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Obama Touts Jobs, But Part-Time Shift Casts Fresh Doubt

President Obama on Friday touted the 3 million jobs added last year, calling it "a breakthrough year for America" and proof that his party's theory of spreading prosperity works. In a speech before the Democratic National Committee, Obama said that while there's still work to do, the party's middle-class economics will "build an economy that generates rising incomes and opportunities for everybody who's willing to work hard.

Yet two new reports cast fresh doubt on how much progress those who have yet to enjoy the fruits of recovery can expect. One of those analyses, surprisingly, is the Economic Report of the President, published a day before the DNC speech.

In the report, the White House Council of Economic Advisers warns that the high number of Americans working part-time jobs because full-time work is unavailable may persist "even once the unemployment rate has fully recovered.

The elevated level of part-time work looks especially stubborn in one sector of the economy, they note, finding some "evidence that employer demand for part-time workers in the service sector has shifted.

The ObamaCare Effect

The second report, from the Federal Reserve Bank of Atlanta, has a similar thrust: "The economy has been generating full-time general-service jobs at a much slower pace than in the past," write the Atlanta Fed's John Robertson and Ellie Terry.

In fact, the economy has 2.5 million more part-time workers and 2.2 million fewer full-time workers than in 2007, they say.

Economists and politicians have been arguing for two years about whether ObamaCare would create a shift to part-time work due to the 30-hour threshold at which the health law's penalties apply for employers who don't offer coverage.

Up until now, most authoritative sources who have looked at the question have concluded there's no evidence anything is amiss about the recovery of full-time work. They're backed by data showing that virtually all hiring on a net basis in the past several years has been full-time.

But these two reports suggest that something may be amiss after all in one important sector of the economy.

General-service occupations, such as food preparation, office and administrative support, janitorial services, personal care services and retail, accounted for about 2.5 million new full-time jobs from 2003 to 2007 but just 1.3 million from 2010 to 2014, the Atlanta Fed researchers say.

The share of general-service workers working part-time for economic reasons has fallen by about 25% from the recession-era peak. But the share working part-time for economic reasons in production occupations — manufacturing, trucking, construction — is down 75%.

Why General Services Get Hit

It's not surprising that general-service workers are bearing the brunt of the employer mandate. Employers with a primarily low-wage workforce, such as retailers and fast-food restaurants, are more likely to shift toward part-time because the cost of the penalty or health coverage makes up a much bigger share of compensation than it does for higher-wage industries.

Other evidence also indicates a connection between ObamaCare and the shift to part-time work. Census Bureau data show that the number of workers usually clocking 25 to 29 hours per week is up by a half million since the start of 2013. Meanwhile, those working 31 to 34 hours per week is down about 250,000.

Robertson, of the Atlanta Fed, said that the Affordable Care Act's effect on part-time labor is "hard to quantify." But he notes that an Atlanta Fed survey found that businesses relying on more part-timers cited lower compensation costs just as often as they cited weak demand.

White House economists say there's no evidence ObamaCare is behind the part-time trend, arguing that the share working part-time for economic reasons wouldn't have fallen in 2014 if employers were worried about the mandate penalty in 2015.

Yet the hours-worked data and anecdotal evidence of workers having their hours cut suggest that employers began to respond in 2013, before the Obama administration delayed the penalty in July of that year.