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Underemployment Following the Great Recession and the COVID-19 Recession

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  • Daniela Dean Avila
  • Kurt Graden Lunsford

Abstract

The underemployment rate, the percent of employed people who are working part-time but prefer to be working full-time, moves closely with the unemployment rate, rising during recessions and falling during expansions. Following the Great Recession, the underemployment rate had stayed persistently elevated when compared to the unemployment rate, that is, until the COVID-19 recession. Since then, it has been consistent with its pre-2008 levels. We find that changes in relative industry size account for essentially none of the underemployment rate increase after the Great Recession nor the underemployment rate decrease after the COVID-19 recession. Based on this finding, we do not expect the underemployment rate to revert to its pre-COVID-19 levels if industry composition reverts to its pre-COVID-19 structure.

Suggested Citation

  • Daniela Dean Avila & Kurt Graden Lunsford, 2022. "Underemployment Following the Great Recession and the COVID-19 Recession," Economic Commentary, Federal Reserve Bank of Cleveland, vol. 2022(01), pages 1-6, February.
    • Handle: RePEc:fip:fedcec:93657
    DOI: 10.26509/frbc-ec-202201
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    References listed on IDEAS

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    1. Robert G. Valletta & Catherine van der List, 2015. "Involuntary part-time work: here to stay?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    2. David G. Blanchflower & Andrew T. Levin, 2015. "Labor Market Slack and Monetary Policy," NBER Working Papers 21094, National Bureau of Economic Research, Inc.
    3. Andrews, Donald W K, 1993. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Econometrica, Econometric Society, vol. 61(4), pages 821-856, July.
    4. Tomaz Cajner & Dennis Mawhirter & Christopher J. Nekarda & David Ratner, 2014. "Why is Involuntary Part-Time Work Elevated?," FEDS Notes 2014-04-14, Board of Governors of the Federal Reserve System (U.S.).
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