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.

US Informal Economy estimated to have DOUBLED to $2 Trillion since 2009

All the financial repression via bailouts, rescues, inflationism, new taxes and regulations from the US mortgage-banking crisis of 2008 have driven many of the average Americans to the informal economy.

From the CNBC:

The growing underground economy may be helping to prevent the real economy from sinking further, according to analysts.

The shadow economy is a system composed of those who can't find a full-time or regular job. Workers turn to anything that pays them under the table, with no income reported and no taxes paid — especially with an uneven job picture.

"I think the underground economy is quite big in the U.S.," said Alexandre Padilla, associate professor of economics at Metropolitan State University of Denver. "Whether it's using undocumented workers or those here legally, it's pretty large."

"You normally see underground economies in places like Brazil or in southern Europe," said Laura Gonzalez, professor of personal finance at Fordham University. "But with the job situation and the uncertainty in the economy, it's not all that surprising to have it growing here in the United States."

Estimates are that underground activity last year totaled as much as $2 trillion, according to a study by Edgar Feige, an economist at the University of Wisconsin-Madison.

That's double the amount in 2009, according to a study by Friedrich Schneider, a professor at Johannes Kepler University in Linz, Austria. The study said the shadow economy amounts to nearly 8 percent of U.S. gross domestic product.

Whether in politics (Boston’s martial law) or in economics (informal economy) the US appears to be sliding down the path towards a banana republic.

Why?

The informal, underground or shadow economy have always been a product or outcome of the politicization of the marketplace.

Proof?

Regulations have been skyrocketing in the US. A big segment of growth comes from the post-crisis years. The number of pages of regulations from the Federal Register has ballooned almost sevenfold since 1940s. Chart from Political Calculations Blog.

Additional regulations means more taxes too.

Number of pages of Federal Tax Rules has swelled by about eight times since the 1940s, where the bulk of the recent expansion of tax rules also occurred during the years of post-US mortgage banking crisis . (Chart from Cato’s Chris Edwards)

Regulations signify as hidden taxes too. 

Estimated compliance costs is at $236 billion in 2012. This would account for 1.5% of the US GDP. By the way, $2 trillion informal economy is about 12.7% of the $15.7 trillion US GDP in 2012. 

Yet there are indirect regulatory costs too.

Overall, the total estimated regulatory costs have been at $1.752 trillion in 2011 according to Competitive Enterprise Institute.  That’s more than 10% of the US economy. Such costs must be a lot more today.

Statistics would not really capture the lost business opportunities from the burdens of additional taxes, regulations and other politics based programs because they are largely invisible or unseen by the public. For instance, I recently pointed out how state authorities shut down a child’s lemonade stand for the lack of license. So one has to be leery of any supposed analytical insights entirely focused on the shouting of statistics or on the dependence on empirical methodology.

We will have to add the burdens of tax and regulatory costs  from Obamacare and Dodd Frank.

That’s not all. There is also the enormous onus from entitlement spending. (chart from Heritage Foundation)…

…and the diminishing purchasing power of the US dollar from the printing presses of the US Federal Reserve since 1913 (chart from visual.ly), whose boom bust cycles have led to the justification of more interventions or “never let a crisis go to waste” dogma. 

So such vicious cycles of government expansion leads to a debt trap.

To cap it, increasing politicization of the marketplace means higher costs of doing business which entails more limitations or restrictions on economic opportunities and diminishing productivity and capital accumulation, which extrapolates to stagnation or a decline in living standards.

Thus when people’s survival is at stake, and where costs of doing formal business is high and increasingly a hindrance, they resort to the informal, underground or the shadow economy.

The digital age via the web has also substantially contributed to the expansion of the informal economy, where the former provides the platform to conduct businesses outside the prying eyes of the government. The emergence of the Bitcoin is a wonderful example.

The growth in the informal economy will also likely be manifested in the evolution of politics. This should translate to a growing divide or the deepening polarization between the productive class and political parasites (political class, cronies, welfare-warfare beneficiaries and the bureaucracy).

Although while informal economies represent as good sign of people’s attempt to generate productivity outside the political realm, they represent as an implied or passive revolt against politics. Alternatively, this also could mean social unrest ahead.

Updated to add: Informal economies will be smeared by the mainstream as illegal and immoral operations (such as drugs, money laundering and etc...). While there could be some, most of them aren't. This would represent as propaganda to cover up the failure of governments or to shift the burden of blame on the public rather than they owning up to their failures.

Quote of the Day: Hidden Cost of Regulations

The truth is that there is no way to calculate the real cost of more regulations, more taxes, and more government control. It’s sort of like Obama insisting that his policies have “saved jobs.” How in the hell does anyone prove he saved jobs? He can’t. It’s a statement carefully crafted for idiots. No rational person with an IQ above 60 would take seriously such an absurd claim.

Likewise, you can’t prove what the cost of a government monstrosity like Obamacare will cost, because it’s impossible to know how many companies it will put out of business, how many jobs will be lost, how much it will destroy the economy, how high interest rates will go, and how bad the coming hyperinflation will be.

The truth is that the cost could be in the trillions of dollars, but no one can ever know for sure because most of the costs are hidden. And the biggest cost would likely be the loss of what is left of our freedom and of the country that was once known as the United States of America.

From libertarian author Robert Ringer