March 28, 2024

Economix Blog: The Rise of Part-Time Work

CATHERINE RAMPELL

CATHERINE RAMPELL

Dollars to doughnuts.

One of the more unsettling trends in this recovery has been the rise of part-time work.

We are nowhere near recovering the jobs lost in the recession, and the track record looks even worse when you consider that so many of the jobs lost were full time, whereas so many of those gained have been part time.

Compared with December 2007, when the recession officially began, there are 5.8 million fewer Americans working full time. In that same period, there has been an increase of 2.8 million working part time. Part-time workers — defined as people who usually work fewer than 35 hours a week — are still a minority of the work force, but their share is growing.

Source: Bureau of Labor Statistics, via Haver Analytics. Source: Bureau of Labor Statistics, via Haver Analytics.

When the recession began, 16.9 percent of those working usually worked part time. That share rose sharply in 2008 and 2009 and has not fallen much since then. Today the share of workers with part-time jobs is 19.2 percent.

This would not be so troubling if people were electing to work fewer hours. But that is not the case.

Basically all of the growth in part-time workers has been among people reluctantly working few hours because of either slack business conditions or an inability to find a full-time job. Together these people are considered to be working part time “for economic reasons.” Their numbers have grown by 3.4 million since the downturn began.

The number of people working part time “for noneconomic reasons,” on the other hand, has fallen by 639,000 since the recession began.

Source: Bureau of Labor Statistics, via Haver Analytics. Source: Bureau of Labor Statistics, via Haver Analytics.

These trends are part of the reason that many people believe the standard unemployment rate of 7.7 percent understates the extent of underemployment. If you include both part-time workers who want full-time work and people who have stopped looking for jobs but still want to work, the unemployment rate is actually 14.3 percent.

It’s not clear what’s behind the growth in part-time work. It probably has to do mostly with companies’ not having as much need for labor today as they did when the economy was strong. The Affordable Care Act also has incentives for employers to keep their count of full-time workers below 50, but that has probably affected only a few companies at the margin at this point.

Article source: http://economix.blogs.nytimes.com/2013/03/08/the-rise-of-part-time-work/?partner=rss&emc=rss

Off the Charts: From Philadelphia, Slowdown News

That possibility was raised this week by the abrupt fall in an economic indicator that normally receives little attention but that fell unexpectedly to a level that in the past has signaled a recession had either begun or was about to do so.

The Federal Reserve Bank of Philadelphia reported that its monthly business outlook survey of manufacturers in its region found that only 14.7 percent of them thought business was improving, while 45.4 percent thought conditions were worsening. As a result, the index , calculated by subtracting negative responses from positive ones, fell to minus 30.7. In July it had been a positive 3.2

The index has been around since 1968, and during that time there has been a recession every time it fell below minus 30, as can be seen in the accompanying chart.

The Philadelphia Fed survey also asks about various aspects of business. The figures for current shipments and for new orders also fell into negative territory.

“The most troubling part is the decline in new orders,” said Ryan Sweet, a senior economist for Moody’s Analytics. “Sentiment is so fragile now that businesses could be hunkering down.”

In the survey, 45.4 percent of companies reported business conditions were getting worse, compared with just 24.3 percent in July. The 21.1 percentage point increase was one of the sharpest moves ever for the index, and the worst since the number reporting deteriorating conditions rose 25.9 percentage points in October 2008, after the collapse of Lehman Brothers led to a credit crisis and turned a relatively mild recession into a severe one.

Michael Trebing, a senior economic analyst at the Philadelphia Fed, cautioned that the survey responses were received between Aug. 8 and 16, a period of extreme volatility in the stock market caused in part by a decision by Standard Poor’s to downgrade the credit rating of the United States. He said it was possible that news background contributed to the negative responses from companies.

Several regional Federal Reserve Banks conduct similar surveys, but most have not yet released August figures. The New York Fed’s survey also came out this week. It also showed a decline into negative territory, but the move was not as large.

The Philadelphia index is based on a survey of 150 companies in Delaware, southern New Jersey and eastern Pennsylvania.

Manufacturing is no longer the primary driver of the American economy, and of course that region might not be typical of the entire country. But manufacturing has been a strength of the recovery that began in the summer of 2009, and the new report adds to growing evidence that the sector’s recovery is losing steam.

Floyd Norris comments on finance and the economy at nytimes.com/economix.

Article source: http://feeds.nytimes.com/click.phdo?i=753c541fb50870881919050559c8cfda

Economix: Who Cares About the Fed?

