Obamanomics: Learning to love temporary, part-time and contract work

The July fifth jobs report was reported in the mainstream media as possibly the greatest economic event in years.  The economy, the media screamed, created 195,000 jobs and job creation for the past two months were upgraded raising the three month average 202,000 per month.  The unemployment rate stayed at 7.6% as more people started looking for a job.

Underneath all the hoopla is a different story.

First, 60% of the job gains, according to the Wall Street Journal, were in low paying industries: retail firms added 37,000 jobs, leisure and hospitality companies added 75,000; the number of higher paying manufacturing jobs decreased by 6,000. 

The number of people wanting full time work, but working  part time increased by 322,000 to 8.2 million (1.3 million in California).   The underemployment rate (the unemployed, the people working part time who want full time work, and the people who have stopped looking for work) now totals 20 million Americans and rose in June from 13.8% to 14.3%. 

According to the Associated Press, temporary and contract  workers currently number 17 million in the economy as companies turn to them in the face of uncertainty in the economy.  The number of “temps” in the workforce has increased more than 50% to 2.7 million people since the recession ended four years ago.

One explanation for the accelerated growth of part-time, contract and temporary jobs is ObamaCare.  The law requires employers with more than 50 workers to provide full time workers health insurance or pay a $2000 fine; it defines “full time” as 30 hours per week or more, giving businesses an incentive to hire more part-time or temporary workers.

The labor participation rate (the percentage of able-bodied Americans working or actively seeking work) rose from 63.4% to a still pathetic 63.5%.  The labor participation rate was at its highest point in 2000 when it hit 67.3%, but has been declining since.

The consequences of the move to temporary, part-time and/or contract workers are that the combination of low pay, few benefits and little job security makes these workers less likely to spend freely and, therefore, boost the economy.  It may look great that 195,000 jobs were added in June, but if most were people who lost jobs paying $60,000-$100,000+  and are now asking “do you want fries with that order”, we will see little economic recovery in the near future.