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Companies are beginning to reduce the hours their workers work, forcing hundreds of thousands of people into part-time jobs. This could be an early warning sign for the economy.
According to the Bureau of Labor Statistics, the number of people who worked part-time but want to work full-time rose by 452,000 in June, the sharpest increase in more than three years. A total of 4.2 million people were in part-time employment for economic reasons beyond their control, a 12 percent increase from the previous month.
Economists warn against making too much of a single data point but say the recent surge in involuntary part-time work could be a harbinger of layoffs to come, especially when combined with other signs of a slowdown in the labor market.
“When I look at that indicator — along with two straight months of black employment falling — it cheers me up a little,” said Michele Evermore, senior fellow at the Century Foundation and former associate director of the Department of Labor. “I don’t want to be like Chicken Little here, but this is usually a leading indicator that things are starting to slow down.”
In interviews with nearly a dozen people whose employers had recently reduced their hours, all said it was because of declining sales. Most worked in service jobs — fast-food restaurants, grocery stores, hair salons — where schedules can be easily altered to keep up with demand. But in at least two cases, office workers said lost revenue had forced their employers to reduce their workers’ hours across the board.
“As a company, we’re not doing as well as we were this time last year,” said Liv Roach, who works at a sustainability nonprofit in New York, where most full-time employees were recently downgraded to part-time. “Our nonprofit’s income depends on larger companies and they are starting to pull out. People keep saying that recession fears are fading, but no, recession fears are still very high.”
Economists have been expecting a recession for over a year. While the US economy contracted in the first half of 2022 – typically portending a recession – it has since recorded healthy growth.
A surprisingly strong job market and sustained spending have kept the economy humming, even as the Federal Reserve aggressively hikes interest rates to slow the economy and curb inflation.
More than a year into the Fed’s campaign that has seen borrowing costs rise at an all-time high, signs that the economy is slowing are mounting: the housing market is in decline. Production is in a downturn. And the job vacancies are decreasing.
“In recent months, it has become harder for the unemployed to find a job, and even when they have one, it has become harder to find enough hours,” said Julia Pollak, chief economist at ZipRecruiter. “This is mainly due to the labor market returning to a more normal and sustainable pace. But that’s because of a situation that was much more favorable to workers. So a return to normal means some workers will be losers.”
The first losers, she added, are often the most vulnerable: people in hourly and low-wage jobs, black and Hispanic workers, and immigrants.
In East Lansing, Michigan, Lawrence Hart-Howlett recently took on a second job after his $14.42-an-hour job at a Michigan State University cafeteria was cut from five days a week to two days for the summer.
But a week into his new job as a dishwasher at a fast-food chain, his hours were cut by 20 percent. This week, he found they’ve been reduced yet again: to 15 hours a week instead of the original 24.
“I had to take this job to fund my first job, and what am I supposed to do now?” said Hart-Howlett, 37. “Honestly, it kind of pissed me off. I’m not sure if I can pay next month’s rent.”
Economists use a variety of factors, including unemployment figures and bond yields, to determine the likelihood of a recession. Some say a surge in part-time work could be a sign of an imminent downturn before unemployment picks up. Joshua Mask, an economics professor at Temple University, says that in every recession since 1980, a sharp rise in involuntary part-time work has predicted a downturn in the coming months.
“It’s an odd pattern that dates back to the 1980s and is potentially another leading indicator that we could use to spot recessions,” Mask said. “I do not think about it [part-time work] as a predictor, but I think it captures the early stages of a trend.”
That momentum may be particularly exaggerated this time, he said, given that employers have been struggling with labor shortages for so long. For much of the post-pandemic period, there were more vacancies than job seekers. Many companies have been forced to increase wages and benefits, and offer perks to attract and retain workers. This has led to at least some employers ‘hoarding’ workers longer than necessary.
“Instead of laying off 10 percent of your employees, you can cut everyone’s hours by 10 percent,” said Century Foundation’s Evermore. “It’s a less visible way to save money.”
Kyndal Mesenbrink had expected to work the usual 60-hour week this summer, drinking beer and vodka sodas at a bar next to Houston Astros Stadium. But over the past month, business has slowed — and with it, her work schedule.
These days she works about 30 hours a week, but ends up working even less. Her salary has dropped accordingly, from around $350 tipped on a typical Friday night to $120.
“Everyone’s working shorter hours across the board,” the 23-year-old bartender said. “You might have planned three hours, but sometimes it’s so dead that after 30 minutes they’re like, ‘Okay, you can go.’ You almost have to fight to stay at work.”
Even when customers come in, she says they order cheaper drinks — like vodka instead of Gray Goose or Tito’s Handmade Vodka. And while 32-ounce beers, which sold for $13, used to be the norm, most customers say they’re reaching for 16-ounce beers, which cost half as much.
“People don’t feel like they have the money to go out to bars and spend money,” she said, adding that the average cash amount has gone from about $50 to $25. “There’s a lot of fear about what’s going to happen and what the future will be like.”
In San Francisco, the emergency veterinary hospital where Natasha Landen works recently laid off its part-time staff and reduced all full-time staff to 32 hours. Business has slowed “noticeably” in recent months as inflation-plagued customers migrate away from emergency hospitals to cheaper general clinics.
Landen, 33, a receptionist, has started working weekend shifts at another animal hospital to earn extra money.
“On paper, the numbers just don’t add up anymore,” she said. “We don’t see enough patients.”
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