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Unemployment, Part-time Workers and Obamacare

When the most recent unemployment data was released just a couple of days after the second Presidential debate, there was some speculation that the numbers were “rigged” or “fudged”. We’ve been saying for a long time that even though they should be two sides of the same coin, the “Employment” numbers don’t track with the “Unemployment” numbers.

See: Employment vs. UnEmployment.

Basically, what the comparison chart shows is that unemployment is falling faster than employment is rising. Historically, in a recovery employment rises faster than unemployment falls.

But this time somehow “magically” unemployment is falling faster than employment is rising. How can that be?

Discouraged Workers are not the Answer

Unemployment- Part-time workerSome possible explanations up until this point were that people had given up looking for work (became “discouraged workers”) and so they were no longer counted as unemployed under the standard U-3 definition. This would of course make the U-3 number look better but wouldn’t indicate an improving economy. However logical this possibility sounds, the data does not hold up.   If we look at the Bureau of Labor Statistics numbers for Unemployed persons by duration of unemployment we can see that the number of people unemployed for more than 27 weeks in September 2011 was 6,217,000 but in September 2012 that number had fallen to 4,835,000 so the long term unemployed had fallen considerably.

In the table below we see the number of “discouraged workers”  in thousands according to the Bureau of Labor Statistics. Once again we see the number of discouraged workers declining.

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2002 328 375 330 320 414 342 405 378 392 359 385 403
2003 449 450 474 437 482 478 470 503 388 462 457 433
2004 432 484 514 492 476 478 504 534 412 429 392 442
2005 515 485 480 393 392 476 499 384 362 392 404 451
2006 396 386 451 381 323 481 428 448 325 331 349 274
2007 442 375 381 399 368 401 367 392 276 320 349 363
2008 467 396 401 412 400 420 461 381 467 484 608 642
2009 734 731 685 740 792 793 796 758 706 808 861 929
2010 1065 1204 994 1197 1083 1207 1185 1110 1209 1219 1282 1318
2011 993 1020 921 989 822 982 1119 977 1037 967 1096 945
2012 1059 1006 865 968 830 821 852 844 802

Accounting Tricks of Another Sort: Part-Time Employment

But there is another issue, i.e. part-time employment and that is where the discrepancy appears to be. According to the Bureau of Labor Statistics (BLS) Glossary:

The BLS calculates Unemployment using the “Current Population Survey” a household survey and they calculate Employment using the “National Compensation Survey” which is a separate survey of employers.  For more information see Current Unemployment Rate  on how Unemployment and Employment are calculated. 

But the problem comes because under  the “Current Population Survey” workers  are considered full-time if they work more than 35 hours a week but under the “National Compensation Survey” the BLS says “Employees are classified as full time or part time as defined by their employer.”

So right off the bat we have a different definition of “Full-Time” employment. So we have the beginning of a problem. As long as employers consider full-time more than 35 hours a week there is no problem, but if for some reason employers changed their classification we could see a divergence between the employment numbers and the unemployment numbers such as I noted in the above mentioned article.

The Law of Unintended Consequences

As mentioned in the article Unintended Consequences of Well-Intended Policies  all governmental policies have unintended consequences and with the thousands of pages of hastily written law in Obama Care there are probably hundreds, if not thousands, of unintended consequences.  One such consequence is related to  section 1513 sub-section 4 Paragraph A which says, “The term ‘full-time employee’ means, with respect to any month, an employee who is employed on average at least 30 hours of service per week.” So basically, Obamacare has rewritten employment law and changed the definition from 35 hours a week as defined by the Bureau of Labor Statistics to 30 hours a week as defined by Obamacare.

So what are the unintended consequences?

If you owned a company and you had to provide certain health care benefits to full-time employees but not to part-time employees, and those benefits would drastically reduce your profitability, what would you do? The fact is, many companies in their reporting under the  “National Compensation Survey” for the employment statistics chose 35 or 40 hours as their definition of a full-time employee. But now they are being forced to change that definition to 30 hours. Therefore, they are cutting the number of hours they are giving to employees from 35 to 28 or 29 hours a week. But they still have the same number of hours of work to do. So they then turn around and hire more people to work less than 28 hours a week to cover the extra labor done by the employees whose hours were cut. So one obvious unintended consequence of Obamacare is that many minimum wage workers will have their hours cut.

This is exactly what is happening, the most recent employment statistics (for September 2012) showed a massive surge in part-time employment of +582,000. Some speculated that a large portion of them came as a result of increases in campaign staff and people trying to sign up unregistered voters. But it is quite possible that these part-time jobs came from companies cutting their regular workers and hiring make-up workers so their average number of hours worked would be below the 30 hour limit.

The Unemployment Loophole-

Work 1 hour a week and you are no longer “unemployed”

Also interestingly, the BLS defines part-time as “those who worked 1 to 34 hours during the survey reference week”. So if you work as little as one hour a week you are no longer “unemployed”. And so by changing the definition of part-time and thus increasing the number of part-time workers  (even though no more total hours are worked) the unemployment rate magically goes down! Under this logic, all the government has to do is say that anyone who works more than 20 hours is full time and the unemployment rate will magically fall to below 5%.

Whether unintended or not, it is all slight of hand and does not help the economy. After all, even if you are classified as “employed” rather than “unemployed” who can support their family by working one hour a week?  The numbers may look better but, the fact remains that people are underemployed and so we see college grads are working part-time minimum wage jobs and people are having difficulty making end meet.

See Also:

What is the Real Unemployment Rate?

Current Employment vs Unemployment Chart

Was Jack Welch Right on Twitter? Are Unemployment Numbers “Unbelievable”?

Will Big Bird Lose His Job?

Employment vs. Unemployment

Is the Government Fudging Unemployment Numbers?

10 Awesome Jobs You Can Do From Home

The Fastest Growing Careers of 2012

Photo Credits: By billjacobus1

About Tim McMahon

Work by editor and author, Tim McMahon, has been featured in Bloomberg, CBS News, Wall Street Journal, Christian Science Monitor, Forbes, Washington Post, Drudge Report, The Atlantic, Business Insider, American Thinker, Lew Rockwell, Huffington Post, Rolling Stone, Oakland Press, Free Republic, Education World, Realty Trac, Reason, Coin News, and Council for Economic Education. Connect with Tim on Google+