One aspect of the economic recovery could haunt the housing market far beyond its current cycle.
Seven million is a big number, and unfortunately –for both the housing market and the wider economy – it’s attached to a remnant of the Great Recession that continues to haunt us.
That is the number of “involuntary part-time workers,” people who would prefer to work full-time jobs but are unable to find such work, and instead languish in part-time jobs in retail, hospitality and fast food, according to a recent article by The Wall Street Journal.
Obviously, seven million people in such a disposition represent an enormous amount of unfulfilled economic activity, and it does not bode well for a market as intrinsically connected to the economy as housing.
Involuntary Part-Time Workers – the Key Facts
Here are the key facts to keep in mind, when it comes to involuntary part-time workers:
- In the past year, employers added roughly 3.3 million full-time workers to the economy.
- However, the number of full-time workers in the overall economy is still two million less than where it was in 2007.
- At the same time, that seven million number we referenced earlier represents 4.5 percent of the civilian workforce.
- That’s down from a high of 5.9 percent in 2010, but remains far above the 2.7-percent average in the previous decade.
- Involuntary part-time work is heavily concentrated in service-sector jobs; indeed, just 48 percent of involuntary part-time workers in such jobs had found full-time work in July 2013, up from 46 percent in 2009.
- Also, for the retail and hospitality sectors, involuntary part-time labor is double its normal rate.
Are We Looking at a New Economic Norm?
A strong income stream is necessary to purchase a home. As we’ve written before, even a 3 percent down payment requires a hefty amount of cash, and if one is working less than 34 hours a week (and especially in a low-wage, service-sector job), then it’s all but guaranteed that they will not be buying a house.
Which leads us to the essential question – are we seeing a new, structural norm for the economy, or are we still stuck in a cyclical blip, one that will right itself when the economy fully recovers?
There are differing views on the topic, but most economists seem to believe that the problem is more cyclical than anything else, and that we should not worry about involuntary part-time work becoming permanent; still, such labor remains 66 percent above its historic norms, so this will likely become one of the key challenges that housing works through as it soldiers on ahead.