(Bloomberg Business) — If you're working multiple jobs just to make ends meet, Federal Reserve officials are looking for you.
Central bankers considering when to execute the first interest-rate increase in almost a decade are weighing the extent of hidden slack in the labor market—the kind of underutilization of labor resources that isn't captured by indicators like unemployment and labor-force participation rates. One possible source: the million-plus Americans cobbling together two or three jobs for hours that add up to a normal workweek.
The share of the employed population working multiple part- time jobs for full-time hours has been rising for 11 of the last 12 years, reaching 0.78 percent in 2014, a record in two decades of data. These people are not included in statistics on the part-time population, because the Bureau of Labor Statistics defines full-time workers in its current population survey as "those who usually worked 35 hours or more (at all jobs combined)." Counting them as fully employed, especially when they would rather have just one steady job, may mask weakness in the labor market.
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Fed officials have acknowledged that the unemployment rate, which held at an almost seven-year low of 5.5 percent in March, may underestimate how much hotter the job market can run.
"The labor force participation rate continues to be unusually low, suggesting that potential workers may be waiting on the sidelines for further improvements in job opportunities and wages," Fed Governor Jerome Powell said in a speech on April 8.
Or, they could be working three jobs to approximate a full- time one. Powell said hidden slack in the labor market justifies a gradual approach to monetary policy tightening after an initial interest-rate increase, which he expects later this year.
Even the so-called U-6, a measure for "underemployment" that includes discouraged and involuntary part-time workers, could be "understating labor-market hardship," said Ed Dolan, an economist who blogs for EconoMonitor. "Some of the people who work full-time are involuntarily working multiple jobs."
Digging deeper into this subset, the ranks of those working multiple part-time jobs (not just for full-time hours) have been growing faster than the group who moonlights in a part-time job in addition to working a full-time one. The chart below, indexed to 2004 averages, shows this divergence.
The number of workers in multiple part-time jobs has increased by 11 percent to 2 million since 2007, and represented 27 percent of all people holding multiple jobs in 2014, up from a low of 21 percent in 1998.
Many employers cut workers' hours during the recession, and restoring them has proven sluggish. Some blame the Patient Protection and Affordable Care Act for the rise in non-traditional work arrangements, as health mandates compel businesses to avoid the costs of keeping full-time employees on the books. Others point to persistently weak business conditions, according to a survey by the Federal Reserve Bank of Atlanta.
We don't know what proportion of these people are working multiple part-time jobs for economic reasons. For some, it's a voluntary choice—they enjoy the work or want to enhance their skills. For others, it's the only way to make ends meet or earn extra income. Most multiple-jobholders are in the second bucket, according to BLS economist Steven Hipple.
Even if a fraction of these workers would rather have one steady job, they represent a pocket of hidden slack the Fed is looking for.
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