Feb 22, 2024 - Economy

ADP data: Americans are working less now

Data: ADP Research Institute; Chart: Axios Visuals
Data: ADP Research Institute; Chart: Axios Visuals

Hourly workers — especially women and young adults — are working less than they did before the pandemic, according to an intriguing report out this morning.

Why it matters: The drop is the latest indication of how the U.S. labor market has been reshaped since Covid hit.

Driving the news: Median weekly hours worked fell to 37.7 in December 2023 from 38.4 in 2019, according to the report from ADP Research Institute, an arm of the U.S. payroll processing company.

  • That's a meaningful decline — nearly 2%.

What's happening: We don't know exactly why the numbers moved, but the data offer clues. For starters, higher wages likely made it possible for some people to work less.

  • Folks who changed jobs in 2022 saw their wages rise a stunning 16.4%, per ADP data, compared to 5% gains for those who stayed in the same job.
  • So, a good chunk of people worked less but actually saw an increase in their annual pay.
  • In December 2023, for example, 44% of workers whose hours were reduced still saw an increase in their annual gross pay because their hourly wage went up so much.

Zoom in: A look at who, precisely, is working less also helps explain things. These folks include:

Women: In 2019, women worked 4.4 hours less per week than men, who worked 40 hours. That gap has since widened to 5.4 hours, with men's time staying steady.

  • This may have to do with child care. As the cost of care has skyrocketed and become more difficult to find, women might find they have to work less at their jobs in order to work more to care for children, says Nela Richardson, ADPs chief economist.
  • Plus, the industries that saw bigger declines in hours worked — health care, leisure and hospitality — are dominated by women. Women are also more likely to work part time.

Young adults: Those under 35 are working an hour less per week than they did in 2019. They may not need to work as much as older Americans and can choose to work less. "They don't have the same responsibilities. It's just you," Richardson says.

Higher earners: They're more likely to have the kind of hourly jobs that can be done remotely, Richardson points out.

  • They may be choosing to work less because they're saving on commute costs, she says. Or because of personal preference — thanks to wage increases.

Zoom out: This isn't just a wage story, says Richardson. A "psychological shift" happened in the pandemic that caused people to reevaluate their work lives, in some cases spurred on by remote or hybrid work options — and changes like that are hard to reverse.

Reality check: It's also possible that the decline in hours worked might be a decision being made by employers, rather than workers.

  • Some think the tight labor market — and the elevated rate that some workers were quitting — prompted companies to started hoarding workers, hiring more than they needed, and giving them fewer hours.
  • Or, in response to higher labor costs, they cut worker hours to avoid giving anyone overtime pay.
  • Plus, more folks are working part-time — 47% of hourly roles were part-time in December 2023, up from 43% in 2019.

Context: This report isn't based on survey data, where people tell you how much they're working.

  • ADP actually parses individual payroll records, tracking about 13 million hourly jobs at private non-farm employers.
  • Meanwhile: Weekly work hours have been declining for decades in the U.S., and other rich countries, as we shifted from a manufacturing-based economy to a service-based economy. But the ADP data hones in on more recent -- post-pandemic trends among a particular cohort of the workforce.

The big picture: Even as hours declined, the job market has been remarkably strong. Unemployment has been under 4% since December 2021.

  • And, at the macro level, productivity has surged — that means more workers are doing more per hour worked.
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