US Part Time Jobs: Obamacare and Regime Uncertainty

Dr. Ben Bernanke and his team at the US Federal Reserve appears to be in a quandary over the surge of part time jobs.

From the Bloomberg:

The number of workers holding full-time positions fell in the U.S. in June as part-timers hit a record after rising for three straight months, according to the Bureau of Labor Statistics household data. Part-time employment has been outpacing full-time job growth since 2008. Economists cite still-tough economic conditions as the root cause, with some saying President Barack Obama’s 2010 health-care law exacerbates the trend.

U.S. Federal Reserve Chairman Ben Bernanke told a House committee July 17 that policy makers consider underemployment, which includes part-time workers who want full-time jobs, one of the gauges of labor-market strength…

The number of part-time employees in June rose by 360,000, the Bureau of Labor Statistics reported, based on its survey of households. Full-time workers fell by 240,000, erasing much of the gains from April and May. The share of Americans who work part-time for economic reasons, meaning they can’t find full-time jobs or because their hours have been cut, is 78 percent higher than in December 2007, when the 18-month recession began.

So what the mainstream sees as “strong” economic growth has been founded by part time jobs.

The charts above from Zero Hedge shows of how part time jobs came at the expense of full time jobs last June.

Importantly, much of the new jobs comes from the low wage segments of the service industry, particularly leisure and hospitality, retail trade and education,  health and other temp jobs, as observed by  the Zero Hedge.

Talk about economic "vigor".

Asked whether Obamacare has contributed to the part time jobs, from the same Bloomberg article (bold mine)

“It’s hard to make any judgment,” Bernanke said when Stutzman asked if the Patient Protection and Affordable Care Act’s mandates are slowing the economy. Bernanke said that it has been cited in the economic outlook survey known as the Beige Book, which the Federal Open Market Committee considers in assessing the economy.

“One thing that we hear in the commentary that we get at the FOMC is that some employers are hiring part-time in order to avoid the mandate,” Bernanke said. He added that “the very high level of part-time employment has been around since the beginning of the recovery, and we don’t fully understand it.”

For the official whose opinions and decisions moves the global financial markets and likewise plays a significant role in influencing activities on the main street and on the global economy, “we don’t fully understand it” looks really very reassuring. This means that “we don’t fully understand it” has been the basis of all grand experimental policies being conducted by the FED.

[As a side note: Dr. Bernanke applies the same concept on gold prices, stating that “Nobody really understands gold prices and I don’t pretend to understand them either” but curiously has the audacity to make conclusions on gold prices based on his “non-understanding”]

I believe that the crucial changes in the character of US employment has been related to the record cash pileup by US non-financial corporations

As the Wall Street Journal noted in June, (chart from creditwritedowns.com)

The Federal Reserve reported Thursday that nonfinancial companies had socked away $1.84 trillion in cash and other liquid assets as of the end of March, up 26% from a year earlier and the largest-ever increase in records going back to 1952. Cash made up about 7% of all company assets, including factories and financial investments, the highest level since 1963.

Both variables, the reluctance to invest (as expressed by huge cash holdings) and the change in the character of the US labor force, have been products of regime uncertainty. 

Regime uncertainty as defined by Austrian economics professor Robert Higgs represents the “pervasive lack of confidence among investors in their ability to foresee the extent to which future government actions will alter their private-property rights”

On whether Obamacare has been responsible for such trend changes, Dr. Bernanke’s adroitly fudges the issue by referring to “the beginning of the recovery”.

The reality is that the Patient Protection and Affordable Care Act (PPACA) or the Affordable Care Act(ACA), popularly known as Obamacare was signed into law in March of 2010, basically “the beginning of the recovery”. 

Some provisions of the said law has been slated for January 2014 and the rest in 2020 according to Wikipedia.org  [Update: The US house of representatives has just voted to delay the implementation of the Individual mandate]

As I pointed out in the past, Obamacare comes with 21 new or higher taxes.

And small businesses are the main sector that appear to be hardly affected.

