Unemployment report missing a surge in freelance jobs?

Unemployment is stuck at 9.5 percent. But online sites report big growth in freelance jobs, despite stubbornly high unemployment.

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    In this April photo, Mark Sepeda removes a transmission pan while working on a car in Las Vegas. Mr. Sepeda has been working as a freelance auto mechanic since he was laid off as an iron worker in January 2009. He gets most of his work through online classifieds and word-of-mouth referrals. Despite apparent growth in freelance work, unemployment remains at 9.5 percent.
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It's a compelling vision: Laid-off workers pick up freelance work and find it's so fulfilling and financially rewarding that they don't go back to day jobs.

At a time when job growth is so weak, do these full-time freelancers represent a hidden contingent of employment strength?

It's clear that something is afoot.

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In July, the United States lost 131,000 jobs (most of them temporary census workers), the Labor Department reported Friday. But other evidence suggests that the number of self-employed entrepreneurs and freelancers are on the rise. For example:

• The rate of Americans forming new businesses hit a 14-year high last year – some 558,000 every month – the Kauffman Foundation reported (.pdf) in May.

• Elance, an online marketplace for freelance work, saw second-quarter earnings of its freelance professionals jump to $23 million, 45 percent over the same quarter a year ago.

"People are getting creative about how to find work," says Ellen Pack, vice president of marketing for Elance. "They're finding that an online channel can be a way to find interesting work."

The kinds of jobs span the spectrum from information technology to marketing. One teacher gave up graduate school to become a freelance graphic designer. Another quit his bank job to become an online technical writer.

In all, Elance says it has 160,000 active professional working with some 112,000 employers. "This is a transformative thing for businesses," says Ms. Pack.

"You've seen software move to the cloud and now you're seeing hiring move to the cloud."

But such numbers, while impressive, don't appear large enough yet to move the needle on job growth.

The last time the Labor Department specifically looked at independent contractors, in 2005, it found they made up 7.4 percent of the workforce. That was up from 6.4 percent in 2001, but hardly represented the surge that some experts had predicted at the time.

If a surge has happened since then, it's being masked by other shifts within the ranks of the self-employed. The share of workers represented by the self-employed seems, if anything, to have gone down slightly since 2005, according to Labor Department data.

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