What Happened to the Part-Time Employment Story?

For many skeptical observers, the big employment theme for this year has been an assertion that new jobs were of low quality and mostly part-time. This theme resonated with those who want to disparage economic growth, including sellers of political themes, gold, page views, fear, and related (high-commission) products.

All of these sources pounded the drum when part-time employment was high – ignoring and dismissing the obvious seasonal effects.

What about now? After the delayed release of the September employment numbers, what did you read about part-time employment?

The answer is --- nothing. Sherlock would call it a "dog not barking." This is business as usual in the investment world.

The Breaking News You Did Not Hear

What was the real news? The seasonal part-time effects have reversed. If you have joined us in following Bob Dieli's work, you would get this chart and explanation:

"Quick show of hands: How many of you heard that there were 691,000 full-time jobs created in September? Another quick show of hands: How many you remember hearing that there were 360,000 part-time jobs created in June?"

Resulting in this (chopped inexpertly from his report) –

This is exactly what Bob has been predicting. You need to subscribe to get his complete reports, but mention this post and I think he will give you a free month or two. You will quickly learn the value of his accurate and insightful commentary and also enjoy his humor.

I highlighted his part-time employment analysis in August, when Bob got our Silver Bullet award for refuting analysis from John Mauldin and Charles Gave. The most recent evidence shows that he was right, but don't hold your breath waiting for the mistaken sources to back off!

Other Viewpoints

The only other source I find that even mentioned the part-time reversal is Doug Short. Here is his chart:

It is pretty obvious from this chart that the part-time story is based upon the recession, not anything that has happened after 2009. We hope that Doug's commentary will soon catch up with the evidence.

Investment Conclusion

As usual, I warn against confusing your political viewpoints with your investment decisions. This is such a case. The coalition of the naysayers has used the part-time argument to convince everyone that employment growth is very weak and the economy is heading into a recession. When the data refutes their prior arguments, they have nothing to say.

Personally, I think there is some tendency to part-time employment from ObamaCare, but the effects are vastly overstated. If you look at all of the jobs involved, few businesses are at the margin. There are plenty of anecdotes, and I do not question them. The program could have a better design. Any "hard" threshold invites such issues.

In my investing, I dismiss such issues when the impact is small. So should you.

Most importantly: Beware of sources that shift indicators to suit their purposes!!

Comments

[oldprof]

Chris -- The Dieli chart uses the seasonally adjusted series -- -as it should.

Jeff

[oldprof]

Eric -- Seasonal adjustments do not "smooth" data. That would be a moving average.

Seasonal adjustments identify a regular and repeated pattern and remove it, thereby exposing the reality of what occurred. Over the course of a year the seasonal adjustments net to zero.

The process for seasonal adjustment of government data is thoroughly documented and professional. There is no bias involved --either on the part of the government or Dr. Dieli in his analysis.

On the contrary, those with an agenda often choose unadjusted data. They rely upon the fact that most people do not understand how seasonal adjustments are done, and think that government statisticians are at the beck and call of the President.

So the seasonal adjustment did not "produce" a 5 sigma event. BTW, the margin of error in the household survey is on the order of 450K.

My interest is in making sound investment decisions. The political debate is distracting people from that mission.

Jeff

[Patrick R. Sullivan]

'It is pretty obvious from this chart that the part-time story is based upon the recession, not anything that has happened after 2009.'

I guess that depends on your definition of 'not anything'. If this was a normal recovery the two lines should have reversed (back to where they were in 2007).

[Eric Kuehl]

Jeff, while I agree one should not put political considerations into their process, one also needs to investigate the statistics when a 5 sigma event such as the current month's data shift implies. If you look past the seasonally adjusted data and look at the raw data you will see that the reason for the huge data shift came not from some magical appearance of full time jobs and loss of part time jobs but a change in the seasonal adjustment. One can not declare their viewpoint victorious until rigorous analysis is applied, IMO. Since the adjustment formula is not known then one can only take an informed guess as to the major shift...are you doing so without some bias? The total full time jobs DECLINED 560k and part time jobs INCREASED 702K. This coincides with the increase in multiple job holders of 176K. Do you believe the raw data that confirms the recent trend or do you believe the seasonally adjusted data that produced a 5 sigma event in the data? (I thought seasonal adjustments were to smooth the data...just saying.) Here is the raw data:

http://www.bls.gov/news.release/empsit.t09.htm

[Chris of Stumptown]

Excellent commentary. One question: Doug Short's chart is seasonally adjusted numbers. Dielli's data doesn't specify. Do you know whether his is as well?

It'd be interesting to see Short's chart with a similar unadjusted chart.

[Douglas Lee]

I am missing the point. The part time work we care about are those who want to work more but have had their hours cut or cannot find full time work. The number of those part-timers increased an insignificant amount in September. August was down some from July, but this number has really fluctuated in a narrow range all year -- 7918 in Jan and 7926 in Sept. Those who choose to work part time are not a problem.

[Joe]

Guerrilla Economics; Providing an insight and counterbalance to the noise.

See ya at the track.

[lou]

Great post Jeff, and very informative!