Small businesses have been the heart of the US economy. According to the National Small Business Association, 

-Small business represents 99.7 percent of all employer firms.

-In 2010, there were an estimated 27.9 million small businesses in the U.S.—5.9 million with employees and 21.4 million without employees.

-Small businesses employ about half of the country’s private sector workforce.

- Small firms accounted for 64 percent or 9.8 million of the 15 million net new jobs created between 1993 and 2011.

Yet from a recent survey conducted by the US Chamber of Commerce, “unease around Obamacare appears to be increasing among small businesses” according to the Huffington Post.

In a survey conducted by National Federation of Independent Business (NFIB) last June, small business optimism continues to be plagued by taxes and government regulations and red tape

As the NFIB chief economist William Dunkelburg wrote (bold highlights mine)

The economy remains “bifurcated”, with the big firms producing most of the GDP growth with little help from small business. That balance is shifting, but unfortunately because larger firms are losing ground, not because small business is growing faster. Housing and energy are helping, and that does involve a lot of small businesses but the rout in housing was so severe that there are now supply constraints developing in new home construction due to lost capacity that cannot be easily reconstituted. Home prices are now increasing at double digit rates. Consumer net worth is allegedly doing well due to stock prices and house prices rising. But the quantity of items held, real wealth (houses, cars, fractions of a company owned), is not increasing that fast, just the prices. Been there, done that.

While US government sponsored surveys or the US Federal Reserve of Philadelphia and Minneapolis says that only a small portion has been affected by Obamacare, circumstantial developments (part time jobs and high cash by non-financial corporations due to reluctance to invest) says otherwise.

Nonetheless, “Big firms producing most of the GDP growth with little help from small business” has been a common feature in today’s QE-ZIRP based global financial economy where monetary policies have been engineered to buoy asset markets (stocks, real estate) via credit fueled destabilizing speculations (bubbles).

The reality is that the Dr. Bernanke's policies has substantially been responsible for these. FED easing policies combined with Obamacare and the increased regulatory mandates (the Federal Register is now over 81,000 pages long. Obamacare has 906 pages, Dodd Frank has 849 pages) and aside from a surge in taxes (US tax code now 72,000 pages) all contributes to the uncertainty over the investor’s property rights, hence the lack of commitment to invest and the corresponding changes in the hiring and employment dynamic.

Regime Uncertainty and US Employment Woes

Dr. Ed Yardeni’s noteworthy perspective on the recent ‘conspiracy theory’ controversy over US employment data: (bold added) 

The employment gain was attributable to an increase of 838,000 in full-time employment, while part-time employment fell 26,000. What’s odd is that among those working part-time (which edged down slightly), there was a 582,000 increase in those working part-time for economic reasons. In other words, lots of people found full-time jobs, and lots of people who wanted to work full time could only find part-time jobs. Got that? Even odder is that the payroll survey showed that employment in the temporary help industry edged down by 2,000 in September.

While I doubt that anyone at BLS tampered with the household data for political motives, I’m certain no one even thought to bother with the payroll employment numbers. September’s increase was a measly 114,000. I give much more weight to the revisions to the previous two months, which tend to be upwards when the economy is expanding. They totaled 86,000 during July and August, raising their monthly average gain to 161,500. The oddity here was that upward revisions occurred at the local-government level--mainly the hiring of school teachers (up 77,000)--which nearly matched the revision to overall payrolls…

The debatable question is whether the Obama administration’s policies are creating jobs. The answer, of course, is they didn’t create them. Mitt Romney says he’ll create 12 million jobs if he is elected to be the next president. Presidents don’t create jobs. Profitable companies expand and create jobs, especially small ones that turn into big ones.

So politics could have played a sleight of hand trick in the statistical improvements of US employment conditions.

Well, the real reason for the sluggish job conditions can be traced to concerns of small business which makes up the kernel of employment: growing political uncertainty, as I earlier pointed out here.

