Warning: Unemployment Numbers May Be Larger Than They Appear

While a superficial reading of June’s job numbers — the U.S economy added 195,000 jobs — may sound heartening, the truth is there is more reason to fear than to cheer.

Yes, the gain of 195,000 jobs in a month’s time would be a healthy uptick if those positions were the good jobs Americans were used to seeing in a healthy economy.

But they aren’t.

According the Bureau of Labor Statistics, the U.S. economy actually shed 240,000 full-time jobs. So then what’s to account for the gain? Part-time jobs. The reason June employment numbers are deceptively good is because the economy created 322,000 part-time jobs. In addition, the 322,000 who took the part-time jobs are underemployed. They don’t want part-time work, but couldn’t find full-time jobs. That’s not a sign of a healthy recovery.

More proof of an anemic job recovery is evident when the types of jobs added to the economy are examined. The sector that reported the largest gain in jobs was in the restaurant and leisure sector. In other words, the economy created more jobs as waiters, not exactly the occupation to restore the economy. Manufacturing, once the mainstay of the economy, actually contracted by 6,000 jobs. The good job numbers are only due to more bad jobs.

Also disheartening: the BLS counts 1 million workers who say that they want to work but have given up hope of finding a job; this is 200,000 more than last year. U6, the category the BLS uses to include discouraged and underemployed workers, is at a staggering 14.3 percent, up .6 percent from May. The total U.S. unemployment number stands at a grim 11.8 million, a statistical stone’s throw from the 12.8 million unemployed during the height of the Great Depression.

Worse, the government may be unwittingly contributing to the trend in more part-time jobs and fewer full-time opportunities. As Obamacare looms over employers, the incentive is for companies to hire few full-time workers. Obamacare mandates that employers have to provide health insurance for full-time workers or face a $2,000 penalty. According to data from the Congressional Budget Office and the U.S. Department of Labor, mandatory medical premiums will cost employers, on average, $3,600 for single employees and $11,000 for employees with families. Consider, in New York, where a minimum-wage worker with a family working 2,000 hours a year currently costs an employer $20,160, not including payroll or unemployment taxes, s/he will now cost an employer more than $31,000. That’s a 50 percent increase in payroll costs. However, if the employer knocks down the hours, and hires two employees for 20 hours a week, then that’s a savings of $11,000 a year, even though the same number of work hours is being performed. The two-for-one worker will show up as a net gain of one job in the BLS’s report.

Another unintended circumstance of the mandate may be that some workers will want only part-time jobs, as University of Chicago economist Casey B. Mulligan points out. For example, if an employer decides to provide the minimum level of insurance to avoid the penalty, then between out-of-pocket expenses and deductibles, the cost of insurance for the employee would be approximately $8,000. Factor in costs of child care that many full-time employees need and the costs of out-of-pocket health benefits, and a conservative estimate of costs would be $9,000.

However, if the employee decides to become a part-time worker, then with Obamacare he’s covered mostly by the government, and will have to pay a maximum of out-of-pocket premiums and deductibles of under $5,000. Given the lower rate of income tax, and the need for less child care, Mulligan says a part-time worker putting in 30 hours a week at a $28-an-hour rate earns about the same as a full-time 40-hour-a-week employee.

The ugly truth is that 8 million Americans are taking part-time jobs because they can’t find full-time work. Another 12 million are fully unemployed. Many more millions are under the statistical radar because they have not looked for work in more than a year. That’s at least 20 million Americans who are struggling to put food on the table, clothe their children and pay for housing. Both the Obama administration and Congress have yet to adequately attack the unemployment crisis that’s been festering since 2007. That’s where the focus of our government has to be.

Putting Americans back to work is a full-time job.

This article appeared in print on page 10 of the July 8th, 2013 edition of Hamodia.