Where are the Jobs? Overseas.
Many American companies are hiring - just maybe not in your town. They're hiring overseas, where sales are surging and the pipeline of orders is fat. More than half of the 15,000 people that Caterpillar has hired this year were outside the US. UPS is also hiring at a faster clip overseas. For both companies, sales in international markets are growing at least twice as fast as domestically.
The jobs are going elsewhere. The Economic Policy Institute, a Washington think tank, says companies have created 1.4 million jobs overseas this year, compared with less than 1 million in the U.S. The additional 1.4 million jobs would have lowered the U.S. unemployment rate to 8.9%.
American jobs have been moving overseas for more than two decades. In recent years, though, those jobs have become more sophisticated - think semiconductors and software, not toys and clothes. And now many of the products being made overseas aren't coming back to the United States. Demand has grown dramatically this year in emerging markets like India, China and Brazil.
Meanwhile, consumer demand in the US has been subdued. Despite a strong holiday shopping season, Americans are still spending 3% less than before the recession on essential items like clothing and more than 10% less on jewelry, furniture, electronics, and big appliances, according to MasterCard's SpendingPulse.
With the future looking brighter overseas, companies are building there, too. Caterpillar has invested in three new plants in China in just the last two months to design and manufacture equipment. The decision is based on demand: Asia-Pacific sales soared 38% in the first nine months of the year, compared with 16% in the US Caterpillar stock is up 65% this year.
"There is a shift in economic power that's going on and will continue. China just became the world's second-largest economy," says David Wyss, chief economist at Standard & Poor's, who notes that half of the revenue for companies in the S&P 500 in the last couple of years has come from outside the U.S.
Known as one of the most innovative American companies of the 20th century, DuPont now sells less than a third of its products in the U.S. In the first nine months of this year, sales to the Asia-Pacific region grew 50%, triple the U.S. rate. Its stock is up 47% this year.
DuPont's work force reflects the shift in its growth: In a presentation on emerging markets, the company said its number of employees in the US shrank 9% between January 2005 and October 2009. In the same period, its work force grew 54% in the Asia-Pacific countries. While most of DuPont's research labs are still stateside. The company opened a large research facility in Hyderabad, India, in 2008. A key factor behind this is the rise of the middle class in these emerging countries. By 2015, for the first time, the number of consumers in Asia's middle class will equal those in Europe and North America combined.
"All of the growth over the next 10 years is happening in Asia," says Homi Kharas, a senior fellow at the Brookings Institute.
Coca-Cola CEO Muhtar Kent often points out that a billion consumers will enter the middle class during the coming decade, mostly in Africa, China and India. He is aggressively targeting those markets. Of Coke's (KO) 93,000 global employees, less than 13% were in the U.S. in 2009, down from 19% five years ago. The company would not say how many US hires it has made in 2010. But its latest investments are overseas, including $240 million for three bottling plants in Inner Mongolia as part of a three-year, $2 billion investment in China. The three plants will create 2,000 jobs in the area. In September, Coca-Cola pledged $1 billion to the Philippines over five years.
The strategy isn't restricted to just the largest American companies. Entrepreneurs, whether in technology, retail or in manufacturing, today hire globally from the start. Consider Vast.com, which powers the search engines of sites like Yahoo Travel and Aol Autos. The company was founded in 2005 with employees based in San Francisco and Serbia.
Harvard Business School Dean Nitin Nohria worries that the trend could be dangerous. In an article in the November issue of the Harvard Business Review, he says that if U.S. businesses keep prospering while Americans are struggling, business leaders will lose legitimacy in society. He exhorted business leaders to find a way to link growth with job creation at home.
Source: USA Today, Pallavi Gogoi, 12/28/10