Tags: part time | slack | federal reserve | rate hike

Part-time 'Slack' May Be Nearing Its End as Fed Debates Hike

Wednesday, 22 Apr 2015 01:16 PM


U.S. part-time employment is fast-approaching levels common since the 1970s in a sign that a key part of labor market slack may be almost gone, giving the Fed one less reason to delay hiking interest rates frozen near zero for more than six years.

Central bankers watch the part-time figures as a measure of labor market health. While current part-time numbers remain high compared to the hot job markets of the 1990s and early 2000s, they are closing in on the longer term average.

A Reuters/Ipsos online poll found a potentially modest gap between the hours workers want and what they can find. More than a third of those working fewer than 30 hours a week and asked how much they wanted to work for the same hourly rate were satisfied with their current hours or wanted to work less. While others wanted more hours, only 23 percent said they wanted to commit to a traditional 40-hour week.

Among those working more than 30 hours a week, there was a significant desire to scale back: almost a fourth of that group said they wanted to work between one and 18 fewer hours each week.

With the jobless rate of 5.5 percent near pre-crisis levels, Fed policymakers are studying other aspects of the labor market as they weigh whether to raise rates in June or wait for more evidence of an improving economy.

Government labor surveys show the share of employees who say they want to work full time but could only find part-time work was 4.5 percent in March, down from 6.5 percent at the end of the recession in 2009 and approaching the average of roughly 3.9 percent since 1975.

The share of those who choose to work part-time because of family and health constraints, lifestyle preferences, or other reasons, is around 13 percent, a level that has been relatively stable since at least the 1970s. In recent years that group has changed little in its demographics — about 60 percent female and skewed towards younger and older workers — and in the numbers who cite child care, medical or other issues as the reason for working part-time.

"It is striking how stable the relationships have been," said Ariane Hegewisch, a research director at the Institute for Women's Policy Research in Washington.

As it analyzes the steady fall in those forced into part-time work by the weak economy, the Federal Reserve now must judge whether the tight labor markets of the 1990s and early 2000s remain a good benchmark.

Some Fed officials say higher levels of part-time work might be the new norm because of changes in employment patterns.

"Some industries are moving towards more of a part time model," Atlanta Fed president Dennis Lockhart said this month. While he said he regards the more than 6 million people who work "part-time for economic reasons" as too many, he is not sure how low the figure can go. 

NEW NORMAL?

Fed governor Jerome Powell in a recent speech in New York said present levels of part-time work could well be a "new normal" because of the scars of the Great Recession/

For Michelle Paradis, 34, one of about 11,000 workers who responded to the Reuters/Ipsos poll, part-time work was neither quite an independent choice nor a clear sign of economic slack. She limits her work to 16 hours a week in a hair salon to stay under the federal $1,090 monthly earnings limit for social security disability recipients. "It adds up to a livable wage," says the mother of three.

Fed officials and economists generally agree that more of the current part-timers could move into full-time jobs. The question is whether that potential involves millions more workers or the roughly 900,000 that would bring part-time levels back to their average since the 1970s — a target that may be just a few months away.

Andrew Levin, a former Fed economist and now a research fellow at the International Monetary Fund, argued in a recent paper that the economy's performance from 1994 to just before the recession was an appropriate yardstick and suggested a substantial "underemployment gap." Between 1994 and 2007 the involuntary part-time workers — those whose hours were cut or who could only find part-time work — made up about 3 percent of those employed.

Until inflation starts to rise, he said, there is still room for involuntary part-time work to fall.

"One view would be to say...Maybe we are done," absorbing part-time labor, Levin said. But "we have been persistently falling below two percent (inflation) ... If you want price stability the best thing you can do is push employment to its maximum."

Others point to the tepid pace of wage growth, low labor force participation, and other data as evidence of continued slack.

Minneapolis Fed President Narayana Kocherlakota and some other policymakers argue, consequently, for delaying rate hikes until at least next year.

In Kocherlakota's district, Minneapolis resident Sivya Leventhal exemplifies the flux the Fed wants to understand. While her husband, laid off from a local TV station, looks for a full-time job, she works part-time at the preschool in her synagogue to help pay bills.

Leventhal has a college degree and full-time experience, but wants to stay part-time until her son is older.

"Financially it would make more sense but we are committed to this," she says.

Behind some of the numbers are also career choices that may not have existed a few years ago.

Amanda Gay, 34, became a part-timer as part of a "career reset."

The 2003 University of Georgia graduate ditched a full-time management job with a non-profit, signed up for health insurance through a government-run exchange and used the web-based FlexJobs service to find part-time work teaching English online while she considers moving overseas.

"There is no one-size fits all choice anymore."

© 2017 Thomson/Reuters. All rights reserved.

 
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U.S. part-time employment is fast-approaching levels common since the 1970s in a sign that a key part of labor market slack may be almost gone, giving the Fed one less reason to delay hiking interest rates frozen near zero for more than six years.
part time, slack, federal reserve, rate hike
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2015-16-22
Wednesday, 22 Apr 2015 01:16 PM
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