Business

Are politics hampering job growth? Friday may tell

One month does not make a make a trend. But the American job market clearly has been cooling for at least four months. In the week ahead, investors will learn if the slowdown in hiring continued in June.

Last month, American companies created just 38,000 new jobs. It was the weakest month of job growth in five-and-a-half years.

It was a sharp drop in new jobs, but not the first significant slowdown since the end of Great Recession. Investors and job seekers have experienced this kind of softness before. In the spring of 2012, companies dialed back hiring and remained cautious until December. There were worries about health care costs, a strong U.S. dollar pinching exports, European debt and a fractured Congress.

Oh yeah, 2012 also happened to be a big election year.

Sound familiar?

Most business executives, like long-term investors, will say politics doesn’t enter into their strategic and operational calculations. However, it can’t help but influence them. The drumbeat of rhetoric on trade, wages, taxes, regulations and health care knocks the confidence out of decision-makers. Is the opportunity of adding jobs now worth the risk of the economic policies to come with a new president and Congress?

The Federal Reserve faces a version of that question as it wrestles with the question of whether to raise short-term interest rates late this month. Is the risk of slowing job growth now offset the opportunity to slowly return interest rates to something resembling normal?

Job creating, like investing, isn’t without risk. On Friday, we will see if companies are willing to accept the risks or just wait.

Financial journalist Tom Hudson hosts “The Sunshine Economy” on WLRN-FM in Miami. Follow him on Twitter @hudsonsview.

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