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Is Your Business Suffering from ‘Pre-Election Stagnation?’

Is Your Business Suffering from ‘Pre-Election Stagnation?’

By Bridget McCrea

If you’ve put new business strategies and growth plans on hold until after the presidential election, your company may suffer the consequences.

If your company is suffering from pre-election stagnation, you’re not alone. The highly publicized, tumultuous lead up to the 2016 presidential election has companies across industries a bit jittery about what’s to come and how the U.S. economy will react to the changing of the guard. According to the National Association for Business Economics, 11 percent of its members have postponed hiring or investment decisions until after November. And, more than half of NABE’s members rated this year’s election a negative for the economy (the rest were unsure or neutral).  

“For now, many companies are simply sitting tight,” writes Washington Post’s Ylan Q. Mui in Businesses are getting worried the election will hurt the economy. Business investment in factories, equipment, and technology has fallen for three consecutive quarters, the longest streak of declines since 1979. Many analysts do not expect it to pick up until after the dust settles in November. And, in a National Federation of Independent Business (NFIB) survey of small businesses, the political climate ranked second to the economy as a reason to delay spending.

“Uncertainty is high, expectations for better business conditions are low, and future business investments look weak,” said Bill Dunkelberg, NFIB’s chief economist, in the Washington Post article. “Our data indicates that there is little hope for a surge in the small business sector anytime soon.”

Key Employment Trends
The upcoming election is also impacting hiring and wage decisions, according to the most recent Paychex Small Business Snapshot. The survey found that the election is a key factor impacting decisions to add staff and increase wages among companies with 100-500 employees. Nearly three-quarters of those employers said the election is impacting their decision to add staff (74%) and increase wages (71%). Of companies with 20-99 employees, less than half said the election is affecting their decisions to add staff (42%) and increase wages (48%).  

“Any election year brings with it a sense of uncertainty and many business owners could be hesitant to make decisions affecting the long-term during such an ambiguous time,” said Martin Mucci, Paychex president and CEO, in the company press release.

“With that in mind, there’s been speculation that the election may be keeping businesses from deciding to add staff or increase wages,” Mucci continues. “As our research indicates, while the presidential election is an important consideration for larger businesses when it comes to these decisions, the overwhelming majority of smaller businesses do not see it as a factor in their decision to hire or raise wages.”

Two More Years of Growth Ahead
The good news is that the U.S. economy is expected to stay on its current growth trend for at least two more years. The not-so-good news is that pre-election stagnation is definitely having an impact on business strategy and future planning.

A recent Bank of America Small Business Owner Report, for example, found that just 29 percent of small business owners surveyed feel confident that the national economy will improve during the next year.

In addition, a high percentage of companies say the presidential election will affect their business. And, when asked about the 2016 elections, 67 percent reported the presidential elections would affect their business “a lot” or “somewhat,” while 53 said the same about elections for Congress.

When asked to what extent the election process is affecting their expectations for U.S. economic growth, for example, 51% of respondents to NABE’s survey answered with “modestly negative” and another 4.4% said, “significantly negative.” Just 4.4% of companies saw the election process as being “modestly positive” for U.S. economic growth (and 0% saw it as significantly positive).

According to Kevin Swift, NABE Outlook survey chair and chief economist for the American Chemistry Council, a majority (56%) of survey participants perceive a Clinton presidency as neutral for their economic growth forecast and 60% view a Trump presidency as unfavorable for their growth forecast.

From Neutral to Negative
Rewind to early-2016 and Swift says growth in business spending was neutral at the time. “Now it’s decidedly negative,” he points out. “Going into 2017, the expectations of a rebound in spending have been tempered somewhat. This is one area where the election may be having an impact—on business investment.”

To distributors that are delaying key business decisions until after the presidential election, Swift points out that economists don’t see a recession in the cards for the U.S. on the near horizon. And while the current recovery period hasn’t been as strong or as rapid as some would have liked, the overall impact of developments like Brexit have been milder than anticipated, at least for the most part.

“There seems to be a recurring theme every three or four months,” Swift says. “Something happens, we get a negative report, and/or people start to get worried about the economic impact of those issues. But collectively, the economists we talk to aren’t seeing any overall negative [impact].”

Staying the Course
Acknowledging the fact that companies can get antsy when a changing of the guard is just around the corner, Dan Schawbel, managing partner of Millennial Branding, a Gen Y research and consulting firm, says staying the course is probably one of the best strategies that firms can be using right now.

“Most citizens recognize that presidential candidates and other elected officials tailor their views to correspond with the current tides of economic activity,” Schawbel writes in How Your Company Can Win the 2016 Election Season.“However, more than a few economists have discovered that prices stagnate due to a general unwillingness to make big business decisions while election outcomes remain uncertain.”

Ultimately, perhaps the best move any company can make during the volatility of an election year is to stay put, Schawbel advises. “Though it seems that elections become longer and longer, the effect of democracy on the market is relatively short-lived.”

McCrea is a Florida-based writer who covers business, industrial, and educational topics for a variety of magazines and journals. You can reach her at bridgetmc@earthlink.net or visit her website at www.expertghostwriter.net.

 

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