The Part-Time Economy
Full-time jobs are going away and that may not be a disaster for the economy.
The U.S. is losing jobs at an alarming rate. Full-time jobs, that is.
Part-time jobs, on the other hand, are booming.
Is this a sign of a weakening economy or a new normal? I’m going to examine that below. But first, this was your week on Wall Street.
The New Part-Time Economy
There’s been a lot of prognostication about the state of the economy on Wall Street lately. I wrote last week about the yield curve un-inverting, the Sahm Rule, and a weakening job market as signs a recession may be coming.
The theory behind each of these red flags makes sense because economists are worried about a downward economic tailspin:
Layoffs begin.
Consumers pull back spending.
Businesses worry about consumer spending, so they lay off more workers, starting a downward cycle.
The Fed responds by lowering rates, hoping to stem job losses.
But the economy isn’t crashing, and a lot of economists are wondering why. I have a theory.
Modern Slack In the Economy
One factor we rarely talk about in macroeconomics is the dynamics individual households face. It’s this micro-economy that ultimately drives the macroeconomy and economic cycles.
When someone in a household loses their job, it can be devastating to that household’s economy. They pull back, which causes less economic activity, and the downward cycle begins.
Below, you can see the percentage of normal income can drop to zero with a single layoff in a one-income household and 50% in a dual-income household.
If the only viable option is to look for another full-time job as the economy is in a tailspin, a layoff can destroy a household’s economy. Just ask anyone who was laid off in 2000 or 2008 how easy it is to find another full-time job.
But the economy in 2024 may be more dynamic than it was in previous cycles. Gig work and solopreneurship are on the rise, allowing workers to earn some income even if they’re laid off from a full-time job.
Take the table above, but let’s assume a laid-off person starts to drive for $Uber(UBER)$ or starts a YouTube channel to share their expertise. Income doesn’t drop by 100%, it drops by 50%. And the household economy has a buffer with which to survive.
What we’re seeing in the data is relatively strong consumer spending overall and solid economic growth, but full-time jobs are in decline, replaced by part-time jobs.
Is this part-time economy providing more resilience to the economy overall?
Is this the modern slack that keeps us from deep recessions in the future?
Time will tell, but I think this could create some surprises to the upside in this current economic downturn.
https://asymmetric-investing.beehiiv.com/p/part-time-economy
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