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Now the Bad News: Those August Jobs Were Rented

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Despite what some on Wall Street say, the August jobs report shows little hope for recovery.

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So that leaves the 13.8 million jobs reported in August for the various health segments of the HES Complex. Yes, government programs including Medicare, Medicaid, and health research still account for well less than 50% of total health-care funding -- meaning that this sector isn't entirely dependent on the public exchequer. But now we have Obama Care -- and that will most assuredly curtail any remaining upward momentum in the trillion dollars of funding that passes through employer health plans and private medical insurance.

To be sure, Republican orators have wasted no words describing Obama Care as a budget-busting calamity, owing to the expansion of coverage to 40 million more Americans. But the overwhelming evidence from state-run European systems -- where health spending is about 10% of GDP versus our 17% -- is that the primary impact of heavy-handed bureaucratic management is redistribution and rationing of health-care resources, not endless American-style expansion.

Moreover, the Obama legislation delayed much of the coverage expansion and mandates until 2014 in order to make the numbers look better. But this budgetary legerdemain will leave existing employer health plans in a state of limbo. Such plans will be exempted from the act's "minimum essential coverage" mandate, but this grandfathered protection will be valid only so long as current plans aren't materially "changed" before the 2014 effective date. Thus, while waiting for the several thousand pages of regulations defining the new federal coverage standards and explicating what constitutes an impermissible "change" in existing plans, it's likely that employers will either freeze current plans or eliminate them entirely.

The curtailment of employer-plan funding growth has been underway for several years. Now the massive uncertainties owing to the next four years of complex rule-making and court challenges due to Obama Care can only function to intensify this slowdown.

In fact, a sharp retrenchment of private-sector reimbursement growth is already evident in the interstices of health-care payroll trends. The categories that have the highest mix of employer-versus-government funding are physicians' offices, outpatient care, and hospitals. There are presently 7.6 million jobs in these categories, but the receding rate of growth is now unmistakable. During the seven-year boom, these categories added about 14,000 jobs per month. The figure then dropped to 9,500 per month during the Great Recession, and has averaged only 7,000 per month since last December.

By contrast, home health and other ambulatory services, along with nursing and residential care, rank high on the scale of fiscal dependency. There are now 6.2 million jobs reported for these categories, but the growth rate of 13,000 jobs per month since last December isn't appreciably different than the 12,000 to 14,000 per month rate that has been reported continuously since the turn of the century.

Needless to say, the bullish economists and strategists who apparently read just the headlines might be chagrined to discover that the only "evergreen" source of jobs left in the HES Complex consists of work changing bedpans and providing home companionship for the infirm. And even these gains will soon come up against the realities of Peak Debt.
No positions in stocks mentioned.

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