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Health Law Hits Hiring, Ups Prices In 5 States

ObamaCare may be among the reasons why the economic recovery is still searching for its third gear, suggest Federal Reserve surveys of businesses in five states.

While the law hasn't prevented solid job growth this year, it appears to have slowed gains at a sizable minority of firms.

In a Philadelphia Fed survey of regional manufacturers out Thursday, 18% said they employ fewer workers due to the Affordable Care Act than they would in its absence. Just 3% say employment levels are higher as a result.

Further, 18% said part-timers make up a greater share of workers due to ObamaCare, which absolves employers of responsibility for health care for those who work fewer than 30 hours a week. Just 1.5% said they've scaled back part-time work in response.

The Philadelphia Fed's monthly business conditions index hit its best level since March 2011. But the capital spending outlook was a relative weak spot, falling to a seven-month low.

The ObamaCare responses in Philadelphia are in line with those from businesses in the New York region, including parts of Connecticut and New Jersey.

The New York Fed released two surveys on Monday showing that 22% of manufacturing and 17% of service firms are carrying fewer workers in response to ObamaCare. The part-time share of the workforce is higher at about 20% of firms in each sector and lower at about 5%.

IBD's own analysis of hours-worked data that businesses report to the Labor Department shows that ObamaCare's mandate is having its biggest impact on low-wage sectors. Among private industries where pay averages up to about $14.50 an hour, the average workweek has sunk to 27.4 hours, undercutting the record low seen at the depth of the recession in 2009.

One limit to ObamaCare's economic drag is the possibility of evading its mandates by outsourcing work. The Fed surveys show that to be a popular tactic.

In the Philadelphia area, 14% of manufacturers said they've boosted outsourcing on account of ObamaCare vs. 3% outsourcing less. In the New York region, 19% of manufacturers and 9% of service firms say they've stepped up outsourcing in response.

The two most widespread impacts of ObamaCare reported by businesses are rising insurance bills for employees and higher prices for customers.

In the Philadelphia region, including parts of Pennsylvania, New Jersey and Delaware, 29% of manufacturers said they've raised prices to offset ObamaCare's impact, with 0% saying the law led to a price cut.

In the New York area, 36% of manufacturing and 25% of service firms blamed ObamaCare for price hikes.

Among the 51.5% of Philly-area firms who say they've modified health benefits in response to ObamaCare, 88% said they've hiked employee contributions to premiums and 91% said they raised deductibles.

The New York Fed survey also asked employers about the law's impact on health costs per person. This year's costs were "a lot" higher among 35% of manufacturing and 20% of service firms.

In 2015, half of manufacturers and one-third of service firms were anticipating "a lot" higher per-person costs due to the law.