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Will Republicans Capitalize on Employee Optimism?

Will Republicans Capitalize on Employee Optimism?

by Dennis Jacobe

The unemployment rate soars to 6%. The Dow is unable to extend its 8-week winning streak for another week. The president overhauls his key economic policy team. None of this suggests that an acceptable economic recovery is underway in the United States.

On the other hand, the challenges facing the administration's new economic team are in some ways unlike those of many past recessions. For example, current employee confidence levels do not reflect recession, but instead provide a solid base from which new economic policies should be able to stimulate the U.S. economy.

Employee Confidence Increases

Employee confidence increased in November, according to the Employee Outlook Index -- a joint effort of UBS and The Â鶹´«Ã½AV Organization*. The Index surged 10 points from 61 in October to its current level of 71. This puts employee confidence back within one point of its April baseline of 72 -- its high point for the year. All three dimensions of the Employee Outlook Index increased in November. (See "Employee Confidence Surges Upward" in Related Items.)

Current Company Financial Conditions

Three in four employees of private sector, for-profit companies (75%) rate their company's financial situation today as good (41%) or excellent (34%), up from 73% in October. However, employees are less confident in their companies' financial situations than they were in April when 79% provided a good or excellent rating, or May when 77% of offered such ratings.

Direction of Employers' Financial Conditions

More than two-thirds of employees say that their company's financial situation as a whole is getting better (68%) as opposed to 20% who say it is getting worse. This is up slightly from October, when 66% of employees said their company's financial situation was getting better. Still, the numbers are not as strong as they were earlier this year -- April to June -- when three in four employees said that their company's financial situation was getting better.

Key Points

The White House's overhaul of its economic team suggests that this Bush administration has learned from history. The Republican successes during the midterm elections are a result of national security issues -- the war on terrorism and homeland defense. But as the former President Bush learned in 1992, defense issues are not likely to trump the economy in the eyes of most American voters in the next presidential election. If the Republicans want to continue their tenure in the White House in 2004, it is politically imperative that the current administration and the Republican-led Congress get a strong economic recovery going as soon as possible next year.

The current comparatively high level of employee optimism gives the president's new economic team much to build on as they consider stimulative policies early next year. But employee optimism will not remain high if the new policy-makers take too long to act. With the Republicans in control of both the White House and Congress, there is little doubt who voters will blame if strong fiscal actions are not taken.

*Results are based on telephone interviews with 599 adults who are employed with non-governmental, for-profit companies having five or more employees, aged 18 and older, conducted Nov. 11-14, 2002, Nov. 22, 2002, and Nov. 25-26, 2002. For results based on the total sample, one can say with 95% confidence that the maximum margin of sampling error is ±4%.


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