Sluggish hiring has been an outcome of lethargic business fixed investment…

…which can be traced to REGIME UNCERTAINTY

As Professor Robert Higgs writes, 

I have argued for years that this anemic investment recovery evinces, at least in part, the prevailing regime uncertainty brought about by the Fed’s and the Bush and Obama administrations’ massive, ill-advised, and counter-productive interventions in the economy during the past five years. These interventions are continuing, however, and continuing to prolong the recovery. The idea that these actions will ultimately succeed if only the authorities persist in them long enough and on a sufficiently great scale was a bad idea from the start, and its bankruptcy became fairly evident a long time ago even to many observers wedded to mainstream economics and conventional economic policy making.

Policy makers have cost the U.S. economy a decade or more of normal economic growth. How long will people in their capacities as political and financial actors continue to tolerate this foolish, destructive policy making? I do not know, but I believe I know what the result of these misguided ongoing experiments will be—economic stagnation at best, relapse or another bust at worst.

The bottom line is that in contrast to the quack idea that Presidents "create" jobs, the reality is Presidents “unmake” or “destroy” jobs from repeated interventionism-inflationism which only engenders regime uncertainties or from a political environment which have been antagonistic or hostile to businesses.

Jack Welch Echoes Mark Twain on US Jobs Data: Lies, Damned Lies and Statistics

Statistics can be massaged with the furtive intent to promote political agenda of the incumbent.

Jack Welch formerly the CEO of General Electric stirred up the hornet’s nest when his ‘conspiracy theory’ tweet on the latest US jobs data went viral.

From Bloomberg,

A good conspiracy theory is irrefutable. A bad one usually collapses when confronted by reality.

The claim by some supporters of Republican challenger Mitt Romney that President Barack Obama’s Chicago-based campaign doctored September’s unemployment figures for political gain fall into the second category, according to members of both parties who have served in the government’s economic data system.

Jack Welch, the former chief executive officer of General Electric Co. (GE), touched off an Internet-based frenzy yesterday when he suggested on Twitter that Obama’s team lowered the country’s unemployment rate to 7.8 percent to give the president a boost. “Unbelievable jobs numbers. . . these Chicago guys will do anything. . . can’t debate so change numbers,” he wrote.

The charge then was picked up by Arizona Senator John McCain and Florida Representative Allen West, both Republicans.

Welch’s message was re-sent via Twitter 3,832 times, meaning each of those people re-broadcasted it to their groups of followers, in the first 10 hours. Rebuttals posted by journalists on Twitter, including Keith Olbermann and Politico’s Roger Simon, were re-tweeted at least 300 times combined. Representative West’s message of support was re-tweeted 592 times.

As caveat, popularity doesn’t necessarily translate to the truth. In most occasion it has been the opposite.

(from Bob Wenzel)

But it has been noteworthy that the tepid growth of the recent job data has not been broad based (see above) and which comes amidst declining labor participation rate…

This likewise reflects on the slowest job growth recovery since 1948…

(both charts from Doug Short)

Yet soaring claims on food stamps and disability benefits

(from Zero Hedge)

…could be an instrumental, if not a principal, dynamic which has contributed to the declining trend of labor participants, as previously discussed here, aside from the Baby Boomers.

As the Zero Hedge rightly observes: 

Finally, and putting it all into perspective, since December 2007, or the start of the Great Depression ver 2.0, the number of jobs lost is 4.5 million, while those added to foodstamps and disability rolls, has increased by a unprecedented 21 million. Oh and about $7 or $8 trillion in debt. Who's counting really. 

Jack Welch’s tweet essentially resonates on Mark Twain’s famous quotation on the condemnation of statistics:

There are three kinds of lies: lies, damned lies and statistics.

US Unemployment: It’s Partly About Skills-Jobs Mismatch

It isn’t true that unemployment in the US is all about the lack of opportunities.

Instead a big part of this, aside from regulatory uncertainties, is the mismatch of required skills relative to the available jobs.

