August 19, 2022

Economix: Hour by Hour, a Measure of Economic Stress

An idled home construction site in Riverside, Calif., in 2009.David McNew/Getty ImagesAn idled home construction site in Riverside, Calif., in 2009.

Ben S. Bernanke, the Federal Reserve chairman, highlighted a relatively obscure measure of economic health, “aggregate hours of production workers,” to make the important point that our economy is not very healthy at all.

The name pretty much explains the statistic: It measures the total number of hours that Americans are paid to work in production jobs, which make up 80 percent of all jobs.

Why not take the measure of all jobs? Well, the Bureau of Labor Statistics has done just that since 2006, and the numbers show a similar decline, but it has tracked production hours since 1964, allowing comparisons with other recessions.

The comparisons, as Mr. Bernanke noted Tuesday, are not good.

Paid hours “fell, remarkably, by nearly 10 percent from the beginning of the recent recession through October 2009,” he said. Moreover, after two years of renewed growth, paid hours remain about 6.5 percent below the prerecession peak.

“For comparison,” Mr. Bernanke continued, “the maximum decline in aggregate hours worked during the deep 1981-82 recession was less than 6 percent.”

No other recession since 1964 has produced a comparable decline in hours worked.

Bureau of Labor StatisticsIndex of aggregate weekly hours, production and nonsupervisory employees, total private industries. (2002=100; shaded areas indicate United States recessions.)

The hours-worked data also highlights a shortcoming of the work-force statistics that garner more public attention, in particular the unemployment rate.

Those statistics basically treat all jobs as equal. But some people are working part-time or a few hours less each week or their employer has stopped authorizing overtime. They have a job but they are working fewer hours and making less money.

A recent article by Steven Kroll, an economist for the Bureau of Labor Statistics, charts the distinction.

In some parts of the labor market, like professional and business services, job cuts almost entirely explain the decline in hours worked. In that area, 9.9 percent of employees lost their jobs, while the number of hours worked fell 10.1 percent.

In other areas, however, job losses significantly understate the decline in paid work. Construction jobs fell 21.5 percent; hours worked fell 24.5 percent. Manufacturing jobs fell 17.3 percent, while the number of hours worked fell 20.3 percent.

The data, Mr. Kroll wrote, “illustrates employers’ tendency to cut payroll employment rather than hours.” In other words, American companies generally choose to lay off one person rather than reducing two people to half-time work.

Because this is Germany week in the blogosphere, I’ll just close by noting that the plentiful body of research noting that German companies generally do the opposite, with the result that a deeper recession produced fewer job losses in that country.

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