The recession not only meant fewer jobs and higher unemployment, it also meant fewer hours of work for the employed. Regaining these lost work hours is a vital step toward a robust recovery that restores family incomes to pre-recession levels. The fact that work hours have almost fully recovered is one hopeful signal that more job creation is on the way.
In Dec. 2007, when the Great Recession began, the average number of hours worked per week in the private sector (including both full-time and part-time jobs) was 34.6. As employers cut hours, the length of the average workweek dropped to 33.8 by March 2009. While this drop in hours meant smaller paychecks and more hardship for workers, it also actually saved jobs. The 2.3 percent drop in average hours multiplied across the private sector workforce of more than 100 million workers means that if hours had not dropped, 2.5 million more jobs would have been lost.
In the wake of a recession, as demand for goods and services increases, employers begin to ramp back up by restoring the hours of their existing workers before hiring new ones. All else equal, restoring hours is good news, because it means bigger paychecks for individuals and families. But the restoration of work hours is bad news as far as employment growth goes, because increasing hours absorbs work that could be done by new hires. In the current recovery, the restoration of hours has been a drag on employment growth ever since average hours began growing again in late 2009. Think of it this way: The drop in hours saved 2.5 million jobs on the way down, but it has delayed new employment growth to that same extent on the way back up.
Some good news in the labor market today is that the process of restoring hours is nearly complete. As of Dec. 2011, the length of the average workweek has been 34.5, just one-tenth of an hour below its pre-recession level. This means that we have nearly worked off the “hours overhang,” and employers needing to add additional hours will be more likely to add new workers instead of increasing the hours of the workers they have. This is a positive sign for future employment growth.