Last week, I published an article showing four examples of how the Obama administration’s regulatory uncertainty has had a negative effect on the economic recovery. In that piece, I noted that private sector growth sharply decelerated following the passage of the Patient Protection and Affordable Care Act (PPACA) of 2010.
The most common criticism was that the private sector job growth’s sharp deceleration primarily reflected sluggish GDP growth due to lackluster demand. Some further argue that compared to sagging demand, the effect of the PPACA’s passage was immaterial.
While I would agree that weak demand was primarily responsible for the continued job growth deceleration by early 2011, the data does not appear to support this thesis during the first two quarters of 2010. This period had the two highest GDP growth rate-quarters during Obama’s presidency.
The chart below shows private job growth decelerating immediately following the PPACA’s passage in March 2010, despite a strong quarter of 5.5% GDP growth before the PPACA became law, and a solid 5.4% GDP growth in the quarter after.
If one layers the S&P 500 over the same period, there is nothing but an upward trend through July 2011.
It so happens that most corporations have plenty of cash, yet they are not hiring. Instead, they are reacting to an era of policy and regulatory uncertainty by buying back stock and paying investors dividends. In fact, 2010 was the fifth-largest year for share repurchases since at least 1985. Corporations bought back $325.8 billion of stock in 2010, more than double 2009 levels. According to The New York Times, American corporations reported their highest profits ever in the third quarter of 2010 (as of November 23, 2010), and had grown for seven consecutive quarter up to that point. The New York Times attributes the increase in profits primarily to “strong consumer spending.”
So much for attributing 2010′s job growth deceleration to weak demand.
It is still unclear just how much passage of the PPACA led directly to a deceleration in job growth. That said, to claim it had no significant effect whatsoever, flatly ignores available data.