The Full-Time Aristocracy

Chart of the Week, June 12, 2013
By Eric Schaefer of American Independence Financial Services

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We can always count on the Bureau of Labor Statistics (BLS) each month to provide topics for this publication. The May 2013 employment situation report once again did not disappoint. Buried within the report's tables is an important trend which has received scant attention from the media.

On Friday, equity traders and investors fell over themselves once again to push share prices higher (the S&P 500 Index advanced 1.28% for the day, salvaging what would have otherwise been a mediocre week), following the BLS announcement of the creation of 175,000 new jobs in May. On the face of it, the report was mildly encouraging. The reported number came in higher than the whisper number (+145,000) and the ADP private sector payroll report (+135,000 for May) released on the 5th.

The questions and concerns mount though when one delves into the numbers. Just over 50% of the jobs created by establishments were in the temporary help (+26,000), the retail trade (+27,000) and the food service (+38,000) industries. We mean no disrespect to the legions of Americans who toil in these industries, but in general these are low skill, low wage and high turnover positions — hardly the type of jobs to rebuild the confidence and finances of the battered and beleaguered working-class.

The other side of the report — the household survey — upon closer analysis, was equally as discouraging. While the BLS reported 335,000 more Americans claimed to have obtained employment in May, 150,000 of the positions are part-time (defined as less than 35 hours per week on a regular basis).

At the start of the last recession (December 2007), the number of individuals working part-time by choice was 20.4 Million. Five years and five months later this statistic at 19.3 Million is largely unchanged. In contrast, the numbers working part-time for economic reasons (either because of reduced hours in what is normally considered full-time employment or part-time work was the only work available) surged from 4.8 to 7.6 Million. Today involuntary part-time employment accounts for 28.3% of all part-time positions. At the recession's commencement, the corresponding ratio was just 18.9%. In the past, part-time work was a preference; today, it is a necessity.

Interpreting this picture is complicated by the seasonal adjustment of the monthly trends. Cutting through the thicket of contradictory trends in the seasonally adjusted (SA) versus the non-seasonally adjusted (NSA) numbers, we hypothesize the dip in the proportion of part-time workers (as a share of the employed) is due to the reduction in the number of full-time employees relegated to part-time status during the recession. In December 2007, 3.1 Million (NSA) Americans who normally worked full-time were not working 35 hours or more because of slack business conditions. By June 2009, the recession's trough, this number ballooned to 6.8 Million (NSA). As of May 2013, workers forced to part-time status because of slow business conditions was 4.8 Million (NSA). In the aggregate, 2.0 Million part-time workers still have seen no improvement in hours since the recovery began. While technically employed, these workers are, by their own ambitions, currently underemployed.

Part-time work has become a staple of the post-war American economy. There are two secular reasons for this. The first is the increase in labor force participation by women. The second is the rise in teenagers pursuing college degrees, a significant portion of whom combine part-time work with their full-time studies. These trends illustrate the historic flexibility of the U.S. labor market in accommodating the ambitions and needs of a variety of different participants. But, for the working-class, involuntary part-time work is a dead end in the pursuit of the American Dream.


Notes on Sources, Methods and Definitions:

The gray shaded vertical regions indicate recessions as determined by the National Bureau of Economic Research (NBER).

All labor force and population data was obtained from the Bureau of Labor Statistics (BLS). In the monthly household survey, respondents are questioned regarding the number of hours worked. Less than 35 hours per week is classified as part-time employment; more than 35 hours is considered full-time employment. All data is seasonally adjusted unless indicated to the contrary.

The S&P 500 Index is widely regarded as the best single gauge of the large cap U.S. equities market since the index was first published in 1957. It is a market capitalization weighted index of the performance of 500 stocks which S&P believes are representative of the U.S. equity market. You cannot invest in an index.

(Sources: NBER; BLS; AIFS estimates.)


About American Independence Financial Services, LLC

American Independence Financial Services, LLC ("AIFS") is the investment adviser and administrator for the American Independence Funds. The firm is a limited liability company founded in 2004. It is majority owned by its senior management, who average over 25 plus years of industry experience and achievement. Today AIFS offers eight different mutual funds and manages approximately $1.1 Billion in assets on behalf of its clients.

Our "partnership" culture and boutique size helps keep us focused on finding investment managers and strategies which offer a real choice in the marketplace. We strive to deliver active management which beats passively managed alternatives over time. We also seek strategies which are innovative and address investors’ needs.

We believe our lineup of investment strategies reflects our unique worldview. We invite you to visit our website www.aifunds.com to learn more about us and to discover our independent perspective on investing.

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