Geopolitical Uncertainty and Corporate Hiring: What History Tells Us

Geopolitical uncertainty is not new to the American workforce. From the Gulf War to the 2008 financial crisis, from trade tensions to military interventions, history provides a rich dataset on how global events affect domestic employment decisions. This analysis examines that historical record to help readers understand what patterns have emerged and what economic research tells us about the relationship between uncertainty and hiring.

Understanding Economic Policy Uncertainty

Economists have developed rigorous tools to measure uncertainty. The Economic Policy Uncertainty Index, developed by researchers at Stanford and the University of Chicago and published by the Federal Reserve Bank of St. Louis, tracks uncertainty through newspaper coverage, tax code expirations, and disagreement among economic forecasters. This index provides an objective, measurable baseline for understanding how uncertainty fluctuates over time.

Key historical benchmarks from the index include:

Event Period	Uncertainty Index Peak	Duration Above Baseline
Gulf War (1990-1991)	~150	8 months
September 11, 2001	~180	12 months
Iraq War Start (2003)	~140	6 months
2008 Financial Crisis	~220	18+ months
COVID-19 Pandemic (2020)	~500	6 months at peak
April 2025 (Trade Policy)	~280	Ongoing

Source: Economic Policy Uncertainty Index, Federal Reserve Bank of St. Louis (FRED), Baker, Bloom, and Davis (2016). Note: Index baseline is 100; values above indicate elevated uncertainty.

What Academic Research Shows About Uncertainty and Hiring

A substantial body of peer-reviewed research has examined the relationship between economic uncertainty and corporate hiring decisions. The findings are consistent across multiple studies:

Research published in the American Economic Review by Nicholas Bloom (Stanford University) found that uncertainty shocks lead firms to adopt a "wait-and-see" approach to major decisions, including hiring. The study found that following uncertainty spikes, firms typically delay hiring for 3-6 months before resuming normal activity.

A 2019 study by the Federal Reserve Bank of Kansas City examined firm-level hiring data and found that a one-standard-deviation increase in policy uncertainty corresponds to approximately a 1% reduction in employment growth over the following quarter. This effect was more pronounced in industries with higher exposure to policy changes.

The International Monetary Fund's research on economic uncertainty found that elevated uncertainty can reduce global GDP growth by 0.5-1.0 percentage points in severe cases, with employment effects following similar patterns.

Historical Case Studies: Employment During Geopolitical Events

Gulf War (1990-1991)

The U.S. military operation in Kuwait and Iraq coincided with a recession that began in July 1990. Bureau of Labor Statistics data shows:

• • Unemployment rose from 5.4% (July 1990) to 7.8% (June 1992)
• • Nonfarm payrolls declined by 1.6 million jobs during the recession
• • Defense-related industries saw countercyclical hiring increases

However, economists note that separating the effects of the military operation from the broader recession (which had begun before the conflict) is methodologically challenging. The recession had multiple contributing factors, including an oil price shock, the savings and loan crisis, and Federal Reserve monetary policy.

Iraq War (2003-2011)

The Iraq War began during the recovery from the 2001 recession. Employment data from this period shows:

• • Unemployment was 5.8% in March 2003; it declined to 4.4% by March 2007
• • Defense contractor employment increased by approximately 200,000 jobs (2003-2006)
• • Manufacturing employment continued its long-term decline despite increased defense spending

The Iraq War period demonstrates that military operations do not necessarily correlate with negative employment outcomes, particularly when they coincide with expansionary fiscal policy and other favorable economic conditions.

Current Labor Market Context

As of late 2025, the U.S. labor market shows the following characteristics based on Bureau of Labor Statistics data:

Metric	November 2025	Year Ago
Unemployment Rate	4.4%	~4.1%
Jobs Added (Monthly)	-9,000	~200,000
Announced Layoffs (Monthly Avg)	~100,000	~63,000

The 2025 labor market has been characterized by elevated layoff announcements (over 1.2 million for the year according to Challenger, Gray & Christmas) alongside periods of hiring in certain sectors. This mixed picture reflects the complex interplay of multiple factors, including technological change (AI adoption), sector-specific dynamics, and policy uncertainty.

How Companies Respond to Uncertainty: Survey Data

Business confidence surveys provide insight into how companies plan to respond to uncertain conditions:

• • HSBC Trade Survey (November 2025): 57% of U.S. firms expressed strong confidence in international trade prospects over the next two years, above the global average of 38%
• • Brookings Institution: Economic policy uncertainty spiked in April 2025 and remains elevated, with pharmaceutical and biotechnology sectors reporting stalled business deals
• • Foreign Direct Investment: Despite uncertainty, major international investments were announced in 2025, including SoftBank ($100B), TSMC ($100B), and UAE ($1.4T over a decade)

This data suggests that while uncertainty affects decision-making at the margin, it does not necessarily halt all economic activity. Companies appear to differentiate between short-term uncertainty (which may delay decisions) and long-term fundamentals (which drive major investments).

Practical Implications for Workers

Based on historical patterns and academic research, workers can reasonably expect the following during periods of elevated geopolitical uncertainty:

• • Hiring Delays: Companies often pause hiring for 3-6 months following major uncertainty events, extending recruitment timelines
• • Sector Variation: Defense, energy, and government contractors may see increased demand, while consumer-facing and trade-dependent industries may be more cautious
• • Temporary Contraction: Initial hiring slowdowns typically last 1-2 quarters before normalizing, absent other economic shocks
• • Regional Effects: Geographic areas with higher concentrations of affected industries will experience more pronounced employment impacts

Limitations of This Analysis

It is important to acknowledge what this analysis cannot determine:

• • Causation vs. Correlation: Historical correlations do not prove that geopolitical events directly caused employment changes; multiple factors always contribute
• • Prediction: Past patterns are informative but not predictive; each situation has unique characteristics
• • Policy Evaluation: This analysis does not assess whether any particular policy is beneficial or harmful; it only examines employment correlations

Conclusion

The historical record shows that geopolitical uncertainty does correlate with short-term hiring caution, typically lasting 3-6 months following major events. However, the magnitude of employment effects varies significantly based on concurrent economic conditions, sector exposure, and the duration of uncertainty.

For workers navigating uncertain times, the data suggests that while some hiring delays are likely, fundamental economic factors (skills, sector health, regional economy) remain the primary determinants of individual employment outcomes. Uncertainty tends to delay rather than eliminate hiring, and economies have historically adapted to new geopolitical realities within 12-18 months of major events.