By one measure, the labor market has not recovered at all. By another, the recovery is complete.
The red line in the chart below is a monthly index of the employment-to-population ratio, normalized to a value of 100 in December 2007, when the recession began. In this series, each employed person counts the same, regardless of how many hours she or he works.
The employment-to-population ratio fell more than 5 percent during the official recession period and fell almost an additional 2 percent in the second half of 2009. The ratio has been essentially constant since then; there has been no meaningful increase in the fraction of Americans who are employed.
The blue line shows the average number of hours worked by people with jobs in the private sector. In this series, only people with jobs are included in the calculation.
The hours series reflects a large contraction of more than 2 percent during the recession years. In other words, a number of employees found that their hours were cut during the recession and that long-hours jobs like construction were lost to a greater degree than short-hours jobs.
Unlike the employment-to-population ratio, average work hours have largely recovered since 2009. Earlier this year, the average hours series reached 100, which was its value for much of 2007.
To put it another way, 93 percent of the people who would have been employed in an economy such as we had in 2007 are employed today and are likely to feel that they are as busy with work today as they were then. The other 7 percent are not working at all.
There are several theories as to why the recovery has been so asymmetric in terms of hours and employment.
One is that the unemployment insurance program, eligibility for which has expanded significantly since 2007, pays people to be without a job but usually does not pay them for having reduced hours. Thus, unemployment insurance does more to prolong joblessness than it does to prolong working at reduced hours.
Another theory is that actual or anticipated health insurance costs discourage employers from having too many employees; instead, they accomplish their tasks by having existing employees work longer hours.
Because health insurance costs accrue on a per-employee basis, an employer with, say, 38 employees working 40 hours each has the same total number of work hours as an employer with 40 employers working 38 hours each, but the former employer’s health insurance costs are 5 percent lower.
Yet another theory is that employers are concerned that their economic conditions may change quickly and find it easier to adjust work schedules than to adjust the number of employees.
And still another theory notes that the employment-to-population ratio would have fallen even without a recession as baby boomers reached retirement age. At the same time, those retirements might not reduce average work hours among those who had not yet reached retirement and might even increase them.
In any case, it is worth monitoring the separate recoveries for employment and for hours, as they can shed light on supply-and-demand factors that caused the recession and have prevented a full recovery by all measures.