US job growth in April beat economist expectations as nonfarm payrolls rose 165,000, and the jobless rate fell to a four-year low of 7.5%. But the report contained worrisome signs that President Obama’s health care reform law is hurting full-time, high-wage employment.
While the American economy added 293,000 jobs last month, according to the separate household survey, the number of persons employed part time for economic reasons — “involuntary part-time workers” as the Labor Department calls them – increased by almost as much, by 278,000 to 7.9 million. These folks were working part time because a) their hours had been cut back or b) they were unable to find a full-time job. At the same time, the U-6 unemployment rate — a broader measure of joblessness that includes discouraged workers and part-timers who want a full-time gig – rose from 13.8% to 13.9%.
What’s more, there wasa 0.2 hour decline in the length of the average workweek. This led to 0.4 percentage point drop in the index of average weekly hours, “equaling the largest declines since the recovery began,” notes economist Dean Baker of Center for Economic and Policy Research.
Let’s see, more part timers and fewer hours worked. Economist Douglas Holtz-Eakin says what we’re all thinking: “This is not good news as it reflects the reliance on part-time work. … the decline in hours and rise of part-time work is troubling in light of anecdotal reports of the impact of the Affordable Care Act.”
Anecdotal reports like this one from the Los Angeles Times: “Consider the city of Long Beach. It is limiting most of its 1,600 part-time employees to fewer than 27 hours a week, on average. City officials say that without cutting payroll hours, new health benefits would cost up to $2 million more next year, and that extra expense would trigger layoffs and cutbacks in city services.”
Now, there is the possibility that government furloughs are affecting the length of the workweek. (Though at the same time, steady if unspectacular private-sector job growth shows the Fed may be continuing to effectively offset any negative sequestration impact.) Here is JPMorgan on the subject:
Government shed a trend-like 11,000 jobs last month, a number which bore little evidence of a meaningful sequestration impact. Similarly, it is hard to directly link the decline in the average workweek to furloughed government workers, as the workweek only measures private industry hours. It’s conceivable the decline in the workweek may be related to the Affordable Care Act, but a simpler explanation is that it had jumped two ticks in the prior two months, and through the month-to-month noise is just settling into a stable trend.
We’ll see. But the combo of data and anecdotes should at least raise red flags about how health care reform could be permanently altering the structure of the American labor market.
A few other points:
1. The labor force participation rate was dead in the water. If it were back to January 2009 levels, the U-3 unemployment rate would be 10.9%. Demographics are playing a role here. But even taking that into account may put the real unemployment rate in the 9% to 10% range.
2. Only 53.9% of private industries added jobs last month, the second lowest of the labor market recovery, according to JPM.
3. Even with the unemployment rate at a misleadingly low 7.5%, it is way above where the Obama White House predicted it would be if Congress passed the 2009 stimulus, as the above chart shows. Back then, Team Obama thought 5% was the economy’s full-employment rate but recently has upped that number to 5.4%.
4. If the economy continues to add jobs at the 2013 pace of 196,000 a month, the labor market would return to pre-recession employment levels in seven years and ten months, according to the Hamilton Project’s “jobs gap” calculator.