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Economic Picture Is Getting Ugly

The labor market is far from tight at this point, in fact, it's in shambles. This is the worst time to try and force companies to pay up. The loopholes in the law will just force them to shift workers to part-time status, lay employees off, or just not hire. That's no way to get a weak economy growing again. But we are stuck with this.

In October, Darden Restaurants (DRI) announced that it is no longer offering full-time hours to many hourly employees. In order to avoid providing "affordable" health insurance to employees, required for those working at least 30 hours per week, Darden will be scheduling employees for 28 hours per week.

We are seeing similar moves from Applebees franchisees, and others. Papa John's (PZZA) announced the possibilities of both price increases and cutbacks in hours in order to cover the costs of the new law.

Uncle Sam can force employers to abide by the new law, but it can't force them to hire or prevent them from cutting hours or laying off workers. While the law was seen as a huge victory by many -- no administration had ever gotten such broad-based health care legislation passed -- I'm afraid that we are already starting to see the law of unintended consequences.

Some believe the layoffs and cutbacks announced post-election are simply either sour grapes for the election results or were going to happen anyway. We'll see. Perhaps, before we get too far down the road to full implementation, the administration and Congress can get together and agree to some changes to this law, changes that won't force businesses and consumers into a corner?

I hope so but am not holding my breath.

At the time of publication the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Jonathan Heller, CFA, is president of KEJ Financial Advisors, his fee-only financial planning company. Jon spent 17 years at Bloomberg Financial Markets in various roles, from 1989 until 2005. He ran Bloomberg's Equity Fundamental Research Department from 1994 until 1998, when he assumed responsibility for Bloomberg's Equity Data Research Department. In 2001, he joined Bloomberg's Publishing group as senior markets editor and writer for Bloomberg Personal Finance Magazine, and an associate editor and contributor for Bloomberg Markets Magazine. In 2005, he joined SEI Investments as director of investment communications within SEI's Investment Management Unit.

Jon is also the founder of the Cheap Stocks Web site, a site dedicated to deep-value investing. He has an undergraduate degree from Grove City College and an MBA from Rider University, where he has also served on the adjunct faculty; he is also a CFA charter holder.

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