Conflicting News About the Job Market

When is good news not really? When economists say so!

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It's no secret that the average workweek has been shrinking over the course of this recession. Well, it's no secret to people who enjoy reading Labor Department news releases. There are plenty of workers who probably feel like they're working extra hours. But, the average work week dropped from 33.7 hours in May 2008 to 33.1 hours in May 2009.

The number of workers employed in part-time jobs has risen by more than 2 million in the past year, while the number who are working part-time involuntarily (meaning they'd rather be working full-time but had their hours cut or can't find full-time work) has jumped by 4.4 million over the course of the recession. (Is it fair to figure that some workers--older workers in particular--who would have been satisfied previously with part-time pay now need more income? Or, is this largely driven by employers cutting part-time jobs, then cutting full-time jobs down to part-time?)

Harvard economist Jeffrey Frankel noted yesterday in a blog post (which David Leonhardt picked up) that while the considerably slower pace of May job losses sure seemed like good news to some, the average work week was at its lowest level since 1964. Frankel says:

Hours worked suggests that the hope-inspiring May moderation in the job loss series may have been a monthly aberration. If firms were really gearing up to start hiring workers once again, why would they now be cutting back as strongly as ever on the hours that they ask their existing employees to work? If one factors in falling wages, to compute total weekly earnings, the picture looks still worse. My bottom line: the labor market does not quite yet suggest that the economy has hit bottom.

It's worth noting, one other piece of BLS data which seems a little brighter: the diffusion index, which measures the spread of industries adding or slashing jobs (a 50 represents a perfect balance). May's 32.7 percent figure is an improvement over the previous five months, showing job losses weren't as widespread. (See more on this at Calculated Risk.)

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