Canadian employers added virtually no net new jobs over the final five months of 2011. The unemployment rate was 7.5 per cent in December, up from 7.3 per cent in August – and dramatically higher than the 5.9-per-cent rate recorded at the start of 2008. Over all, Canada’s economy added almost 200,000 jobs in 2011, but almost all of the hiring occurred in the first half of the year, Statistics Canada reported Friday.
There is more momentum behind hiring in the U.S., but the country is climbing out of a much deeper hole. American employers created 200,000 non-farm jobs in December, and the unemployment rate dropped to 8.5 per cent, the lowest in almost three years. For all of 2011, the U.S. economy added 1.64 million workers, the best year since 1996. Yet last year’s gain barely put a dent in the almost 9 million jobs that were lost during the recession.
Speaking in Iselin, N.J., New York Federal Reserve president William Dudley called unemployment “unacceptably high,” suggesting the Fed remains concerned about the economy and could try further stimulus. It is “appropriate to continue to evaluate whether we could provide additional accommodation in a manner that produces more benefits than costs,” Mr. Dudley said.
Despite record profits and growing sales, Mr. Oberhelman and his peers are bracing for rough weather. The European debt crisis remains a dark cloud over the global economy, and the political paralysis that gripped Washington last year appears likely to continue as Democrats and Republicans jockey for position for November elections. China’s authorities are tapping the brakes on that country’s red-hot economy to keep a lid on inflation.
There’s growth, but not a lot of it, so maintaining those sales will be a challenge, which is the biggest reason corporations are so reluctant to spend their money in payroll and new facilities, according to Steven Ricchiuto, chief economist at Mizuho Securities in New York. U.S. corporations held $1.24-trillion (U.S.) in cash at the end of 2010, according to Moody’s Investors Service.
Executives also are bracing for more competition. The big North American, European and Japanese multinational corporations that traditionally dominate global trade are facing new challengers from countries such as China and Brazil. Mr. Oberhelman is on record saying he expects a Chinese entrant in the heavyweight class of big-machinery makers within a few years, which would put pressure on profits at Caterpillar and its current rivals, AB Volvo of Sweden and Komatsu Ltd. of Japan.
All of these factors have companies looking closely at their collective agreements for savings, over and above the gains some may have made when bargaining in the midst of the financial crisis three years ago.
It’s not all doom and gloom. In some cases, manufacturing jobs are actually returning to the United States, although with some caveats. A decade ago, a company such as Caterpillar might not even bother to negotiate with its workers: It would simply pack up and go to China. But the “offshoring” trend is reversing, giving way to the relatively recent phenomenon in the U.S. of “re-shoring.”
The decline in the value of the dollar is making goods priced in greenbacks cheaper in international markets. At the same time, the gap in production costs between the U.S. and Asia is narrowing. Chinese wages are rising at a pace of about 15 per cent a year, while U.S. wages are growing at an annual rate of about 2 per cent, which is less than inflation. Increased competitiveness at home is coaxing executives to open plants in the U.S. to meet domestic demand, leaving their Asian factories to meet growth in China.
“China has caused countries to get productive fast, or die,” said Hal Sirkin, a Chicago-based senior partner at The Boston Consulting Group who is tracking the rebound in U.S. manufacturing. “It’s just the beginning. This is a fundamental rebalancing of the economy.”
At the same time, the high Canadian dollar has made what used to be a cost advantage for some Canadian workers versus their U.S. counterparts into a liability, with wages in Canadian manufacturing now outstripping those in the U.S.