Will ObamaCare Push Us Into Another Recession In 2014?

No one can actually predict when a recession will occur or how long it will last.  But, in more than 150 years of tracking our economy, recessions have occurred, on average, every 5 years.  In more modern times, they have tended to occur every 6 to 7 years; and, we are already 6 years and almost 2 months past the start of the last one in December of 2007.

Most recessions occur when inflation outpaces the rate at which the average consumer's disposable incomes increase; forcing most to pull back on buying any or all non-essential goods and services. Thus, the economy contracts.  Other times, however, recessions are spawned by some major, economic-impacting event such as the Crash of '29, the OPEC Oil embargo, 9/11, or, most recently, the burst of the housing bubble.

Thanks to PolitiFact, we have a nice scorecard on Obama for things like the growth in disposable income and inflation.  According to that report, disposable incomes, after falling in 2009, rose 1.5% from 2009 to May 2012; a yearly average of  only six-tenths of one percent (.6%).  At the same time, overall inflation averaged 2.7%; or, 4-1/2 times faster than disposable incomes. More importantly, essential items like food and gasoline have risen much faster than overall inflation. 

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So, it is apparent that a primary cause of any recession -- inflation faster than wage growth -- has been firmly in place since 2009.

But, another significant economic-impacting event -- the continued roll-out of ObamaCare -- is hovering like a black cloud over this already weak economy; and, it is a "cloud" that is already causing a slowdown in hiring and wages to lag even further.  According to the recent December jobs report, only 74,000 jobs were created; the lowest in three years.  But, more importantly, during the 3-months that ObamaCare was being rolled out, the average hourly wage only increased by about a quarter of one percent; from $24.11 in October to $24.17 in December.  That was half as fast as the rate at which wages rose in the first 9 months of the year.  Is this because of ObamaCare or just a coincidence?

I guess we'll have to wait until January 30 when the GDP report for the fourth quarter comes out to see if the October roll out of ObamaCare hurt economic growth.  If it is substantially less than the projected 2.5% growth, we could be seeing the start of another recession. Further, the U.S. stock markets are tumbling on a assumed slow-down in world economic activity.


References:

Politifact's Obama Economic Scorecard: http://www.politifact.com/truth-o-meter/article/2012/jun/01/scorecard-economy-obama/

December Employment Report, Table 3-B, Average Hourly Earnings: http://www.bls.gov/news.release/empsit.t19.htm

 Econbrowser: Recession in 2006-07?: http://www.econbrowser.com/archives/2005/08/recession_in_20.html