Good employment news from the BLS this morning. They report 248,000 net new jobs in September with the unemployment rate ticking down to 5.9%. Economists had expected a gain of 215,000 jobs. The number of involuntary underemployed (part time for economic reasons) also declined in September, largely due to a decline in slack work. The number of those who could only find part time work declined only slightly
As I’ve noted before, the high level of involuntary underemployed constitutes a waste of human capital. It also masks what is happening in the labor force. Jared Bernstein has pointed out in a recent NY Times article that there are two ways using just the unemployment rate gives a distorted view of the labor market. One is the changes in the participation rate affecting the unemployment rate. The second is the underemployed:
[T]here are over seven million involuntary part-time workers, almost 5 percent of the labor force, who want, but can’t find, full-time jobs. That’s still up two percentage points from its pre-recession trough. Importantly, the unemployment rate doesn’t capture this dimension of slack at all — as far as it’s concerned, you’re either working or not. Hours of work don’t come into it.
As Bloomberg reports, this makes a difference for policy makers.
The labor-market recovery that Federal Reserve Chair Janet Yellen seeks is proving incomplete as many U.S. workers languish in part-time jobs.
Forty-nine percent of people working less than 35 hours a week in 2012 and desiring full-time work were able to find such a position within a year, according to research by the Federal Reserve Bank of Atlanta. That’s down from 61 percent in 2006.
In addition, the almost 3 million Americans unemployed for at least 27 weeks are more likely to accept part-time jobs than counterparts out of work for shorter periods, according to a Chicago Fed paper. That means underemployment, a hallmark of the slow and uneven recovery from the recession, won’t quickly dissipate, backing policy makers such as New York Fed President William C. Dudley who counsel patience in removing stimulus.