Thursday, June 26, 2014

First Quarter Plunge? A "Get In Line" Hypothesis

...At least, for what hypothetical musings are worth. The unexpected GDP revision is still very much on my mind, and there are a number of factors lurking behind skewed first quarter numbers, which don't add up. One might reasonably wonder: will some portions of the economy now have to wait patiently in line, before services production and consumption can generate expected output levels in a given quarter? If so, how might that affect future output?

It isn't difficult to imagine a growing aggregate supply/demand "holdup", which could result from artificially generated scarcities in supply side formations. Politically, those scarcities have yet to be seriously questioned, even though they need to be dealt with. Plus, healthcare holds a central place in the economy, which affects decision making further down the line in numerous areas. In other words, it's a problem not only for directly related industries and suppliers, but unrelated industries which bear responsibility to healthcare providers as well.

One interesting note: there were more positive aspects of the first quarter, in areas far removed from where anyone needs to "wait in line" for a physician. Consider a few measures which were in good shape - industrial output and hiring in general. At least some parts of the economy are not suffering from the fallout of healthcare challenges! From the WSJ (Jon Hilsenrath):
White House economist Jason Furman noted in an email that industrial output increased at a 2.1% annual rate during the first quarter, which is historically out of line with such a large contraction in gross domestic product. Then there is the peculiar hiring behavior of businesses. Hiring expanded at a 1.5% annual rate in the first quarter. Since the end of WWII, there have been fifteen other quarters during which GDP contracted by 2.9% or more. In 14 of these 15 quarters, hiring contracted along with output. 
Output expectations probably remain more positive than they appear, but that does not necessarily mean all is well. What if the time table for healthcare services which contribute to quarterly output, has become part of the problem? Supply side limitation in the form of physicians, has become the elephant in the room where everyone else turns themselves inside out, trying to fine tune other aspects of the economy to deal with the main problem. Physicians hold a primary position, in that wide swathes of healthcare providers must await central authorization before many vital activities can even be set into motion - let alone measured and recorded.

"Getting in line" for constant approval, reduces organizational agility and time use effectiveness on a number of levels. While Obamacare certainly exacerbates time utilization issues, such bottlenecks were already a problem before Obamacare ever came into the picture. Unfortunately, the new healthcare law does nothing to address the top down management structure and supply side limitations which previously existed. If anything, it seems to have strengthened them in some respects.

Only consider the recent outrage over the VA system, which - while clearly operating in a dysfunctional capacity - is far from alone in its time utilization headaches. For one thing, it's hard to imagine that many employees in the VA system fully understood the scheduling problems that were recently uncovered. Indeed, the VA employees I've known in recent years, had been quite proud of what they believed was now a well functioning system. While part of the blame goes to government inefficiencies and skewed incentives, the VA cover up represents skills capacity and time use problems which go much deeper than bureaucratic bungling.

Many who could fulfill some of the functions which physicians now hold, are still being denied the opportunity to do so. Unfortunately, this also holds true for other healthcare skills sets which are closely guarded as well. Presently, there is no telling when that circumstance will actually change on a wide scale, hence strategies need to focus on solutions for regions and individuals where services access is extremely limited.

Even though some aspects of the economy are returning to normal, skills use capacity is still woefully underrepresented. Indeed, one could call this a depression for skills sets, in aggregate. Greater liquidity in skills set potential is needed, to overcome a recession that has never really gone away.

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