PTE is Countercyclical and Volatile

The volatility and cyclicality of part-time employment by reason is easily il­lustrated by considering each group’s share of total employment. Figure 1.1 shows that part-time employed for non-economic reasons displays a secular increase until about 1970, after which it makes up a roughly constant share of 14% of total em- ployment.[1] Although this group fluctuates cyclically, it does so in tandem with total employment. By contrast, part-time employment for economic reasons is markedly counter-cyclical, increasing to nearly 7% of employment after the 1980’s “double-dip” recession and again peaking at about 7% of employment in 2009. That is, part-time employment for economic reasons fluctuates significantly more than the stock of total employment over the business cycle.

To analyze the cyclical movements and volatility of the stocks of full and part-time labor, I compare them to the cyclical properties of quarterly aggregate output.[2] The business cycle statistics of the stocks of full-time and part-time labor outlined in Table 1.1 confirm the cyclical patterns shown in Figure 1.1. Full-time labor and part-time employment for non-economic reasons have similar volatilities and are both pro-cyclical. The unemployment rate is counter-cyclical and much more volatile than output or employment. Part-time employment for economic reasons is nearly as volatile as the unemployment rate and also negatively correlated with aggregate output. Given that these statistics often motivate the interest in understanding the cyclical dynamics of the unemployment rate, it seems reasonable to devote attention to the cyclical dynamics of involuntary part-time labor.

Another measure of interest is the extent to which the transition of workers in and out of part-time for economic reasons accounts for the fluctuations in hours worked over the business cycle. While the total contribution to fluctuations in total hours from flows in and out of P T E is small, the changes in hours attributed to individual flows related to P T E can be large and cyclical. For instance, the total of net hours lost in a given month due to workers who moved from F T to PT E is nearly as large as the total hours lost by full-time workers who moved to unemployment. These patterns are explored further in A.3.5.