LDN - Business

US jobs data may be miscounting millions of 'gig' workers, research suggests

[November 18, 2023] By Howard Schneider

BOSTON (Reuters) - Millions of "gig" workers may get missed every month in the U.S. government's employment report, a discrepancy with implications for how Federal Reserve officials size up the job market and any associated inflation risks.

Research prepared for a Boston Federal Reserve labor market conference found that whether driving for Uber to make ends meet or taking piecework jobs in retirement, casual contract workers sometimes don't consider themselves "employed" or even a part of the labor force.

As a result, they answer government survey questions in a way that may produce a significant undercount of those working, economists Anat Bracha, an associate professor at the Hebrew University Business School in Jerusalem, and senior Boston Fed economist Mary A. Burke concluded in a research paper to be presented at the conference on Friday.

The number could be just a few hundred thousand under the most constrained estimates or as many as 13 million, involving a swing of perhaps 5 percentage points in the share of the adult population that is working at least part-time, a figure the U.S. central bank watches closely.

Though that indicates the labor market at any time may be "tighter" than thought, the researchers said they felt it means the economy actually has more room to increase work and production without generating inflation - a case for the Fed to give the job market more room to run.

Particularly in the years before the coronavirus pandemic "inflation was not accelerating ... despite the substantial amount of hidden informal work that we document," Bracha and Burke wrote. As a result, "the benchmark for full employment could simply be adjusted upward."

The research involved reexamining the detailed responses to a New York Fed survey of "informal work" from 2015 through 2022.

In comparing parts of that questionnaire covering work obtained via online platforms or contract jobs with another section structured more like the Labor Department's monthly survey of employment status, they found the responses often didn't track. That left potentially millions slipping through a statistical crack.

It is a significant data gap for economists who, over the last decade, have debated, rehashed, challenged and revised the longstanding idea that inflation is often driven by low unemployment and the rising wages and spending that follow from it.

The jobless rate, as Bracha and Burke noted, continued falling throughout the 2010s without higher inflation, a fact that prompted the Fed to rethink its approach to monetary policy and not assume that inflation would rise once the unemployment rate got too low. Lately, inflation has been declining without a dramatic rise in the unemployment rate.

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A driver helps a passenger into an Uber car on 6th Avenue in New York City, New York, U.S., July 27, 2018. REUTERS/Mike Segar/File Photo

GREATER POTENTIAL

U.S. central bank officials, significantly including Fed Chair Jerome Powell, still see a connection between the jobless rate and inflation and feel there will need to be increased labor market "slack" for inflation to remain under control.

But how much slack?

As of early 2013, the bulk of Fed officials thought the "longer-run" unemployment rate, a proxy for the level of joblessness consistent with the central bank's 2% inflation target, was between 5.0% and 6.0%. In projections issued in September, Fed officials saw it between 3.5% and 4.3%, a dramatic shift.

The pandemic has kept that issue alive as the Fed tries to assess whether the U.S. is likely to remain in a perpetual labor shortage, absent some dramatic change in immigration policy, or enter an era where work from home, new automation techniques and other job market changes lead to more, and more productive, workers than anticipated.

After concern that the pandemic might permanently constrain women from working, for example, the overall number of women working surpassed the pre-pandemic peak of 74.9 million in January, and has grown another 1 million since. The participation rate for 25-to-54-year-old women hit a record 77% this year.

Researchers at the Boston conference say women might contribute even more to the nation's labor supply with stronger family and childcare policies.

Other research looked at how job training and policies towards employing those with a criminal record might help.

Bracha and Burke said gig workers might also have more to offer. Their research found many gig workers want additional hours of formal employment, suggesting more untapped labor supply.

"Our results indicate that potential hours - as well as potential GDP - were probably higher in recent years compared with official employment estimates," they wrote.

Boston Fed President Susan Collins, in opening remarks to the two-day conference, said getting estimates of employment right were central to the Fed's ability to meet its dual mandate of stable inflation while maximizing employment.

If labor supply is higher than thought or likely to expand as the job market tightens, "then higher levels of economic activity in such times may not generate additional price pressures requiring tighter monetary policy," Collins said. "And the higher levels of activity and participation can benefit those brought into the labor market, contributing to a vibrant economy that works for all."

(Reporting by Howard Schneider; Editing by Dan Burns and Paul Simao)

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