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June 07, 2011



"Political risk makes a lot of puzzle pieces fit together."

This is a good hypothesis, and I think it's certain that it forms some part of the answer. However, I don't see any good reason to assign it a large percentage. Some reasons, in approximately descending order: 1)The elevation in unemployment is largely structural. Hiring manager surveys have shown that companies want to hire but can't find qualified candidates. It doesn't surprise me, considering the skills of the hardest-hit industries don't apply well to growth industries. Looser immigration restrictions would help even unemployed Americans, as more jobs would be created, and though the 'primary' positions might be filled by imported labor, secondary support jobs would open up for the not-quite-qualified. Of course, in *very* strong hiring environments, companies make do with the not-quite-qualified, but the point here is that actual hiring seems likely to understate the degree to which companies would prefer to expand, when the mismatch is extra problematic 2)Financial crisis blah blah blah no need to belabor that point 3)Even leaving the overall financial crisis cycle argument, credit spreads remain such that credit is tight at the same time as it's cheap, showing that traditional lenders continue to be leverage-averse. VCs, meanwhile, have become much more active, implying that there is appetite for investment despite uncertainties. 4)The slack in the housing and commercial real estate markets still hasn't been worked off, meaning there remains a deep sink trapping capital and labor(mobility).

Regarding surveys, they do exist:

Their design may not be everything we might wish for in terms of answering questions about the political economy, but they do at least stay consistent and show variation over time on given topics. I suspect relatively good polls exist on or near management's perception of regulatory threat and wish they were easier to google*. However, I feel like these kinds of polls would have come to my attention (and probably have become political footballs) if they had shown really marked shifts.

*I definitely know polls exist on rankings of threats to business, because I've seen them many times over the years. The problem is finding directly-comparable polls, whatever their methodology.


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