Plans to create jobs and restore American competitiveness will be the centerpiece of President Obama's State of the Union speech Tuesday night. And understandably so, given the elevated level of unemployment and gloomy national mood.
But while the angst over jobs has led to soaring political rhetoric, investors would do well to take a more sober look at the issue. Despite dire proclamations from both sides, a healthy economic turnaround may already be underway in the U.S.
Critics on the right have accused the Obama administration of creating an environment hostile to business and harmful to job growth. Those on the left have bemoaned the economic stimulus measures and Fed policies as inadequate for restarting robust growth and job creation.
The reality, though, is that the jobs picture has been quietly brightening behind the rhetoric, thanks to a strong economic recovery. Indeed, America may already be more competitive than the political posturing lets on.
Better Fundamentals Are Driving Business Decisions
The latest indication that hiring may be about to further accelerate came from a National Association for Business Economics survey of 84 of its member businesses. The percentage of businesses planning to expand payrolls in the next six months outpaced those planning to shed jobs by 35 points, the highest pace since the question was first asked a decade ago.
Much has been made of President Obama's supposedly pro-business turn lately. And some House Republicans were quick to try taking credit for the healthier outlook by saying they helped usher in more business certainty, according to reports.
But, according to the NABE release, the "majority of respondents anticipate no increase or decrease in investment spending or employment in response to new tax policies, suggesting business decisions are being driven by the fundamentals of the improving economy."
Businesses do have plenty to be optimistic about. Profits and share prices have delivered a prolonged surge, defying once-pervasive predictions that the U.S. had entered a dark new economic era. Employment, too, has fared far better than the dire rhetoric would convey.
Job openings soared to 4.7 million at the end of the year according to some Internet sites. Despite the hand-wringing, job growth is already outpacing that posted at the end of the prior two recessions. And upward revisions to monthly government figures may indicate that job growth has been even more robust because government employment measures tend to underestimate during upturns.
Needed: A Surgical Approach to Job Growth
But if anything is more predictable than job growth following an economic recovery, it may be the overreaching pessimism that precedes it.
"Remember the jobless recovery of the Bush years? A few years later, it turned out that job growth was pretty good, at least compared with initial estimates," wrote the often bearish money manager John Mauldin in a research report this month. "But did anybody care three years later?"
Some problems like long-term unemployment continue to be deeply troubling. But rather than a wholesale American renewal, what's needed is a surgical approach instead. For example, training and investments in education can help the U.S. labor force get into the hefty number of positions that are already open.
Plenty of media attention will no doubt be lavished on President Obama's words about his economic and jobs outlook. And both parties will try to take credit for any turnaround that does materialize. But despite the posturing in Washington, there's less to it than meets the eye. Job growth is simply following in the wake of a prolonged economic expansion -- as it has in the past.