The White House's economic distortions
Two advisers fail to convincingly defend the administration’s policies.


US President Barack Obama announces the nomination of Jason Furman to be the new chair of the White House Council of Economic Advisors in the State Dining Room at the White House in Washington, June 10, 2013.

Article Highlights

  • It’s always Christmas but never winter for Team Obama.

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  • A fairer reading of the employment data reveals a summer of stagnation, at best.

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  • The employment rate was the same in August as in May and has barely budged over the past four years.

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It’s always Christmas but never winter for Team Obama. Their economic schemes work exactly as planned and never generate unintended consequences. And when reality inconveniently pops in, they ignore it — or at least try to persuade the rest of America to.

After the Labor Department released the unexpectedly weak August jobs report last Friday, top Obama economic adviser Jason Furman took to the White House blog and declared that “incoming economic data broadly suggest that the recovery continues to make progress.”

That was in the morning. Then, in the afternoon, Furman, with fellow staff economist Betsey Stevenson in tow, returned to the blog to dispel the notion that Obamacare might be turning the American labor force into a bunch of part-timers. Rather, the duo explained, the Affordable Care Act “continues to improve the functioning of labor markets.”

Let’s take those claims in order.

A fairer reading of the employment data reveals a summer of stagnation, at best. First, monthly jobs gains slowed to 148,000 a month in the June through August period vs. 199,000 monthly in January through May. If things continue at this decelerated pace, it will be more than a decade before employment returns to pre–Great Recession levels.

Second, while the unemployment rate fell by three-tenths of a percentage point over the summer, to 7.3 percent, the decline was due to a continuing drop in the labor-force-participation rate, which is now at a 35-year low. Without declining work-force participation, the jobless rate would have risen by a tenth of a point since May, to 7.7 percent.

Third, the employment rate — the share of non-jailed, non-military adults with a job — was the same in August as in May and has barely budged over the past four years.

Where’s the progress in all that?

Now, there are positive signs in some of the more recent and high-frequency jobs data. Initial jobless claims have continued to trend lower, with the four-week moving average now at its lowest level since October 2007. The employment part of the ISM non-manufacturing index, considered valuable for forecasting payrolls, rose sharply in August from July. The number of respondents to the Conference Board’s consumer-confidence survey who said jobs are “hard to get” exceeded the number answering “plentiful” by the narrowest margin since the recession’s start.

Slow but steady wins the race, right? Not when it comes to labor markets, where extended unemployment erodes worker skills and marketability. The glacial recovery in the jobs market risks creating a permanently larger pool of unemployed. An ominous insight from JPMorgan economist Michael Feroli: Federal Reserve policymakers “may gradually be making their peace with a falling [labor force] participation rate.” Without faster GDP growth, faster job creation, and special efforts to target the long-term unemployed, the New Normal job market might be here to stay.

As for Obamacare’s job-market impact, Furman and Stevenson point out that since health-care reform became law in March 2010, 91 percent of the employment increase is due to full-time work. But 60 percent of the jobs created this year, as Obamacare implementation approaches, have been part-time gigs. First Trust economists Brian Wesbury and Robert Stein observe that some of the largest payroll gains recently have been in sectors where firms can more easily shift their employee mix from full- to part-time. Retailers and restaurants now make up the largest share of private payrolls in at least a generation.

“It’s hard to believe Obamacare has nothing to do with this,” Wesbury and Stein conclude.

A San Francisco Fed report supports the White House in part, finding the current level of part-time work largely within post-recession historical norms, but adds that its “persistence during the ongoing recovery is unusual.” The Fed analysis also highlights separate research suggesting Obamacare will likely cause at least some increase in part-time work. Further muddling the picture is that much of this data comes from the more volatile household-employment survey. A fact not in dispute: The Obamacare taxes, when combined with the partial expiration of the Bush tax cuts, have increased top rates on labor income by 20 percent and on investment income by 67 percent. No comment by the White House econ team on how those tax hikes might be affecting economic growth.

Also crystal clear: Four years after the Great Recession officially ended, the American job market remains a mess — whether or not the Obama White House chooses to believe or concede it.

— James Pethokoukis, a columnist, blogs for the American Enterprise Institute.

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