Observations on the Labor Market

One of these is not like the others – local government employment stabilizes, but state does not – structural unemployment decreases – Obamacare does not cause the rise in part time employment

First, a reminder for those with short memories, part of the reason why the current recovery is so lackluster in terms of employment growth, even relative to the preceding jobless recoveries.


Figure 1: Log government employment relative to 2009M06 (blue), relative to 2001M11 (red), relative to 1991M03 (green), seasonally adjusted. Source: BLS via FRED, author’s calculations.

In contrast to previous recoveries, government employment in this recovery is declining.

Second, the breakdown in government employment losses is interesting. It has been concentrated mostly at the local level.


Figure 2: Government employment relative to 2009M06 at state (red), local (green), and Federal (blue) levels, in 000’s, seasonally adjusted, 2009M06-2013M08. Excludes temporary Census workers. Source: BLS via FRED, and author’s calculations. [Note: graph corrected on 9/11]

Notably, of the decline of 512 thousand in local government, 318.3 thousand has been accounted for by the education sector. I suppose that’s okay ‘cause our students got ‘nuff learnin’ (we don’t need no stinkin’ simultaneous equations!).

Third, consider the question: How much of unemployment is structural? Prakash Loungani has updated his earlier estimates based upon information from the sectoral dispersion in stock market returns.


Figure from Prakash Loungani (Sept. 2013).

He writes:

The estimate of structural unemployment has declined over the past year in line with the decline in the actual unemployment rate. In the figure below, the solid (black) line shows the U.S. unemployment rate declining from nearly 10 percent in 2009:Q4 to about 7 ½ percent today. The dotted (red) line is the estimate of structural unemployment; it too has declined over that time and the latest estimate of structural unemployment is 6.2 percent. There is a lot of concern about U.S. long-term unemployment. In this case too, there has been a decline in the estimate of the structural component of long-term unemployment, but it is more gradual than in the case of total unemployment.

If there was an argument for more heavily weighting supply side measures more heavily than demand side measures (on which count I’m dubious), those arguments have dissipated.

Fourth, Obamacare and the rise in part time employment. From Furman and Stevenson writing in CEABlog

Over the 41 months since the Affordable Care Act was signed into law, 91 percent of the increase in employment is due to full-time work. This pattern has roughly held over the past twelve months, with 86 percent of the increase in employment due to full-time work.

The authors also quote a FRB SF study: “We have shown that part-time work is not unusually high relative to levels observed in the past, most notably in the aftermath of the early 1980s recession.”

They conclude:

There is no systematic evidence that employers are shifting employees to just below 30 hours per week. CEA has analyzed the Current Population Survey to estimate worker hours in more narrow ranges than those published by the BLS. This analysis indicates that there has been no noticeable shift in employment just above or below the 30 hours per week threshold, a conclusion that has also been corroborated by outside analysts.

This figure illustrates their assertion:


Figure from CEA (Sept. 2013).

Hence, while the Obamacare-causes-part-time-employment-increases meme dominates in certain circles (I usually see it in listings of anecdotes, and polls), I don’t think the data is determinative on this count, and if there is an effect, it so far is not detectable. Over the longer term, it may go the way of the “QE and hyperinflation” meme. [1]

Other observations on the employment situation release: [Izzo/RealTimeEcon] [Casselman/RealTimeEcon] [Portlock/RealTimeEcon] [Casselman/RealTimeEcon] [Duy] [Lowrey/Economix] [Appelbaum/Economix] [Norris/Economix] [Rampell/Economix] [CR1] [CR2] [Irwin/Wonkblog]

25 thoughts on “Observations on the Labor Market

  1. Ricardo

    The Payroll-to-Population rate.
    August 2013 – 43.7%;
    July 2013 – 44.6%;
    August 2012 – 45.7%.
    In one year employment has declined 2% of the total population. The classification of non-participating members of the workforce is at the highest sustained level in our nation’s history and growing. For the politicians manipulating the numbers and magic formulae may be wonderful, but people are still out of work in massive numbers.

  2. Hans

    Beautiful, Ricardo! I do not believe this stat can be con, unlike from what we get from the BSL…
    The use of Full and Part time employees is in my opinion a poor choice of words…
    What should be used is total employment hours and it would show a reduction…
    Hear, is just a sample of hundreds:
    There will be consequences of ComieCare (anti-market forces) and will be painful and have many victims…
    My wife and I, have seen our insurance premium rise by 50% in the past two years…With our combined 7200$ deductible we are paying $1400.oo per month! We are not 1%ers nor 10%ers…It is killing our budget…
    There are thousand of employers who will reduce work hours due to the… The ACA is as bad as the ADA…

  3. John Smith

    I wonder how they define a “part-time worker” in these studies. If it is “someone who works under 30 hours per week” then the results are bogus. There are huge numbers of part-time workers who work well over 30 hours per week, but they do so by having several part-time jobs. Such people do not, of course, qualify for Obamacare.

