Corporate profitability is back up, and output has returned to nearly pre-recession levels. But employment still has not recovered. Why?
Well, I am sure there are a lot of reasons, but one potential reason I have pointed out for a while are Federal efforts to increase the cost of employment. If the true cost of an employee is higher, or even more uncertain, then investments are going to be funneled preferentially into capital rather than labor. Certainly that is what our company has been doing for a while. Thus productivity is way up, and employment is low.
I believe that Obamacare is a very important element in raising the cost and uncertainty of hiring new employees, particularly for small and middle-sized businesses that so often drive much of American employment growth. Certainly in the NFIB, the small business group to which my company belongs, the entire character of our internal discussions has changed. Three years ago we might have been discussing a mix of 10 or 12 issues we had. Now all you hear is Obamacare discussion. [Note - some on the Left like Kevin Drum argue that this concern is irrational. I seldom take seriously the opinion of people who have never tried to make a payroll about what business people should and should not be concerned about, but it almost does not matter. Whether it is irrational or not, the concern is a fact.]
Let me share a chart I just saw on Kevin Drum's blog (which he used to make an entirely different point). Let's look at the recession up to March 2010:
Look at the orange line which is private sector employment growth (the blue bars include government and get squirrelly in 2010 due to temporary census workers). This looks like a normal (though deep) recession with a nice recovery beginning.
Then, on March 18, 2010, Obamacare passed. Now lets play the numbers forward. Again, pay attention to the private job growth in orange - the blue spike in April in May is all temporary census workers
Correlation is not equal to causation, but Obamacare looks to me to be exactly like the National Industrial Recovery Act under FDR, a huge source of regime uncertainty and stab at free markets that killed an incipient recovery.