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US employment tutorial 5: part-time for economic reasons [ClearOnMoney]
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US employment tutorial 5: part-time for economic reasons

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Commentary

US employment tutorial 5: part-time for economic reasons

10 Dec 2009 by Jim Fickett.

The count of those working part-time but preferring full-time is one useful measure of slack in the workforce. The current high count will probably slow growth in jobs for some time, and is a negative factor in the outlook for consumer spending. For any long-term study across multiple recessions, the year-over-year (YOY) change should be used in place of the level, to reduce the impact of a 1994 change in the survey. The YOY change peaks, on average, a month before recession end; the most recent peak was in Mar 2009.

“Part-time for economic reasons” (PTER) is a bit of an odd phrase; what it means is that someone is working part-time because the economy is bad, rather than because they only want part-time work. The Bureau of Labor Statistics (BLS) define PTER as “at work fewer than 35 hours [per week] for … reasons such as slack work, poor business conditions, or only being able to find a part-time job.” In other words, this describes someone who is part-time, but would prefer full-time.

The first reason we follow the PTER count is that it is one measure of slack in the workforce (the average number of hours in the workweek would do just as well). For example the unemployment rate does not include part-time workers, yet obviously the population as a whole is in worse financial straits if many can only find part-time work.

This graph from the BLS shows the number of workers in PTER status, in thousands:

At the moment there are about 9 million in PTER status, compared to about 4 million before the recession. This is a significant negative factor in the outlook for a recovery in consumer spending. Such a large pool of workers who could easily work longer hours also suggests a slow recovery in re-hiring of the unemployed. This is one reason why many economists expect unemployment to remain high for at least another year.

The second reason to follow PTER is as a recession gauge and timing signal. A difficulty in using any series over time, for example to compare across multiple recessions, is that sometimes definitions change. In 1994 the survey questions from which the PTER count is derived were revised. While the intent was only to clarify, not to change the meaning, there was a one-time shift down of the count by perhaps 20%. Thus for any long-term studies one should use the year-over-year (YOY) change, not the raw level.

This graph from the BLS shows the YOY change in the PTER count, in percent:

The magnitude of the peak YOY change in any recession is an indicator of severity, measuring how strongly employers feel it necessary to make rapid adjustment in labor costs. The peak in the most recent recession was 83%, compared to the previous record of 64%, giving one more measure of the extreme severity of this recession.

The timing of the peak YOY change helps place the end of the recession – the peak occurs, on average (though with large variation), about one month before the end of the recession. Since the peak this time occurred in Mar 2009, this is one of the indicators that many cite in placing the end of the recession in the second quarter of this year.

Date of recession Peak YOY% in PTER
Aug 1957 - Apr 1958 64 in Apr 1958
Apr 1960 - Feb 1961 39 in Feb 1961
Dec 1969 - Nov 1970 35 in Apr 1970
Nov 1973 - Mar 1975 59 in Apr 1975
Jan 1980 - Jul 1980 33 in May 1980
Jul 1981 - Nov 1982 29 in Sep 1982
Jul 1990 - Mar 1991 27 in Apr 1991
Mar 2001 - Nov 2001 40 in Oct 2001

For more details and citations see the reference page Part time for economic reasons background and, for current results, Part time for economic reasons.