  4. spencer

    Unpublished BLS data shows that in 2013 over 100% of the increase in part time employment was accounted for by federal employes forced to work part time because of the sequester.
    In the first 8 months of this year nsa private part time employment actually declined by over a million job.
    I can provide you the data or tell you where to get it at the BLS.

  5. Menzie Chinn

    Hans: Who is the “BSL”? What does the adjective “Comie” denote? And you really think the ADA was such a terrible thing? I think that says a lot. (I’ll remember your comment the next time my mother has to hobble from her distant parking spot to the grocery store.) And is this the same FreeBeacon that notes approvingly Jack Welch’s assertion BLS is tweaking the data? Why, yes, it is!. (More on conspiracies at the BLS, here).

    John Smith: By extensive use of “the internets” (specifically Google, using about 10 seconds, probably more time than it took for you to type your comment), I determined how BLS defines part time…see here.

    Spencer: Thanks much – very useful.

  6. Spencer

    Hans — Jack Welch actually apologized and withdrew his comments on the BLS manipulating the data.
    I find it interesting that you claim the BLS manipulates the data when you don’t like what the data reports but use the data when it suits your purposes.

  7. BenAround

    Unfortunately BEA data on full-time equivalent (FTE) employment by sector are not available quarterly, only annually. However, data on W&S by sector (NIPA table 1.12) show that government W&S declined 0.1 percent in the second quarter over the first, and private W&S increased 1.0 percent. Both government and private declined slightly in the first quarter.

  8. Hans

    Professor Chinn, BSL is an overt insult of a governmental unit..
    Any government program that mandates compulsion, unless for the common good, is in the main ill advised; evil; and a form of tyranny..
    Collectivism, is either Socialism or Communism and of course The Affordable Health Act would be aptly define by either..
    More harm was caused than good to the Republic by the ADA and other junk legislation that people wish to admit to..America, now rated 17th in the world for property rights…OMG!
    Do you know how this act treats handicap parking slots after the building is closed for business and the staff has retired and the lot is void of vehicles; you will receive a citation ($200 thank goodness it is not indexed to the CPI) if you park there without a handicap permit, even if you are the only vehicle in the lot…
    There use to be a time when neighbors looked after one another, but now of course there is a program for just about every need..Here in Minnesota, you call the bus company and your dear loved mother would be pickup at her residence and taken to wherever she need to go…Need to go to work or a concert, the mini bus is on its way…
    Professor Chinn, I am a regular reader of the Free Bacon and enjoy it’s conservative leaning…
    As for Mr Welch, I have little regard nor respect for him…
    I am sorry for being so blunt: I am graceful to you for NOT censoring my post, Professor…
    Mr Spencer, I do not recall ever using BLS numbers hear at this website…I do with great reluctant use their stats, but generally I do not..
    After recent governmental unit sandals (Mr Snowden is an American Hero) I no longer have confidence in the integrity of any Federal agencies, including Ms Jackson of the EPA…
    I say this only with a great deal of regret…
    I would also like to add, that I have no conspiratorial left or right lobe..

  9. Julian Silk

    This is a response to Ricardo’s argument about labor force participation falling in one year, and this undermining Menzie Chinn’s argument. Ricardo’s argument seems to overlook demographics and fear as factors. The Republicans expected to win in 2012. As it is, the “laissez-faire, retrench” philosophy is doing very well at the state level, most recently with the recall of the Colorado state officials who supported tougher gun laws. Isn’t it reasonably for people who could participate in the labor force, but who would have to give up government benefits to do so to exit from the labor force to get some fraction of these benefits before the Republicans take them away? There is a showdown coming over the debt limit as well, and there will almost certainly be a government shutdown, too. Doesn’t it make sense to make use of such Federal or state or local employees who remain on the job now, rather than wait for the shutdown, when there will be no one?

  10. Menzie Chinn

    Ricardo: If you scan through my entries, you will see they are all on Iraq. The reason is that Iraq was a war of choice, and despite your comments in your DickF incarnation, completely unrelated to the 9/11 attacks. And lest we forget who was responsible, PDB of Aug. 6, 2001, more than one month before 9/11.

