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Businesses are mercilessly slashing workers’ hours, forcing the masses into part-time roles. This alarming trend might just be the early harbinger of an impending economic crisis.
In June, the Bureau of Labor Statistics reported a staggering increase of 452,000 individuals who were working part-time but desired full-time employment. This surge marks the largest jump in over three years.
Furthermore, a total of 4.2 million people were compelled to work part-time due to economic circumstances beyond their control. This translates to a 12 percent rise from the previous month.
While caution should be exercised when interpreting a single data point, this recent spike in involuntary part-time work should not be taken lightly by economists. When combined with other indicators of job market slowdown, it could signal the onset of potential layoffs.
“Looking at this indicator, along with the consecutive decline in Black employment, gives me reason to pause,” stated Michele Evermore, a senior fellow at the Century Foundation and former deputy director at the Labor Department. “I don’t mean to sound alarmist, but this does tend to precede a slowdown.”
In a series of interviews with numerous individuals affected by reduced working hours, it becomes evident that the main factor behind this alarming trend is a decline in sales. Most affected individuals work in service jobs such as fast-food outlets, grocery stores, and hair salons, where schedules can be easily adjusted to meet demand. However, there have been instances of office workers experiencing reduced hours due to drops in revenue across the board.
“As a company, we are not performing as well as we were at this time last year,” admitted Liv Roach, employed at a New York-based sustainability nonprofit where the majority of full-time employees were recently downsized to part-time. “Our nonprofit’s income relies on larger corporations, and they are beginning to withdraw. People keep mentioning that fears of a recession are subsiding, but no, the fear of a recession still lingers.”
Another individual, Lawrence Hart-Howlett from East Lansing, Michigan, further illustrates the dire situation. After his job at a university cafeteria was reduced from five days a week to two days for the summer, he was then hit with a 20 percent cut in hours at a fast-food chain where he found an additional job. He received another blow when his hours were reduced from 24 to just 15 a week. A distraught Hart-Howlett exclaimed, “What am I supposed to do? It’s honestly upsetting. I’m not sure if I’ll be able to afford next month’s rent.”
Economists have long been anticipating an impending recession. Although the U.S. economy contracted during the first half of 2022, it has since displayed notable growth.
Nonetheless, the economy is exhibiting signs of softening, including a decline in the housing market, a downturn in manufacturing, and a decline in job openings.
Julia Pollak, chief economist at ZipRecruiter, states, “It has become increasingly challenging for unemployed individuals to secure jobs and, even when they do, to obtain enough hours. This is primarily a sign of the labor market returning to a more sustainable pace, but it also means that some workers will inevitably lose out.
“These initial losses often affect the most vulnerable groups, such as hourly and low-wage workers, people of color, and immigrants,” she added.
According to Joshua Mask, an economics professor at Temple University, a curious trend dating back to the 1980s suggests that an increase in involuntary part-time work is an accurate predictor of an impending recession. Mask claims that this has consistently held true in every recession since 1980.
Mask further explains, “While I don’t consider part-time work as a direct predictor, it does provide early insights into emerging trends.”
Mask emphasizes that this time, the pattern may be even more pronounced due to employers grappling with persistent labor shortages. Job openings have consistently exceeded the number of job seekers throughout the post-pandemic era. As a result, businesses have resorted to offering higher wages, better benefits, and additional incentives to attract and retain workers. Some employers, rather than laying off a portion of their workforce, are opting to reduce hours for all employees as a less visible cost-saving measure.
Kyndal Mesenbrink, a bartender working next to the Houston Astros stadium, has noticed a significant decline in business. Her work schedule has been limited to approximately 30 hours per week, with even fewer actual hours of work. Consequently, her income has plummeted from an average of $350 in tips on a typical Friday night to a mere $120.
Similarly, Natasha Landen, who works as a receptionist at an emergency pet hospital in San Francisco, shares a similar predicament. The hospital has laid off part-time employees and reduced the hours of full-time workers to just 32 per week. As a result of dwindling clientele, Landen has taken on weekend shifts at another veterinary clinic to make ends meet. She reveals, “The financial projections simply don’t add up. We’re not seeing enough patients.”
The increase in involuntary part-time work and the hardships faced by affected individuals paint a bleak picture for the economy. These troubling indicators must not be overlooked, as they could indeed be the warning signs of a forthcoming economic crisis.
As various industries experience labor shortages and diminished sales, the repercussions are felt by workers who are struggling to make ends meet. The situation demands urgent attention and proactive measures to prevent further deterioration.
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