According to the Wall Street Journal,(all bold emphasis mine)

Employers and economists point to several explanations. Extending jobless benefits to 99 weeks gives the unemployed less incentive to search out new work. Millions of homeowners are unable to move for a job because the real-estate collapse leaves them owing more on their homes than they are worth.

The job market itself also has changed. During the crisis, companies slashed millions of middle-skill, middle-wage jobs. That has created a glut of people who can't qualify for highly skilled jobs but have a hard time adjusting to low-pay, unskilled work like the food servers that Pilot Flying J seeks for its truck stops....

Matching people with available jobs is always difficult after a recession as the economy remakes itself. But Labor Department data suggest the disconnect is particularly acute this time around. Since the economy bottomed out in mid-2009, the number of job openings has risen more than twice as fast as actual hires, a gap that didn't appear until much later in the last recovery. The disparity is most notable in manufacturing, which has had among the biggest increases in openings. But it is also appearing in other areas, such as business services, education and health care....

Longer-term trends are at play. For one, the U.S. education system hasn't been producing enough people with the highly specialized skills that many companies, particularly in manufacturing, require to keep driving productivity gains. "There are a lot of people who are unemployed, but those aren't necessarily the people employers are looking for," says David Autor, an economist at the Massachusetts Institute of Technology.

In the transition to the information age, the shape of investment and hiring would pronouncedly be different as it will involve more specialized “local knowledge” skills and deepened division of labor.

Government intervention (stimulus, unemployment benefits, bailouts, obamacare) has kept the labor market from the adjustment process that should have met these “new” realities. Thus, additional government interventions won’t help.

And the recent resignation of the head of the Council of Economic Advisers to President Obama, Mrs. Christina Romer, appear to be a revelation of the failed Keynesian policies of the Obama regime.

US Job Market: Everything Is Relative

In the US, current policies have been anchored on unemployment.

Yet the job markets have been unevenly spread with the best jobs mostly seen in energy and commodity producing states.

According to Gallup,

Gallup's Job Creation Index shows that the energy-producing states of North Dakota, Louisiana, West Virginia, Oklahoma, and Texas are in the top 10 state job markets for the first half of 2010, as they were in 2008 and 2009. They are joined by Alaska, another energy state; the District of Columbia, Maryland, and Virginia, all of which benefit from the presence of federal government hiring; several farm states -- Arkansas, Iowa, and South Dakota -- that benefit from ethanol and a strong commodities market; and Pennsylvania -- possibly reflecting the steady improvement in manufacturing.

Despite an overall improvement in job market conditions, 5 states in the bottom 10 during the first half of 2010 were also on the list in 2008 and 2009: Nevada, Connecticut, Rhode Island, California, and Michigan. Additional financial-crisis states in the Northeast, including New Jersey, Maine, Vermont, New York, and New Hampshire, are some of the worst job markets. Other Western states in the bottom 10 include Idaho and Wyoming. Although Michigan's job market has improved substantially from 2009, it remains in the 2010 bottom 10.

Some thoughts:

First, bubble dynamics forces a shift in the underlying structure of the investments away from areas where misdirected resources had been concentrated and into areas mostly neglected by the previous boom.

Next, not all industries or localities have been similarly affected. In short, everything is relative; some areas get to benefit from the post-bubble shift, and some areas get a temporary lift from government intervention (of course, with unintended consequences yet to emerge).

Lastly, the survey shows where the best jobs had been and what has been the possible attributes.

True, some of the worst spots had been the ground zero from the bubble bust. But what wasn’t incorporated in the perspective is that part of this lag could have been due to the lack of economic freedom (shown above from ppinys.org)—where the recent crisis exposed the underlying rigidities from extant regulatory and tax regimes which functioned as principal obstacles to the necessary adjustments to post bubble conditions. This can be seen particularly in Connecticut, Rhode Island, New Jersey and California—with the exceptions of Nevada and Idaho.

If we try to put this into equation, we get: bubble bust + economic rigidities (from tax and regulatory regime)=worst job markets (of course with some notable exceptions due to special specific local circumstances).