Nums: Cutting to the chase on the jobs numbers …

We’ve been frequently posting about the way employment is “down-mixing” from full-time to part-time jobs.

I personally think that the mix change is one of the most important trends in the economy.

Finally, the trend has become so significant that even the mass media has started reporting on it..

Last Friday … the BLS headline was “Total nonfarm payroll employment increased by 162,000 in July, and the unemployment rate edged down to 7.4 percent.”

High fives, right?

Not so fast.

Yep, total private employment went up 114.186 million … an increase of 162,000 jobs  … that’s true.

 

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And, though the job growth was below expectations and below the number usually cited as being required to keep the unemployment rate constant … the increasingly flakey unemployment rate dropped to 7.4%

That’s good news, too … right?

Not so fast.

Here’s the HomaFiles Employment Index … the way to cut to the chase on the employment numbers …

Glossed over in most mass media reporting was the parallel info that average hours worked dropped by 1/10th of an hour …. the 2nd straight monthly decline.

Why are average hours going down?

Easy.

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

 

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Those 1/10ths of an hour dropped (in June & July combined) may sound like rounding error, but they’re 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 July employment increased by 162,000, FTEs dropped by 156,000.

 

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Let’s take one more cut at the numbers.

The labor force has been growing … as expected since population is growing.

But, the labor force is growing slower than the working age population.

You know, the declining labor force participation rate.

 

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We’ll ignore the fact that people are dropping out of the workforce – by retiring, going on disability or staying home to play video games.

Dealing strictly with the folks who are employed or still looking for work – the “civilian labor force” – the ratio of full-time equivalent jobs to the number of folks in the labor force has been declining steadily this year …   and is about 2-1/2 percentage points below the pre-financial crisis high (69.8%).

 

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Bottom line: the down-mixing towards part-time jobs is steaming ahead … maybe even gaining some ObamaCare-induced momentum … and that there are a decreasing number of full-time jobs available for people who want them.

Q.E.D.

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For a predecessor post on the topic, see Nums: THE way to look at the employment numbers …

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One Response to “Nums: Cutting to the chase on the jobs numbers …”

  1. social issue commentary Says:

    social issue commentary

    Nums: Cutting to the chase on the jobs numbers … | The Homa Files

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