Obamacare-Driven Stagnation

From the file of things that are absolutely obvious to business owners, and a total shocker to the pundit and policy class:

In its latest monthly report on economic conditions across the country, the Federal Reserve points to Obamacare as one reason the unemployment rate has remained near or above 8 percent under the current administration.

That’s what Sally Pipes, president of the Pacific Research Institute, writes in an op-ed piece for Forbes magazine.

The Fed’s so-called “beige book” noted that employers across the country have “cited the unknown effects of the Affordable Care Act as reasons for planned layoffs and reluctance to hire more staff,” Pipes says, adding that as more businesses learn about Obamacare, “the more they’re coming to realize that affordable care” is the last thing it will provide.

Here is my attempt to illustrate the same thing in one chart (net monthly job creation, which Kevin Drum helpfully posts each month):

click to enlarge

I will revise this chart later - this is actually public and private totals.  When you look at private only, the April 2010 peak goes away (that was temporary census hiring) and the chart has an even more stark inflection right there in March 2010 when Obamacare was passed.



  1. mesaeconoguy:


    Increasing the cost of employment reduces and restricts growth. Who knew?

    The punch line is that all these economists (many leftists) expecting 3% growth this year will have a lot of ‘splainin to do at year end when we get 1.0 – 1.5% actual GDP growth.

    We are locked in to that level from here on.

    It appears the left/Obama actively want 14% unemployment and anemic growth.

  2. GlowballWarming:

    Because there is always an opportunity cost, especially for the free sh@t from the government.

  3. s:

    Well, while I thought Obamacare entirely missed the point and wasn't going to contribute at all to fixing American healthcare, I've recently discovered one advantage: my new plan require upfront payment for Drs visits, and I've promptly stopped going in for anything but lifethreatening issues right after the first bill. Instead, I acquired a nice set of off-market antibiotics, which really takes care of about 80% of my usual yearly needs

  4. Matthew Slyfield:

    "especially for the free sh@t from the government." Which is almost always a literal pain in the ass.

  5. SC Hodges:

    And this is only in anticipation, wait til the impact of 25-50% predicted increase in health insurance costs starts to bite in 2014-15. State budgets are going to really be stressed in the 2018 and onward time frame when they start picking up the 10% of the expanded medicaid coverage costs: 30M new medicaid patients at a cheap and probably low balled $3K/yr, with 10% to the state will add $80B to the fed budget and a conservative $9B to state budgets. It is likely to be much larger than this however
    and will result in significant compression of medical coverages by 2020 as appalled politicos realize what they have done.
    TSWHTF then, but the private economy will already have had some serious anchors dragging it down.

  6. AnInquirer:

    Some observations:

    1. The natural response of any economy to a recession is recovery. The American experience is that only misguided government policies have turned recessions into prolonged periods of economic angst.

    2. Even if fiscal policy harms the economy, there still is monetary policy. I know that many libertarians disagree with me, but the FED has done a remarkable job in countering detrimental fiscal policy and helping the economy in the last few years.

    3. Offsetting my previous praise of the FED is this consideration: the FED had a lot to do with the 2008 Financial crisis. First, providing excessive liquidity ten years ago to fuel the speculative housing boom. Second, raising rates too much in 2006 and 2007, prompting the first wave mortgage defaults on ARMs. Third, letting Lehman Brothers go under, giving the message that nothing is safe. The 2008 crisis came from more corners than the the FED, but the FED was a key reason for the disaster.

    4. Further offsetting my praise of the FED is a caution: no one really knows whether the FED can unwind its positions when the need comes to do so. There has been an unprecedented growth in FED assets from 586 Billion to 3 Trillion in just a few years -- provided incredible liquidity in the financial system.

    5. Although the Affordable Health Care Act is the most visible of detrimental fiscal/regulatory policy, there are other initiatives as well. Personally, I think Obama's CO2 initiatives hold the potential for even more damage. We do not know if and how bad these initiatives will be, causing more uncertainty and worry for job providers.

  7. ColoComment:

    "2. Even if fiscal policy harms the economy, there still is monetary policy. I know that many libertarians disagree with me, but the FED has done a remarkable job in countering detrimental fiscal policy and helping the economy in the last few years."
    The FED's monetary policies have enabled that "detrimental fiscal policy" of the federal government, and have permitted the federal government to avoid addressing its basic problem, which is government interference in, and distortion of, private markets. Further, the fake "returns on investment" from FED, TARP, etc., activities have camouflaged the true nature of revenue, spending and debt at the federal level.

