April Employment Report Begins to Show the Signs of the "Obamacare Effect"

Economists breathed a sigh of relief when the Labor Department reported a better than expected April employment report on Friday, but the details show cracks still remain.

Many of the job gains proved to be in lower paying fields and the average number of hours worked dipped.

In fact, April's report revealed the average workweek for private sector employees declined 0.2 hour to 34.4 hours.

The data also suggests The Affordable Health Care Act, aka Obamacare, is already having an impact on hiring since job growth has slowed most significantly among businesses with 50-499 employees.

This could be the reason why...

Companies with more than 50 employees fall under the umbrella of Obamacare. The Act requires businesses with at least 50 full-time employees to offer health insurance to staffers who work at least 30 hours a week. While the mandate doesn't kick-in until Jan. 1, businesses have to track this year's payroll to determine whether employees work enough hours to receive benefits.

As a result, businesses with fewer than 50 workers remain hesitant to hire and have trimmed employees' workweek to remain under thresholds.

"That 50-employee threshold is important and it feels like health care reform is having an impact, Mark Zandi, chief economist for Moody's Analytics told CNN Money. "If you look at the slowdown in job growth in the last few months, it's primarily among companies that are small."

Indeed, those with fewer than 500 employees added just 76,000 jobs in April, half the pace of last year.

In addition, the 31,000 temporary-help service workers added in April was the most since February 2012.

"Hiring temporary workers is one way to be careful" in an uncertain business environment, John Challenger, chief executive officer of Chicago based employment consulting firm Challenger Gray & Christmas Inc., told Bloomberg.

President Obama's healthcare act appears to be the main roadblock to jobs creation.

Some 22 million Americans still can't find work or the full-time work they want. Millions more have simply given up. Now, even more working Americans are finding their hours being trimmed because of Obamacare.

In all, the labor market created 165,000 jobs in April, a number good enough to push the unemployment rate down to 7.5%, its lowest level since December 2008. The figures handily beat the 148,000 net new jobs analysts were expecting, with the unemployment rate sticking at 7.6%.

"In one line: Not bad, especially in the light of beaten-down expectations," Ian Shepherdson, chief economist at Macroconomic Advisors told the New York Times. "This could have been much worse."

The government also made major upward revisions for job creation in the prior two months.

The original weak 88,000 number for March was revised upward to a healthier 138,000. February's number was amended up to a strong 332,000 from robust 268,000. That makes February the month with the most new jobs added since May 2010.

Private sector headcount grew by 176,000 in April, led by a 73,000 gain in professional and business service industry positions. Education and health services added 44,000. The government, which continues to represent a drag on job creation, shed 11,000 jobs. The federal workforce shrunk by 8,000.

Some of the bigger gains were in lower-paying sectors. Hotels and restaurants added 45,000; retail added 29,000; temporary help firms added 31,000 positions.

"You're hiring people, but you're not generating high-income jobs, Steve Blitz, chief economist at ITG told the NYT. "But work is work. It's honorable."

Collectively, April job creation remains well below the 209,000 added per month in Q4 of 2012. The numbers are also nowhere near the more than 200,000 jobs a month needed to drive down unemployment to pre-recession levels under 6%. Just to keep up with the natural growth of the labor force, the economy must add 100,000-plus jobs a month.

Moreover, in the 45 months since the Great Recession ended, job creation has averaged 113,000 fewer jobs a month than in a normal recovery, according to Congress's Joint Economic Committee.

Related Articles and News:

• Money Morning:
  Obamacare's War on Full-Time Jobs Will Sucker Punch Economy
• New York Times:
  U.S. adds 165,000 Jobs; Jobless Rate Falls to 7.5%
• CNN Money:
  Business were hesitant to hire in April
• Bloomberg:
  Payrolls in U.S. Rise 165,000 as Unemployment Rate Drops