again in 2001. From 2001 to 2008, the level of part-time work was relatively stable at around 4 million workers — nowhere near the whopping 8 million figures of today. It thus doesn't seem to be the case that the increase in part-time work has been significantly abetted by an underlying cultural paradigm shift.
But if neither of these factors explain why part-time employment is still very high, what does? The answer is the recession itself. The 2007/2008 recession hurt investment confidence levels to the extent that they have not yet recovered today. The Consumer Confidence Index, for instance, which measures the degree of optimism on the state of the economy that consumers are expressing through their activities of savings and spending, has still not returned back to pre-2008 levels. Essentially, the reason why part-time employment is still at an all-time high is because the U.S. economy simply hasn't yet recovered from the Great Recession. Businesses are still wary of investing in expensive full-time job hiring when they are unsure that the economic environment will remain stable enough that they can afford it. This is especially true given the dependency that has been created between the American recovery and the FED's quantitative easing policy (QE), and the recent threats to begin tapering this controversial strategy. As such, although it may be tempting to try and find alternative explanations as to why the the trend of high part-time employment has not reversed course, the simple truth is that the high levels of part-time employment experienced today are still the consequence of the 2007/2008 economic crisis.
Finally, the scary reality is that the U.S.'s part-time employment situation may be in fact underestimated. The fact that interest rates are still at essentially 0, and have been for the past couple of years, should be propping up employment figures, since the cost of borrowing money is low and therefore investment should be higher than otherwise. In this sense, when interest rates begin to rise again and investment becomes more costly, the American economy might experience a further shift towards part-time employment. It may therefore be the case the the United States has not yet seen the peak of its lethargic part-time recovery.
In the end, a lot of the upsurge in part-time employment seen in the U.S. in last five years still has to do with the aftermath of the 2007/08 recession. My prediction is that the numbers of part-time employment are going to experience a second upsurge as the U.S. economy struggles with a potential petering of the FED's QE policy and as interest rates eventually begin to rise. Subsequently, and depending on how the economy reacts to an easing of QE and a rise in interest rates, the numbers are going to decrease as the American economy stabilizes itself, but will probably find balance at levels higher than they did in the years before the 2007/2008. This is where ancillary factors, such as the Affordable Care Act, will decisively come into play. The main culprit behind America's flagging part-time recovery, however, is still the Great Recession.