  8. Mole1:

    Sorry, but the y axis is "change, thousands of people", right? It's the 1st derivative of total employment. So, a number consistently above 0 is not stagnation, it means total employment is rising at a constant rate.

  9. bigmaq1980:

    Sadly, the once venerable Economist magazine would rather repeat the White House sponsored message than do the pointed analysis that they were good for in days of yore.


    Key points:

    - Economies usually bounce back to their "underlying trend rate of growth" prevailing prior to a recession, However, a "...lower trend was largely in place even before the recession hit...".
    - On top of that, the labor force has not kept up with growth of the over-16 population growth. The "...10M (shortfall) want to work but simply are not looking, they should arguably be included among the unemployed. But in fact, only a fifth of them say they WANT TO WORK." (caps are mine - 80%? - this does not ring true, IMHO)
    - Additionally, long term productivity gains (from investment in technology) have been "anaemic since 2003..., which is about when the productivity-enhancing impact of the internet began to wear off..."
    - Therefore..."Policymakers cannot rejuvenate long-term growth by inventing another internet"

    The subtitle "Demography may explain the weakness of America’s recovery" does not fit its conclusion - very misleading, IMHO. In fact, it colors the entire article, as one must read carefully to see that they are not saying Demography really is the explanation.

    Also, I find that their analysis tip toes around some important points.

    - It does not **clearly** say that government has provided the incentive for people to NOT work - which is one problem. At best, they give this a "nod".
    - It uses the internet as a crutch to explain the causes of lower productivity returns from investment (they use terms like Total Factor Productivity, which further obfuscate cause and effect).
    - By several measures government has seen a significant growth as a percentage of the economy (that alone should bring down productivity returns vs business owner investment) - no mention.

    - It does not mention that there has also been significant growth in regulations (particularly since 2008 - of which Obamacare is a big example). This has created "regulatory uncertainty" that gets "priced into" all private investment decisions (e.g. hiring, capital expenditure).
    - Long term artificially low interest rates (e.g. zero interest rate policy) have investment dollars chasing "less productive" projects - no mention.

    I cannot attribute ignorance to Obamacare and other expansions of government under the current POTUS, especially when advisors of his openly state things like not "letting a crisis go to waste". It surely hasn't passed by them unnoticed that another crisis could well work in their favor. In the case of Obamacare, it c/would be used to achieve a pure single payer system.

  10. bigmaq1980:

    I would add further criticism of the FED - the "remarkable job" countering "detrimental" fiscal policy.

    It is not remarkable at all. It is following the path laid out by many countries before it. The only thing remarkable is the scale and the amount of intervention, to a level of intervention you already criticize in #3. It is not without consequence.

    It is unclear, as you say in #4, if the FED can "unwind", as they are self-admittedly in "experimental territory". It may well be that the "elastic band" continues to tighten, while things appear to be improving. But, having admitted the experimental nature of it, what kind of confidence should we place in the FED in controlling it when a triggering even occurs? They did not see 2008 coming. Unlike 2008, they have run out of tools/room to deal with the next one.

    Allowing the government to borrow at the levels they have, even if they successfully navigate past any new crisis, sets up future generations to massive tax burdens. I recall a saying "taxation without representation".

    No, it is a disaster waiting to happen. We may look back and say that we should have taken our lumps when we could have.

  11. bigmaq1980:

    You ignore the growth in population. If the future numbers don't make up for prior loses, prior population growth, and future population growth, at best it is described as stagnation.

  12. mesaeconoguy:

    Very well put, thank you for providing specifics of exactly my thoughts of the no-longer-appropriately-named Economist.

  13. bigmaq1980:

    Thanks! I do like ZH.

    I disagree with the article though....on an accomodative scale, Bernanke has been an "11"!

  14. mesaeconoguy:

    Yep, about my take as well.

    The question is, how long can this continue?

    It works until it doesn't. That's a dangerous course of action.

  15. mesaeconoguy:

    Re: point 1, this recovery is the weakest on record.



    This is caused by shitty economic policy, among Obama’s mistakes, Obamascare, his crowning “achievement.”