August Labour Force Survey Preview: Fewer Canadians Underemployed
Part-time employment has led Canadian job growth over the past two months, in contrast to a slight decline in full-time work. While this mix of gains might not be particularly supportive of economic growth, it isn’t necessarily a negative a signal from a job seeker perspective. For instance some workers–such as the growing number of Canadians over age 65–might prefer a shorter work week. Encouragingly, the share of total part-time employment made up by those who say they’d rather be working full-time–the underemployed–has actually been falling in recent years.
Statistics Canada’s Labour Force Survey asks part-time workers why they’re working less than 30 hours a week. The most frequent answers in 2017 fell into voluntary categories such as “going to school” and “personal preference”. That said, involuntary economic factors such as “business conditions” and “could not find full-time work” were also commonly cited. While this data isn’t published on a seasonally-adjusted basis needed to compare with monthly headline job growth, we can still assess more generally how the composition of part-time employment is evolving.
The involuntary share of total part-time employment has fallen significantly since early 2015. Starting from over 27% throughout 2014, the share of part-time workers doing so for economic reasons has slid steadily, most recently averaging 22.9% over the 12 months ending this July, approaching the multi-decade low reached in May 2008. A similar drop has also occurred within part-time employment of Canadians age 25-54.
This drop in involuntary part-time employment is an exciting development for the Canadian economy. Most directly, the formerly underemployed no longer have to deal with the frustration and financial hardship of being unable to secure the hours they’d like to work.
More broadly, falling underemployment is another sign of the tightening Canadian labour market. Fewer part-time workers looking to switch to full-time should make it more challenging for employers to fill full-time roles, creating an environment supportive of wage growth. While all eyes will be looking for a bounce back in full-time jobs in the August Labour Force Survey numbers released this Friday, the composition of part-time employment also deserves attention.
We classify individuals in involuntary part-time employment as those who respond that they are working part-time due to one of four reasons: 1) Business conditions, did not look for full-time work in last month, 2) Could not find full-time work, did not look for full-time work in last month 3) Business conditions, looked for full-time work in last month, and 4) Could not find full-time work, looked for full-time work in last month.
To calculate it’s share, we divide involuntary part-time employment by total part-time employment (both series non-seasonally adjusted), and then take the 12 month moving average of this ratio.