In this week’s Economic Report, Dr. Rick Harper looks at the recent rise in unemployment numbers and what they mean in the long term, why job openings have risen and what Obamacare’s repeal could mean for Florida’s economy.
Weekly applications for unemployment benefits rose by 10,000 last week. But looking at historical data, the numbers are nothing to worry about, Harper said.
“You actually have to go back to 1973 to find a similar number of initial claims for jobless benefits,” Harper said. “So, here we are at a two-generation low, and so, no, it’s not a big deal.”
Harper said the high frequency of the reports mean that these numbers are merely a little noise in the data in the long term.
“Overall, the initial jobless claims are consistent with a labor market that’s as healthy as it’s been in decades,” Harper said. “What we have to worry about is the labor force participation rate because you can’t apply for jobless benefits or unemployment insurance benefits if in fact you haven’t been looking for work.”
Labor force participation rates have declined, Harper said.
“They’ve leveled off and slightly declined for women. And for men of prime working age – 25 to 54 – they’re on a long term downward trend for participation,” he said.
The monthly JOLTS report on job openings was released this week, and Harper said the numbers for the year look good.
“Job openings are running at an annual increase of about 4 to 6 percent in late 2016,” Harper said. “That’s healthy. It’s not as good as it was in 2014 and 2015 when we were really recovering.”
Harper said the economy picked up momentum in those years, and we were seeing much larger year-over-year increases.
“We were seeing monthly increase relative to the same month the year before of about 20 percent, and that was sustained over two years,” he said. “So, not as fast as it was, but still pretty doggone good.”
On Wednesday, Congress began dismantling the Affordable Care Act, and a recent study suggested that without a replacement for Obamacare, Florida could lose thousands of jobs. Harper disagrees and said that report is inaccurate because it does not consider the entire state economy.
“Obamacare, in the way that it has been paid for, called for new taxes. There was the extension of the payroll tax,” he said. “It used to be that you’d reach a certain income of $120,000 or so, the majority of that was Social Security. But there was also the Medicare/Medicaid, and that 3.6 percent was actually extended to higher incomes, regardless of the size of the income or the source of the income.”
Harper believes that the repeal of the financial provisions is going to include a rollback of that new tax.
“What’s really going to happen is that higher income citizens are going to get a break in their tax burden,” he said. “What the study, done by the Commonwealth Fund, doesn’t address specifically is the additional spending and jobs that will be created by rolling back the additional tax on individuals and also the medical device tax on manufacturers which will flow as additional profits to the shareholders of those firms.”
Those shareholders will spend the money on something else or save it, Harper said.
“It’s really a distributional effect. It’s clearly going to be an additional cost to health care providers who are not going to have that source of revenue which was the federal subsidy to Medicaid which then flowed through to the people who accepted those Medicaid policies,” Harper said. “So in that sense, I agree that there will be less money flowing to health care providers and they will be the negative recipients of the repeal of Obamacare effects.”
However, jobs will arise elsewhere in the economy, according to Harper.
“The net effect, given that Florida was always paying the additional taxes for Obamacare but chose to decline to accept the expansion of covered population that would have come with Obamacare,” he said. “It could easily be that the net effects to Florida are positive, but clearly negative for health care providers,” he said.
Locally, where health care is one of our top three industries alongside the military and leisure and hospitality, this could create a growth opportunity to serve patients coming from outside the local area.
“However, we don’t get to make those decisions. We have very little control over them,” Harper said. “For the most part, the sector where we really get to set our own destiny is leisure and hospitality because we define the brand of our marketplace, the visitors that come, the advertising that gets done. We can certainly gain share in leisure and hospitality in a way that we can’t in military and health care.”
Dr. Rick Harper is an economist at the University of West Florida. He can be reached at firstname.lastname@example.org. CREO staff writer Mike Ensley contributed to this report. He can be reached at email@example.com.