  11. Ricardo

    Thanks once again for threatening everyone on this board with an internet stalker. Good job!
    So you are not against war just the war with Iraq? Now I get it. So your concern is not with WMDs any longer since you aren’t concerned with Syria’s WMDs? Thanks, your position is becoming much more clear, uh,I think.

  12. BenAround

    It’s possible that some of the unexpected decline in labor force participation is due to a shift towards self-employment during and after the financial crisis.
    Measurement is extremely difficult here but BEA data indicate that the number of nonfarm self-employed outside of construction increased nearly 3% in 2012 over 2011, with most of the growth in business, professional, and financial services. Since this measure is based on counts of unincorporated business income tax returns it may actually understate growth of self-employed if tax compliance is declining in this sector.

  13. Bruce Hall

    Figure 2 is a good illustration in absolute terms, but it would be illuminating to see the data in percentage terms.
    One would expect that, simply because of the larger numbers of local and state governments, the federal government decline would be less of a factor in absolute jobs lost. But what do the percentages look like. If local and state government jobs declined at a greater percentage than federal, it might be reflecting the pain that the federal government avoids by being its own banker.

  14. Menzie Chinn

    Ricardo: This is about accountability. I want everybody to know what you have written in the past, so they can assess what sort of mind you have, as a commentator.

    As you troll, so shall your reap…

    I opposed the invasion of Iraq because I believed the evidence of WMDs had been trumped up (from aluminum tubes to yellowcake), and that the benefit-cost ratio was well below unity. Personally, I thought WWII was a war that had to be fought. Do you think otherwise?

  15. Ricardo

    You have a very difficult time staying on topic. WWII? Where did that come from?
    You ignore the fact that there was no intelligence service in the whole world that did not believe that Iraq had WMDs and that they not only had them they used them against Iran.
    Now there are significant questions about WMDs in Syria. Russia has issued a 100 page document showing that the Islamic radicals are the ones who are using WMDs in Syria.
    Speaking of WWII – what time did Assad attack Pearl Harbor again, or was it the Twin Towers? No, perhaps the Pentagon? I know, maybe he trained the Unibomber in leftist ideology.

  16. tj

    For accuracy, the part-time/full-time comparison should only include employers near or above the 50 full-time employee threshhold. Firms below 50 full-time workers are not subject to the penalties.
    I skimmed the definitions in the report and didn’t see that filter applied. If the analysis included all firms, then it raises serious doubts about the authors credibility. It gives the impression that they are data-mining to find the data set that puts their potential bias in the best light.
    They remove any doubt about their results by looking at the 20-49 group and the 50-99 group. The groups with the greatest incentive to shift workers from full-time to part-time status. Those are broad groups, so weekly hours relative to the larger and smaller firm-size groups might be interesting.
    It looks like those 2 groups (20-99) make up about 18% of the distribution of firms by size.
    I would think someone has done this analysis already, but I couldn’t find it.

  17. Menzie Chinn

    tj: Well, it might be a good idea to do that analysis. It’s often said, “more research is called for”. Still, if you read the CEA blog post, you will see they relied upon the CPS. As far as I know, CPS does not ask what sort of establishment the individual respondent works for. Hence, it seems to me they are not data mining, per se, but working with the data they have, not the data they wish they had (to paraphrase a former SecDef).

  18. 2slugbaits

    Firms below 50 full-time workers are not subject to the penalties.
    As a public service announcement it should be pointed out that the ACA redefines “full-time” to 30 hours. And the threshold isn’t 50 full-time employees, it’s 50 full-time equivalent employees. So if you’re a sneaky employer who thought he might be able to skirt the penalty by replacing your full-time workers with part-time workers, then IRS has an orange jumpsuit and free lodging just waiting for you.

  19. tj

    And here’s further clarification from the Federal Register -http://www.gpo.gov/fdsys/pkg/FR-2013-01-02/pdf/2012-31269.pdf
    FTEs are only relevant for determining which employers are subject to Shared Responsibility.
    Any actual Shared Responsibility penalties will be based on the number of full-time employees only — not full-time equivalents.

  20. Julian Silk

    This is a further comment. As I read from the top, I find:
    The Payroll-to-Population rate.
    August 2013 – 43.7%;
    July 2013 – 44.6%;
    August 2012 – 45.7%.
    In one year employment has declined 2% of the total population. The classification of non-participating members of the workforce is at the highest sustained level in our nation’s history and growing. For the politicians manipulating the numbers and magic formulae may be wonderful, but people are still out of work in massive numbers.
    There doesn’t seem to be anything about Iraq in this.

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