The case of the missing 100k jobs
Stanford University professor Edward Lazear makes a strong case at the Wall Street Journal that we’re looking at the last few months of job data wrong. The media has been celebrating a modest but reassuring uptick in job creation – although, as Lazear points out before making his really devastating point, the economy is still chugging below the prior 12-month average, which doesn’t exactly herald the long-delayed arrival of true “recovery.”
But “a more careful reading shows that “employment actually fell” in February, “as it has in four out of the past six months, and in more than one-third of the months during the past two years.” And it’s part of the Greatest Story Never Told: the media’s deliberate obfuscation of our transformation into a part-time workforce during the Obama era. Instead of counting raw numbers of jobs created and lost, Lazear recommends looking at hours worked - and by that metric, the American workforce is still in decline:
The labor market’s strength and economic activity are better measured by the number of total hours worked than by the number of people employed. An employer who replaces 100 40-hour-per-week workers with 120 20-hour-per-week workers is contracting, not expanding operations. The same is true at the national level.
The total hours worked per week is obtained by multiplying the reported average workweek hours by the number of workers employed. The decline in the average workweek for all employees on private nonfarm payrolls by 3/10ths of an hour—offset partially by the increase in the number of people working—means that real labor usage on net, taking into account hours worked, fell by the equivalent of 100,000 jobs since September.
Here’s a fuller explanation. The job-equivalence number is computed simply by taking the total decline in hours and dividing by the average workweek. For example, if the average worker was employed for 34.4 hours and total hours worked declined by 344 hours, the 344 hours would be the equivalent of losing 10 workers’ worth of labor. Thus, although the U.S. economy added about 900,000 jobs since September, the shortened workweek is equivalent to losing about one million jobs during this same period. The difference between the loss of the equivalent of one million jobs and the gain of 900,000 new jobs yields a net effect of the equivalent of 100,000 lost jobs.
Lazear considers, and rejects, both statistical noise and bad weather (the media’s favorite Obama excuse for poor economic numbers – as though everyone believed the global-warming nuts and assumed winter would never come again, only to be shocked by the arrival of cold temperatures and snow in December) as causes for the decline in hours worked. He suggests a more plausible explanation:
Another possibility for the declining average workweek is the Affordable Care Act. That law induces businesses with fewer than 50 full-time employees—full-time defined as 30 hours per week—to keep the number of hours low to avoid having to provide health insurance. The jury is still out on this explanation, but research by Luis Garicano, Claire LeLarge and John Van Reenen (National Bureau of Economic Research, February 2013) has shown that laws that can be evaded by keeping firms small or hours low can have significant effects on employment.
I have often thought tectonic shifts in the workforce are more of a process than an event. As time goes by, employers adjust to a New Normal of higher labor costs, mandates like ObamaCare that give them cash-money incentives not to hire people, and even flagging supply from a populace that feels less pressure to seek employment. The Democrats’ frantic “job lock” spin after the atomic-bomb Congressional Budget Office report on ObamaCare job loss should forever put the rest the fiction that everyone at the margins of the workforce is desperate to secure a job, and waits only for the opportunity to fill out some applications. There is real downward pressure on supply from the ever-growing welfare state. The marginal cost of dollars earned through employment, or working longer hours, can be staggering due to higher taxes and lost benefits. We’re not talking about lazy people who want to spend their lives lounging in the social safety net; we’re talking about entirely rational decisions to avoid taking a job, or seeking more hours, because the prospective worker literally cannot afford to work more.
Employers have been learning to adjust to this new environment for years. They didn’t start bracing themselves for the oncoming storm of ObamaCare last October. New realities have emerged. Methods of conducting business with fewer hours of labor have been devised. The customer base has adjusted to these realities as well, growing accustomed to less human interaction, fewer people in the dining room or sales floor, more pro-active shopping methods that take advantage of information technology. Retail shopping will never be the same, thanks to smartphones.
Some of these changes were coming anyway, but years of Obama’s permanent semi-recession have inspired employers and customers to make certain adaptations, reflected not just in raw numbers of jobs lost, but in declining hours for the jobs that remain. America works less now. It’s not a trend that shows any signs of reversing, any time soon, since the government policies that initiated this transformation probably aren’t going anywhere until 2017 at the earliest… and at this point, it would take more than merely canceling destructive policies to reverse a process that has been running for years.