On its website the law firm Littler Mendelson proclaims, “With over 55 offices in major metropolitan areas nationwide, more than 950 Littler attorneys provide the firm’s clients with representation and daily advice concerning dozens of different areas of labor and employment law.” Its bread and butter is helping clients cope with government rules, so we can be sure it is not ideologically hostile to new regulations. Which makes its survey of how small businesses are preparing for ObamaCare all the more credible and revealing.
Small Business Speaks
The firm commissioned a Gallup poll of 603 small business owners (revenue under $20 million) to discover how they viewed ObamaCare and were planning for the new law. Bottom line: the firms are scared stiff and have already cut back on hiring and business expansion. A Littler Mendelson partner claimed to be “startled” by the results, but I am not at all surprised. For the past few years I have been going on about how ObamaCare and other new regulations would discourage hiring. For example, last July I showed why the law “makes it far more costly and complex for all small businesses to hire workers. Figuring out healthcare rules has become as daunting as calculating your taxes, maybe more so.” (See “The Other Keynesian Paradigm,” July 9, 2012.)
ObamaCare not only raises the cost of labor but increases the legal risks of hiring. Make one mistake in interpreting the thousands of pages of legalese and your friendly IRS agent could hit you with a huge fine. The recent IRS scandal, showing the agency to be corrupt and incompetent, increases the perceived risk of hiring. Here are key findings of the Littler Mendelson survey, as reported by CNBC:
- 19% of businesses answered “yes” when asked if they had “reduced the number of employees you have in your business as a specific result” of ObamaCare.
- 41% have frozen hiring because of ObamaCare.
- 38% said they “have pulled back on their plans to grow their business” because of the law.
- 48% think the law will hurt their profitability; just 9% think it will be good for their business.
- 55% believe ObamaCare will raise healthcare costs; just 5% said it will cut costs.
- 52% expected the law to reduce the quality of health care; 13% think it will improve quality.
Weak Hiring to Make for a Tepid Taper
With ObamaCare deadlines fast approaching, media attention will increase, and its negative impact on hiring will likely get worse. But as the Littler survey shows, it is already having a big impact, which is reflected in hiring data. Taking a cue from Larry Kudlow, here is the 3-month moving average of payroll employment growth over the past half year, starting with the three months ending December 2012:
- Dec. 209,000
- Jan. 205,000
- Feb. 233,000
- Mar. 207,000
- Apr. 208,000
- May 155,000
Do you see any momentum there? Neither do I. Even though the Fed’s moves hinge on employment trends, Wall Street economists are, with a few honorable exceptions, pretty much ignoring Obamacare’s impact on hiring. But the Littler survey indicates small business hiring will remain weak. Meanwhile, large corporations with global exposure will be unnerved by China’s credit crunch, financial volatility and political unrest in other emerging markets, ongoing recession/stagnation in Europe, and the plunging Japanese Yen. All of which suggests we will get a very tepid taper, along with continued high readings of O-Poverty and O-Ineqauality.
Copyright 2013 Thomas Doerflinger. All Rights Reserved.
