Jobs Mirage: Full-Time Roles Vanish
The U.S. job market appears strong, with nonfarm payrolls rising by 151,000 in February. Yet, full-time employment fell by 1.22 million in the same month. This disconnect points to deeper shifts in employment composition.
Over the past two years, full-time employment has barely grown, rising by just 300,000 since March 2023, despite nonfarm payrolls increasing by over 4 million. A significant portion of these new jobs are part-time or secondary roles. The Bureau of Labor Statistics (BLS) uses the Birth-Death Model to estimate job changes due to business openings and closures, assuming a stable rate of business formation. More businesses are now closing than opening, highlighting economic fragility. Earlier this year, the BLS revised down its 2024 figures by 610,000 jobs.
Flat full-time employment suggests a decline in job quality, with businesses facing higher costs and uncertainty increasingly relying on part-time or contract workers. Sectors such as leisure, hospitality, and retail appear to be plateauing, with hiring shifting towards part-time roles.
February’s data reflect this shift, showing a sharp rise in part-time work, with those working part-time for economic reasons increasing by 483,000 and voluntary part-time work rising by 136,000. At the same time, the U-6 unemployment rate, which includes total unemployed, marginally attached workers, and those employed part-time for economic reasons, rose from 7.5% to 8.0%, while the standard unemployment rate edged up from 4.0% to 4.1%. Many full-time workers have been forced into part-time positions. The payroll survey, which counts jobs rather than individuals, can inflate job numbers when workers take on multiple jobs. If a full-time worker loses their job and replaces it with two part-time positions, the payroll survey registers a net gain in jobs, despite their financial position worsening. The number of people working more than one job rose by 96,000 in February, reaching 8.86 million, reinforcing the trend of individuals taking on additional jobs out of necessity.
If headline job growth overstates economic strength, the economy may be weaker than it seems. A shift towards part-time and lower-quality employment could strain household incomes. Consumer spending may weaken if more workers struggle to secure stable, well-paying jobs, affecting discretionary sectors such as retail and travel.
The Federal Reserve watches labour market data closely when setting interest rates. If job growth remains strong, the Fed may keep rates higher to contain inflation. However, if the labour market is weaker than it appears, the Fed may turn more dovish, easing policy sooner than expected. Rising slack in the labour market could ease wage pressures and create room for rate cuts.
If businesses are cutting full-time positions or shifting to part-time hires, it may signal caution about future demand. Companies that rely heavily on part-time or multiple jobholders could be early indicators of broader economic stress. Leisure and hospitality shed jobs in both January and February, even after seasonal adjustments.
The gap between payroll growth and full-time employment underscores structural shifts in the workforce. Despite the headlines, the labour market’s foundations may not be as strong as the figures suggest and, judging by the sharp rise in the U-6 unemployment rate, risks are rising.
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