Meet the Author

Yoonsoo Lee |

Research Economist

Yoonsoo Lee

Yoonsoo Lee was formerly a research economist in the Research Department. His areas of research include macroeconomics, labor economics, and regional economics.

Meet the Author

Beth Mowry |

Research Assistant

Beth Mowry

Beth Mowry was formerly a research assistant in the Research Department of the Federal Reserve Bank of Cleveland. Her work focuses on labor markets and business cycles.

05.07.09

Economic Trends

Involuntary Part-Time Workers and the Deficiencies of the Unemployment Rate

Yoonsoo Lee and Beth Mowry

The Bureau of Labor Statistics’ March employment report had very few positive things to say about the labor market. Employers slashed an additional 663,000 jobs, and the unemployment rate climbed 0.4 percentage point, from 8.1 percent to 8.5 percent, the highest rate since late 1983. As dismal as 8.5 percent sounds, the unemployment rate actually gives a rosier take on the labor market than alternative measures do. Now appears to be a time when this rate, the government’s most publicized statistic on employment conditions, offers an incomplete view of the state of the labor market.

The unemployment rate is often criticized for leaving some people out of the count. The rate is defined as the percentage of those in the labor force who are unemployed, and to be in the labor force, one needs to be employed or actively seeking work. Not included are people who are willing and able to work but who have stopped searching.

There are a variety of reasons these so-called marginally attached workers may have stopped looking for work. Discouraged workers are considered part of the marginally attached group, for instance, because they believe searching for a job would not be worthwhile. As gloomy economic conditions discourage workers from hunting for new jobs, the official unemployment rate may understate slack in the labor market during recessions.

Involuntary part-time workers are another group whose status is not captured entirely in the official unemployment rate. These underemployed workers would like to have full-time jobs but instead are working fewer than 35 hours a week, either because their hours have been reduced or because part-time work was all they could find.

The employment report showed that the number of people employed part-time for economic reasons (rather than by choice) increased by 423,000 last month. This increase followed on the heels of a 787,000 increase in February, the second-largest monthly jump since records began in the 1950s (the largest was September 2001). The total number of involuntary part-timers is now the highest it has ever been, standing at 9 million—nearly double what it was just a year ago (4.9 million).

The BLS’s Current Population Survey categorizes involuntary part-timers into those working part-time due to “slack work or business conditions” and those who “could only find a part-time job.” In other words, some workers had full-time jobs but went to part-time when their employers cut hours because business was falling off, while other workers had to start out in part-time jobs even though they were looking for full-time work, because that’s all that was available.

Average Job Openings and Labor Turnover by Industry

 
April 2006
March 2009
Change

Reason

Total (thousands)
Percent

Total
(thousands)

Percent
Total
(thousands)
Percent
Total part-time for economic reasons
3908
100.0
9049
100.0
5141
100.0
Slack work or business conditions
2440
62.4
6857
75.8
4417
85.9
Could Only work part-time
115
132
370
385
388
383
Manufacturing
232
282
340
352
457
367

Note: Data are seasonally-adjusted.
Sources: Bureau of Labor Statistics, Current Population Survey.

The 5.1 million rise in involuntary part-time employment from its recent low in April 2006 to the present was mainly due to an increase in workers whose hours were cut back because of slack work conditions. In fact, the number of those working part-time for this reason more than doubled since the beginning of the recession. They accounted for 62 percent of all economic part-timers in 2006, and now they constitute 76 percent of the group.

This large uptick is important to note because it fills in some of the gaps of the labor market story that the official unemployment rate leaves open. When marginally attached workers and involuntary part-time workers are added to the official unemployment rate, the unemployment rate nearly doubles, from 8.5 percent to 15.6 percent.

More and more people appear to be working part-time jobs for economic reasons, rather than by choice. The unemployment measure that accounts for these people and other marginally attached workers has increased even more than the official unemployment rate over the past year.

The official unemployment rate rose from 4.9 percent at the start of the recession in December 2007 to its present 8.5 percent, an increase of 3.6 percentage points. The unemployment rate including marginally attached workers and the underemployed increased 6.9 percentage points in the same period, from 8.7 to 15.6 percent. The steep climb of the rate makes intuitive sense because employers are likely to reduce workers’ hours before implementing layoffs when demand declines for their goods and services. Conversely, in a recovery period, employers are likely to increase the hours of existing employees before expanding workforces.