Improvement in Underemployment Stalls in Mid-May

by Dennis Jacobe, Chief Economist

However, unemployment declines to 9.4% as job creation remains at its best level of the year

PRINCETON, NJ -- The improvement in underemployment, as measured by Gallup, seems to have come to a stop, at least temporarily, in mid-May. Gallup's underemployment rate is 19.1% for the week ending May 16 -- showing little change since it was 19.2% during the week ending April 18.

Underemployment, January-May 16, 2010

Gallup's underemployment measure includes both the unemployed and those working part-time but wanting full-time work. It is based on more than 17,000 phone interviews with U.S. adults aged 18 and older in the workforce, collected over a 30-day period and reported daily and weekly. Gallup's results are not seasonally adjusted and tend to be a precursor of government reports by about two weeks.

Fewer Unemployed Offset by More Part-Time Employees Wanting Full-Time Work

The unemployment component of Gallup's underemployment rate (not seasonally adjusted) continues to show steady improvement, declining to 9.4% in mid-May from 9.9% in mid-April and 10.3% in mid-March. However, these improvements in the unemployment rate have been offset during recent weeks as the percentage of employees working part-time who want full-time work increased to 9.7% from 9.3% in mid-April.

Underemployment Components, January-May 16, 2010

Job Creation at Highest Level of the Year

A separate measure of the job market, Gallup's Job Creation Index, is at +7 for the week ending May 16 -- based on 28% of employees reporting that their companies are hiring, while 21% percent report their companies are letting people go. The mid-May index is not only the highest Gallup has measured this year but also the highest since November 2008.

Job Creation Index, January-May 16, 2010

Companies May Be Getting More Cautious

The leveling off of Gallup's underemployment rate may indicate some degree of increased caution on the part of many management teams. While job creation continues to be stronger than it was a year ago and the unemployment (not seasonally adjusted) component of Gallup's underemployment rate continues to improve, employers are tending to hire more workers part-time even though many may prefer full-time work.

The failure of April chain store sales to maintain March's momentum may have some companies feeling more cautious about hiring full-time employees, and instead doing so more often on a part-time basis. No management team wants to get too far out in front of sales in the current business environment.

Further, the financial crisis in Greece and the European Union may be making companies that export to Europe more cautious -- it seems as though economic activity in Europe will suffer going forward, no matter how the current crisis is resolved. Just as importantly, the European financial crisis is a stark reminder of the global financial system's fragility -- another reason for most potential employers to be cautious.

Regardless, Gallup's underemployment and job creation measures are more continuous and "real-time" than the jobs measures reported by the federal government. Understanding this, Gallup's mid-May findings suggest caution may also be warranted in anticipation of the government's May unemployment report, scheduled to be released the first Friday in June.

Review and export the complete daily trends on these measures: Economic Indexes; Consumer Spending; Economic Outlook; Economic Conditions; Job Market; U.S. Workforce

Learn more about Gallup's economic measures.

Survey Methods

For Gallup Daily tracking, Gallup interviews approximately 1,000 national adults, aged 18 and older, each day. Gallup's underemployment results are based on more than 17,000 telephone interviews completed on a 30-day rolling basis. For these results, one can say with 95% confidence that the maximum margin of sampling error is ±1 percentage point.

Gallup's Job Creation Index is based on more than 3,000 telephone interviews completed on a weekly basis. For these results, one can say with 95% confidence that the maximum margin of sampling error is ±3 percentage point.

Interviews are conducted with respondents on landline telephones (for respondents with a landline telephone) and cellular phones (for respondents who are cell phone only).

In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.

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