What a second Obama term may mean for hiring, job growth

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Presidential elections – particularly when an incumbent wins a second term — typically provide companies and organizations one thing they crave as they assess future investment and hiring plans: A respite from political uncertainty.

Yet 2012 is not your typical year. While the re-election of Barack Obama likely rules out any radical departure from policies of the last four years, adding complexity to assessing the post-election landscape for job growth and hiring is the very ominous “fiscal cliff.”

Economists warn that fiscal cliff — the blend of tax hikes and spending cuts set to go into effect in January — could slow growth, dampen hiring, and even push the economy back into recession if lawmakers do not hammer out a compromise. The fiscal cliff complicates any analysis of how a second Obama term will likely impact job growth and hiring moving forward. Some companies have already reported they are cutting back on spending and delaying hiring until there is more clarity.

The fiscal cliff is term used to describe the dilemma the U.S. government faces at the end of 2012, when the terms of the Budget Control Act of 2011 are scheduled to go into effect. Among the changes set to go into effect at midnight on December 31, 2012 if lawmakers don’t act:

  • Discontinuation of last year’s temporary payroll tax cuts (resulting in a 2% tax increase for workers).
  • The end of certain tax breaks for businesses, as well as tax cuts from 2001-2003, and the beginning of taxes related to President Obama’s health care law.

Meanwhile, the spending cuts agreed upon as part of the debt ceiling deal of 2011 could lead to cuts in as many as 1,000 government programs, including defense and Medicare, which are in line for “deep, automatic cuts.”

Aside from the fiscal cliff issue, assessments of future hiring trends often fall along partisan lines with Republicans arguing that Obama’s policies have deterred meaningful job growth, and Democrats citing a continuation of progress made since the Bush years.

Just prior to the election, the unemployment rate for October was at 7.9% with employers added 171,000 jobs. Hiring also was stronger in August and September than first thought. Yet a separate Labor Department report said job openings dropped by 100,000 in September to 3.56 million, lowest in five months.

From a policy standpoint, Obama was measured during the campaign when it came to projecting job growth during a second term. Obama pledged that, under his policies, the economy will create 1 million manufacturing jobs over the next four years. And he vowed to create 600,000 energy related jobs, with a particular focus on green energy.

At this point there has been little talk of a large-scale government program focused on job creation, as Obama’s $447 billion American Jobs Act, proposed in September 2011, failed to gain any traction.

Yet, an Obama victory likely bodes well for certain industries Nick Raich, Director of Research for Key Private Bank, was featured in a recent video about how the presidential election could affect investment portfolios. Raich said an Obama win favors the hospital, pharmaceutical and biotechnology  sectors.

Indeed, hospital stocks responded favorably in the wake of the Obama victory, which all but assures preservation of the 2010 health care reform law that is projected to expand health insurance coverage. Hospitals are expected to see more patients and more of those patients’ bills will be covered by insurance.

According to MarketWatch, the high-tech sector could also benefit from the Obama win, and, despite widespread opposition from Big Oil during the campaign, some experts speculate the oil and natural gas industries could benefit based on Obama’s promise to expand demand for natural gas applications in the auto industry, and create new power plants to raise domestic oil and gas output.

Some analysts say clarity about who will be leading the country for four more years and historical trends that often show stronger economic growth during a president’s second term, could lead to an improved economy and accelerated hiring.

In an article titled “Obama Win Effect: Cash-Rich Companies Will Lead Economic Boom,” author Bachar Samawi argues that stage is set for an upcoming U.S. economic boom driven by companies including Berkshire Hathaway, Apple, Microsoft, Cisco and Google.

Samawi, who has 25-years international experience in energy, finance, trading and investment management, points to several emerging incentives for companies to hire and invest. Among those factors:  Conditions conducive to companies finally deploying cash to invest in hiring and infrastructure; a push toward innovation; and consumers ability to more readily access credit.

“The recent win by Obama for a second presidential term will likely result in a further boost to the average GDP growth rate during the next 4 years,” Samawi in the article published on Seeking Alpha, a Web site focused on stock and investing news.

Whether that actually occurs, depends on a range of unknowns, including, most immediately, if the U.S. will tumble over the fiscal cliff or if lawmakers find a more accommodating path to ease the descent. For his part, Obama made it clear during his election night victory speech that he is tying his legacy to his plans for economic growth over the next four years.

“Tonight you voted for action, not politics as usual,” he told the crowd. “You elected us to focus on your jobs, not ours.”

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