Today's Economist

Casey B. Mulligan is an economics professor at the University of Chicago.

Short-term interest rates have an obvious effect on the housing market, but not the rest of the economy.

Federal Reserve policy affects short-term interest rates, bank regulation and eventually inflation. I will write about inflation next week, and my fellow Economix blogger Simon Johnson has written much about bank regulation, so today I focus on short-term interest rates.

The Federal Reserve, especially its New York branch, is actively engaged in buying and selling Treasury securities, and it lends money to banks on an overnight basis. As a result, it is widely thought that the Federal Reserve is an important determinant of the rate of interest paid on short-term Treasury securities.

By reducing the supply of Treasury securities and overnight loans, so-called “tight” monetary policy raises short-term interest rates. High short-term interest rates are said to discourage borrowing, and thereby curtail private sector investment projects. The idea is that private sector projects are undertaken only when their expected return exceeds the cost of borrowing.

In theory, high short-term interest rates result in relatively few capital projects, with high expected returns, and low short-term rates result in more capital projects, including those with lower expected returns.

But the effect of high short-term interest rates on Main Street’s economy has been exaggerated. Although it is commonly assumed that today’s rock-bottom rates should help strengthen a business recovery, it appears that business conditions actually have little to do with short-term money markets.

Many important private sector investment projects are relatively long term — it most likely takes a year or more for a project to be completed and deliver a positive cash flow to investors. As a result, many capital projects are financed through long-term borrowing, with equity financing, or out of corporate retained earnings, rather than borrowing in the short-term market where the Fed’s fingerprints are so obvious.

In theory, long-term interest rates could rise as the Fed tightens the short-term money market, because some savers would be on the margin of saving in either the short- or long-term markets. Equity capital markets and retained earnings could, in theory, also be subject to similar indirect effects.

Thus, the effects of Federal Reserve interest-rate policy on investment are indirect, and it is an empirical question as to whether the expected effects — tight money discourages investment projects — are significantly reflected in preventing capital projects with low expected returns.

Luke Threinen and I have measured national average profitability of capital projects from the national accounts by dividing total interest and profits in the economy during a year by the total capital stock in place at the beginning of the year. In doing so, we have distinguished residential capital (i.e., houses) from business capital.

Capital produces value over a number of years. In the case of housing capital, the value is in the form of shelter and the convenience of a home. For any piece of capital, profitability (capital’s marginal product, as economists call it) can be calculated as the dollar value it creates during a year — after subtracting depreciation, costs of labor, maintenance and intermediate goods — per dollar invested.

Owners of capital prefer their capital to be more profitable, rather than less. It’s the profitability of capital (after taxes and subsidies; more on those below) that makes an owner willing to purchase capital in the first place.

Chart 1 compares the profitability of housing capital to the inflation-adjusted return on one-year Treasury bills (for comparability with T-bills, housing profitability is adjusted for property taxes). Consistent with the view that tight monetary policy both raises Treasury bill rates and reduces housing investment, the two series are positively correlated. The home-mortgage market appears closely linked, so high Treasury bill rates cause banks to charge more for home mortgage loans, which discourages homeowners and landlords from building homes unless the demand for homes is sufficient (i.e., landlords can earn enough rent from their tenants to cover a high mortgage rate).

Among other factors, easy credit from the Federal Reserve in the early and mid-2000s made it easy to buy and build homes, and as the inventory of homes grew the amount of rent that each home could earn (many homes went vacant, for example) fell, which shows up in Chart 1 as especially low values for the red series. In this way, the housing cycle of the 2000s confirms the usual story about how monetary policy can affect housing investment.

The usual story about Federal Reserve policy and business investment says that a similar process works on the business sector: High Treasury bill rates cause banks to charge more for business loans, which discourages business from investing unless demand for their product is sufficient (i.e., businesses can earn enough profit from their operations to cover a high loan rate).

Our findings for the business sector are quite different from the usual story. Chart 2 compares the profitability of business capital to the inflation-adjusted return on Treasury bills, and the correlation is negative.

One way that easy monetary policy could hurt business investment is by encouraging home-construction activity, and home construction takes resources away from business construction.

The evidence in Charts 1 and 2 suggests that the housing market can be stimulated by easy monetary policy, at least in the short run. But the link between monetary policy and the business sector is much weaker, and our data are consistent with the view that, holding constant the rate of inflation and the amount of banking regulation, monetary policy does not have a discernible effect on the cost of business capital.

Article source: http://feeds.nytimes.com/click.phdo?i=e1406475c6a886c77563d5e2d63b0a9e