The August Jobs Report Disappointed On Many Dimensions
The August jobs report disappointed on many dimensions. The employment increase was a marginal 142,000, significantly lower than the average over the last twelve months of over 212,000. The labor force participation rate edged down to 62.8 percent, a level not seen since the 1970s. The number of long-term unemployed showed little change at 3 million, and the U-6 rate, which includes discouraged workers, involuntary part-time workers, and workers marginally attached to the labor force, stood at 12 percent, nearly double the official unemployment rate of 6.1 percent. These statistics are important indicators of how poorly or how well the labor market and the broader economy are working for the average person. However, they provide little insight into the daily lives of the people that these statistics capture. On a typical day, how much time do the unemployed devote to looking for work? Are there demographic differences in the intensity of job search? Do the unemployed invest more in education and training in the hope of transitioning to better jobs than do employed workers? To answer these questions, we need to turn to another survey, the American Time Use Survey, also conducted by the Bureau of Labor Statistics.
The American Time Use Survey (ATUS) is a nationally representative, household survey that attempts to collect detailed information on the amount of time people spend on different activities such as work, childcare, volunteering and socializing in a typical day. In 2013, as per the latest report, the average employed worker spent almost 8 hours working, another 2 hours doing housework and related activities and more than 5 hours watching TV, socializing or exercising. In recent times, the ATUS has been used to research how unemployed individuals have made use of their time during recessions, particularly whether they have spent time on job search or on education and training activities that could improve their chances of finding a job. In the survey, job search is defined as activities such as contacting employers, sending out resumes, answering ads, scheduling and waiting for interviews, etc.
The ATUS data are available for the period 2003 to 2013. Using this (properly weighted) data yields some interesting results. Before the recession (2003-2007), unemployed people, on average, spent 19 minutes per day on job search. Over the course of the recession and recovery (2008-2013), unemployed individuals spent about 6 minutes more on job search each day. Much of this increase was driven by the long-term unemployed, who spent 35 minutes per day on job search, compared to just 25 minutes per day before the recession. Surprisingly, unemployed single mothers have reduced their job search since the recession by 3 minutes per day, perhaps because they are spending more time on childcare and home production.
Within the unemployed, search intensity varies greatly by educational status. Over the period 2008-2013, those unemployed with a college degree or higher spent an average of 54 minutes per day on job search, while those with a high school diploma or less spent just 15 minutes per day on average. This difference was prevalent before the recession as well. A possible explanation for this finding comes from Krueger and Mueller (2008), who note that if expected returns to job search are low, then people are less likely to invest in search. Therefore, those who expect higher wages from a job are more likely to engage in search. This may also explain why single mothers, who often do not possess a college degree, are less likely to engage in job search.
Despite increases since the recession, it is clear that time spent on job search is very low compared to other activities such as childcare, home production and leisure. Aguiar, Hurst, and Karabarbounis (2013) find that the unemployed spend less than 6 percent of their freed up time due to unemployment on job search. Instead, almost all foregone market hours are allocated to cooking and home activities (30 to 40 percent), increased sleep time and television watching (30 percent), and other leisure activities (30 percent).
Policy may have played a role in this regard. Research suggests that search intensity is affected by programs such as unemployment insurance. Krueger and Mueller find that individuals spend less time on job search when they live in states with more generous unemployment benefits. Based on their calculations, an unemployed individual in the state with the highest maximum weekly benefit amount spends about 54 fewer minutes every day looking for work compared to an unemployed person in the state with the lowest weekly benefit amount. The authors also find that job search intensity more than triples during weeks 15 to 26 of unemployment as the 26 week limit on unemployment benefits approaches. This could explain the findings of earlier papers, which concluded that more generous UI benefits are associated with longer spells of unemployment, and that the job finding rate spikes at the time when benefits are exhausted. Beginning in 2008 and ending in 2013, we have had extensions of benefits across all states due to the federal Emergency Unemployment Compensation program, which may have contributed partly to less time being devoted to search.
Analyzing time use studies also allows us to see if the unemployed are engaging in activities that would increase their chances of finding work again. In particular, how much time do they spend on education and training activities? Education and training activities include taking classes, auditing courses, earning a degree, or attending internships that provide a certificate. Recruitment firms suggest that employers look more favorably upon job applicants who make productive use of their time to learn skills relevant for their jobs.
Since 2008, the average unemployed person has spent approximately 42 minutes per day on education and training, down from 46 minutes per day during the period of 2003 to 2007. The short-term unemployed account for this drop, who at 47 minutes spent 3 minutes less on these activities in the recession than the earlier period. However, some encouraging news is that the long-term unemployed as well as unemployed single mothers have spent approximately 24 and 33 minutes per day respectively on these activities since 2008, up from just 10 and 9 minutes per day before the recession. Hence, in the past five years, time spent on education and training has nearly tripled for these groups. However, compared to time spent on all activities during the day, education and training still rank relatively low. This is in line with the finding of Aguiar, Hurst, and Karabarbounis (2013) that only 5 percent of foregone market hours are allocated to educational attainment.
This analysis of time use data corroborates the concern of economist Daniel Hamermesh, who argues that the unemployed have not sufficiently invested in skill building since the recession. Of course, there could be many reasons for this. For instance, unemployed individuals may be unable to generate the resources and money necessary to earn new certifications and training in their field. Single mothers may be forced to spend more time providing childcare given they do not have the money to opt for commercial daycare. They may also spend more time cooking rather than buying meals from outside. Finally, search itself may require less time today than in the past, with the spread of the internet and websites that make applying for jobs easier. For all these reasons, less time may be devoted to job search and education and training.
Given this data, policies that address the skills gap directly may be extremely efficient at getting individuals back to work. These include customized apprenticeship and training programs for unemployed workers funded through state grants, and the use of the UI system to match workers to jobs directly through wage subsidy programs (as discussed in my recent testimony). Addressing the concerns of single mothers with childcare responsibilities through refundable child care tax credits and the expansion of the EITC could help improve their jobs situation as well. These proposals may be more beneficial than simply extending unemployment benefits or even raising minimum wages, which may have detrimental effects on employment, and may further reduce the incentive to look for new work.
