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Weekly Hours Worked: Another Recession Casualty :: Jonathan James :: Economic Trends :: 06.04.12 :: Federal Reserve Bank of Cleveland

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Jonathan James

Jonathan James is a former research economist in the Research Department.

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06.04.12

Economic Trends

Weekly Hours Worked: Another Recession Casualty

Jonathan James

Many aspects of the labor market have yet to return to their pre-recession levels in the economic recovery. Employment and labor force participation have been the main focus for analysts, but another important and related measure of the health of the labor market is weekly hours worked for those employed. During the 2007 recession, workers experienced a sizable and enduring reduction in weekly hours worked. By some measures, weekly hours have gained traction in recent years but have yet to fully recover. It is important to understand the sources driving the changes in weekly hours because even if unemployment rates return to long-run averages, a persistent reduction in weekly hours may impede aggregate productivity from regaining its full potential.

Hours worked are measured in a survey of employers and a survey of households. While the employer survey provides only the total aggregate and average hours worked, the household survey provides substantially more detail on the situation of workers. This detail facilitates a deeper investigation of the patterns observed through the recession and recovery.

Looking at the household survey, we see that average weekly hours worked fell by one hour over the recession, a 2.5 percent decrease from the pre-recession high of 39 hours. Since they hit their recession low in 2010, average hours have trended upwards but still remain well below pre-recession levels according to the household survey.

To fully examine the effect of the recession on hours worked and the response of hours worked during the recovery, it is helpful to look at the working patterns of prime-working-age (25-54) males. Prime-working-age males represent an important subsample because economists view these workers as being the least likely to exit the labor force, providing stronger evidence of the labor market response to poor economic conditions.

Indeed, the impact of the recession on weekly hours is significantly stronger for prime-working-age males. As of 2011, this group continued to work on average more than one hour less than their pre-recession level, a 3 percent reduction.

The household survey asks those employed part-time (less than 35 hours) the reason they do not have full-time employment. Unsurprisingly, during the recession, the fraction of part-time workers reporting that their primary reason for working less than full-time was due to “slack work, business conditions” more than doubled over the recession. These numbers were quite substantial for prime-working-age males, with 40 percent of part-time workers desiring full-time employment. Unfortunately, this sentiment has persisted well into the recovery.

The substantial increase in the gap between hours worked and desired hours for part-time workers provides a strong explanation for the decline in average hours over this period. Equally important, and often overlooked, is the response of work hours to those on the other end of the distribution: those currently working full-time who desire to work beyond regular full-time hours (greater than 45).

Looking at the shift in the fraction of workers employed part-time, full-time, and overtime, before the recession and during the recovery, provides additional insight into the source of the reduction in hours worked. Interestingly, for all employed workers, there has been little change between 2007 and 2011 in the fraction of workers working regular full-time. This is the result of an increase in the fraction of part-time workers and an equivalent offsetting decrease in the fraction working overtime. These figures suggest that in order to restore average working hours to previous levels, both the underemployment of part-time workers as well as workers desiring to work more than regular full-time hours must be mitigated.

Just as the recession appeared to have a stronger effect on the average hours of work for prime-working-age males, this group has also experienced more drastic compositional changes in the fraction employed part-time, full-time, and overtime. One major difference before and after the recession is a larger decline in overtime workers between 2007 and 2011 (−4.33 percent) than increases in part-time workers (+2.86 percent), meaning that the fraction of regular full-time workers actually increased almost one and a half percent during the recovery from pre-recession levels.

Breaking these compositional changes out by occupational category for prime-working-age males reveals some interesting patterns. Both management/professional occupations and sales/office support occupations are characterized by large reductions in overtime employment. These two occupations are the ones typically described as white-collar occupations and represent about half of prime-working-age male employment. In contrast, the remaining occupations, service and construction, and to a lesser extent production occupations, which consist of blue-collar occupations, experienced larger increases in part-time workers than decreases in overtime workers.

These results are interesting because the effects of the recession on employment are different from those on working hours. The recession’s impact on employment was disproportionate, with construction occupations suffering the largest losses, while the impact on hours worked has been much more diverse. It is clear that along with increasing total employment, weekly hours worked must rebound as well in order to restore aggregate productivity to its full potential. It is unclear whether the regaining of hours worked will naturally coincide with the economic recovery, or if perhaps additional policy considerations may be necessary to induce workers and employers back to their previous levels.