Nums: THE way to look at the employment numbers …

In a  couple of the past week’s posts we’ve been exploring the employment down mixing from full-time to part-time jobs.

I personally think that it is one of the most important – and least reported trends in the economy.

Flashback to last Friday … the BLS headline was that 165,000 jobs were added in April and the unemployment rate dropped to 7.5%

That news flash elicited giddy re-reporting … e.g. Business Insider’s “STOCKS GO WILD AFTER AWESOME JOBS REPORT” … “awesome” and all caps,

Yep, total employment went up 165,000 jobs … that’s true

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But, here’s the rest of the story …

Buried deep – or ignored in the reporting was the parallel info that average hours worked dropped by 2/10ths of an hour.

Why?

Less overtime for full-time workers … and, you guessed it, down mixing to part-time workers.

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That 2/10ths of an hour may sound like rounding error, but it’s not.

Basic math: a small number times a very big number can give you a pretty big number.

Here’s a way to put the hours drop in perspective.

When I worked at GE, employment was tracked using a normalizing metric called FTEs – full-time equivalent employees.

It’s a simple concept that wasn’t unique to or invented by GE.

Say you have 2 part-time employees who are each working 20 hours per week … 2 time 20 equals 40 … the equivalent number of hours that a full-time employee would work.

OK, let’s apply that metric to the U.S. employment market.

The calculation: number of employees times average hours worked divided by 37.5 hours per full-time employee

Technical note: I’m using 37.5 hours as the full-time basis since that seems to be a standard.  The numbers scale slightly differently if 40 hours is used, but the answers stay the same.

Check digits: the employment mix is roughly 80% full-time, 20% part-time … if full-timers are working 37.5 hours, then part-timers are working an average of 22 hours to make the overall average 34.4 hours.  That’s seems to square.

Note that while employment increased in April, FTEs dropped.

The decline looks small, but …

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Zooming in to look at the March to April change …  because of the decline in average hours worked, FTE employment dropped by 444,000 … or, roughly .42%.

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A decrease, not an increase … and, suddenly, awesome doesn’t look so awesome any more …

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