Joseph Peterson grew up wanting to be a pastor, just like his dad. A part-time job at Starbucks Corp. (SBUX:US) is allowing him to pursue his dream.
His barista’s salary is supporting him and his wife, Nicole, while he studies for a divinity degree at Baptist Bible Seminary in Clarks Summit, Pennsylvania. “I’d rather get my schooling done now, when it’s just the two of us and our cost of living isn’t very high,” said Peterson.
Peterson, 24, is among a growing number of people who are working part-time because they want to, and not because the sluggish economy forces them to settle for less than a full-time job. That’s a reversal of what happened during the recession and the first years of the recovery. It shows a labor market in the early stages of a shift toward more full-time employment choices rather than just low-paying, part-time positions such as coffee servers, say economists including Neil Dutta and Ethan Harris.
“If it’s a non-economic reason, it’s basically an individual choice,” said Dutta, head of U.S. economics at Renaissance Macro Research LLC in New York. “Whichever way you look at the labor market, information suggests to me a largely cyclical weakness. It’s way too early to say that there’s some structural break.”
Since the end of 2010, the number of people working less than 35 hours a week for non-economic reasons, including child care and family obligations or school, has climbed 4.6 percent to 19.1 million, according to Labor Department data. Those citing a slack economy or inability to find full-time jobs dropped by 7.7 percent over the same period to 8.25 million.
So far, part-time hiring is still growing faster than the total job market. The 1.2 percent gain in hiring at an annualized rate so far this year has been paced by a 4.6 percent increase among those working less than 35 hours. As a result, part-time workers accounted for 19.6 percent of all employment in July, little changed from a record 20 percent in January 2010.
An improving economy means the job market will soon reach a tipping point, where employers will need to offer more hours and better pay to attract qualified applicants, according to Harris, co-head of global economics research at Bank of America Corp. in New York.
Some of those jobs will be filled by part-time workers who have been searching for full-time work, such as Frank Avila, 27, who starts a full-time job next week as an administrative assistant in Conroe, Texas, at the supermarket chain H-E-B. He’d been working part-time at a different location for about a year after moving from California in August 2012.
“It’s not that I wasn’t able to pay any of my bills,” Avila said. “I didn’t have any playing money. Everything was going to the bills and rent.’
He said he hopes to use the extra money from his new job to help pay off credit-card debt and eventually buy a house. “I’m very excited. I feel a weight lifted off my shoulders.”
About two-thirds of the increase in part-time jobs can be traced to the so-called cyclical influences of the recession and ensuing slow expansion, when out-of-work Americans had little bargaining power and companies had the upper hand in dictating what type of employment was available, said Harris, a former researcher at the Federal Reserve Bank of New York.
“When you get a full recovery in the job market and workers can pick and choose their jobs, people will not be willing to take those jobs and the companies that are offering them will have to switch over to full-time,” Harris said.
He projects gross domestic product will expand at a 3 percent clip in the first half of 2014, prompting employers to take on more full-timers. The economy grew at a 2.5 percent annualized pace from April through June, more than previously forecast, according to revised figures from the Commerce Department issued today in Washington.
Peterson, the pastor-in-training, is already being pursued by churches willing to put him in the pulpit.
“We’ve actually had a few offers to go to a church and have a full-time position, but they wouldn’t necessarily pay for school,” said Peterson. “I’d be doing my job and having a wife and probably a family and still having to go out-of-pocket for school.”
Peterson said he hopes to get his degree by the end of 2014 and then search for a full-time position, potentially in the Carolinas where Nicole has family.
Not all economists agree the jump in part-time hiring will prove fleeting.
“I think it’s a structural shift,” said John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina, and a former chief economist for the Senate Banking Committee. “Firms have learned to use part-time people more effectively.”
The industries that have led the gains in employment, including retailing, leisure and hospitality and temporary-help agencies, tend to use fewer full-time workers, and those trends will probably continue, he said.
The record share of part-timers in the workforce at the start of 2010 is less startling when adjusted for a 1994 change in the way the figures were calculated, according to researchers at the Federal Reserve Bank of San Francisco.
Starting in January of that year, all Americans were asked how long they worked each week, and those saying less than 35 hours were put in the part-time category, causing their numbers to surge. Previously, people who identified themselves as full-timers weren’t asked about the number of hours they worked.
After prior years’ numbers were adjusted to the new definition, they showed the part-time share of employment actually peaked at 20.3 percent in 1983, following the back-to-back recessions in the early 1980s, San Francisco Fed researchers Rob Valletta and Leila Bengali wrote in an Aug. 26 economic letter.
“By this standard, the level of part-time work in recent years is not unprecedented, although its persistence during the ongoing recovery is unusual,” they said.
Valletta and Bengali conclude “that the continued high incidence of individuals working part time for economic reasons reflects a slow recovery of the jobs lost during the recession rather than permanent changes in the proportion of part-time jobs.”
The prevalence of part-time work is making it difficult for Fed policy makers to gauge the strength of the job market as they decide when to scale back monetary stimulus and increase the benchmark interest rate. Chairman Ben S. Bernanke has said they may soon start trimming the $85 billion a month in bond purchases and will aim to stop the program by mid-2014 when they project the jobless rate will be around 7 percent.
In July testimony before Congress, Bernanke said long-term unemployment and under-employment, including people working fewer hours and at jobs below skill levels, are among the “problems” the labor market continues to face.
The jobless rate unexpectedly dropped to 7.4 percent last month, in part because of the increase in part-time help. Additional declines in unemployment for the same reason would be less meaningful in determining policy makers’ next steps. The Labor Department’s August jobs report will be released on Sept. 6, less than two weeks before the Fed’s next meeting.
A pickup in growth will probably be the main reason unemployment will keep dropping, making it easier to read the job-market tea leaves, said Carl Riccadonna, senior U.S. economist at Deutsche Bank Securities Inc. in New York.
“A faster pace of economic growth is going to mean more demand for labor, and businesses will not have the luxury of just adding temporary workers on a part-time basis,” Riccadonna said. “This recovery has been much slower and more drawn out than the typical recovery, and that’s why it’s taking time to turn that corner. This is the final stage before full-time hiring shifts into a higher gear.”
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