Labor market strains deepen as part-time work for economic reasons surges to multi-year high
The number of Americans preferring full-time jobs but instead having to settle for part-time work surged to a multi-year high in July, underscoring growing signs of strain in the U.S. labor market as economic uncertainty mounts.
These individuals, who would have preferred full-time employment, found themselves working fewer hours due to reduced business activity or an inability to secure full-time jobs.
Breaking down the increase in part-time employment for economic reasons, 153,000 of such workers cited “slack work or business conditions” as the reason for their reduced hours, while 305,000 reported that they “could only find part-time work.”
The surge in part-time employment for economic reasons is a worrying sign for the U.S. economy. It indicates that employers may be responding to economic uncertainty by scaling back hours rather than committing to new full-time hires. It could also signal a possible broader weakening trend in the labor market, especially if economic conditions continue to deteriorate.
One immediate concern of the rise in the number of workers forced into part-time roles due to slack business conditions or inability to find full-time jobs is its potential impact on consumer spending. Workers who are involuntarily part-time typically earn less than their full-time counterparts and so have less disposable income. This could weigh on consumer spending, which is a key driver of the U.S. economy, accounting for over two-thirds of economic output.
In July, the U.S. economy added 114,000 new jobs, a marked slowdown from June’s 179,000 and well below economists’ expectations of 175,000. The headline unemployment rate rose to 4.3 percent, the highest since October 2021, further signaling deceleration in the job market.
“Moreover, the year-on-year declines in full-time employment are always a warning sign of impending recession threat, especially when part-time is spiking higher, suggesting firms are reluctant to replace retiring or quitting workers with like for like replacements—the first stage of cost cutting,” they wrote.
The ability of the economy to transition part-time workers into full-time roles is often seen as a barometer of economic strength, encompassing factors like business confidence and consumer spending capacity.
Friday’s jobs report noted that the average workweek edged down in July by 0.1 hour to 34.2 hours. In manufacturing, this decline was deeper, with the average workweek falling by 0.2 hours to 39.9 hours.
In another possible sign that households may be feeling increased economic strain and needing to bolster their financial situation, the number of people not in the labor force who said in July that they want a job rose by 366,000 to 5.6 million, per the Bureau of Labor Statistics report.