The new reality for job seekers, is that most businesses just aren’t hiring right now. Instead, more and more companies are turning to temporary staffing or overseas operations, for the flexibility and cost savings they offer. This doesn’t bode well for unemployed workers in the U.S. For more on this, continue reading the following article from Money Morning.
The U.S. job market has improved since the unemployment rate’s 10.1% high in 2009, but the sluggish pace of economic recovery has kept many workers jobless and discouraged.
The U.S. Department of Labor reported earlier this month that the country’s unemployment rate in April rose to 9.0% from 8.8%. Employment in more than a dozen sectors hit four-year lows in April, and another 10 have gained little since hitting lows in the beginning of this year.
But it’s not just a slow economic recovery that is leaving people unemployed. The U.S. job market is changing, as companies find ways to function with fewer workers and some shift operations overseas.
More than 13 million people are searching for work, and even though U.S. companies have collected about $940 billion since the credit crisis, many aren’t hiring.
Most prefer to spend in other ways, creating a wide gap between capital spending and employment. Corporate investment will climb 11% this year while employment only rises 1.7%, according to a Bank of America Merrill Lynch report.
The report states inventory rebuilding, low borrowing costs, and tax breaks for equipment buying are encouraging companies to spend, not hire.
Claim up to $26,000 per W2 Employee
- Billions of dollars in funding available
- Funds are available to U.S. Businesses NOW
- This is not a loan. These tax credits do not need to be repaid
And some that are adding workers have turned to temporary staffing for flexibility in employment.
"This is the new face of labor," Neil Alexander, from the labor law firm Littler Mendelson, told MarketWatch. "We have large clients that have laid off hundreds, thousands of employees. They are now using a large chunk of temp workers, managing their labor needs in real time. It’s cost containment."
Another factor to high unemployment is that the U.S. job market is changing its structure and needs. Even as U.S. manufacturing has started to pick up in recent months, jobs in that sector have not followed suit because companies are using newer technology that allows them to get done the same amount of work or more without hiring as many people.
Manufacturers of nondurable goods lost about 600,000 jobs during the recession and have only brought back about 20,000 of those positions since January of this year.
"Those jobs are not likely to come back," Mark Vitner, senior economist with Wells Fargo Securities, told CNNMoney. "Those plants are so automated, you have to increase output an awful lot to create very many jobs."
Many companies are also hunting for new employees overseas, shifting their workforce away from the United States to be more globally balanced.
Software maker Oracle Corp. (Nasdaq: ORCL) and Cisco Systems Inc. (Nasdaq: CSCO) both added about twice as many workers overseas over the past five years as they have in the United States. General Electric Co. (NYSE: GE) now has about 54% of its workforce abroad.
A big reason for the shift is growing demand for products and services in emerging markets.
"It’s time to own up to the fact that the United States is no longer the world’s growth engine," said Money Morning Contributing Editor Shah Gilani. "Developing countries and economies have now assumed that mantle. There’s still demand for U.S. goods and services overseas, but it’s a lot more efficient to manufacture in those markets where you are selling products."
Now some analysts wonder if the United States has lost its appeal as a place for multinationals to invest in employment.
"It’s definitely something to worry about," economist Matthew Slaughter told The Wall Street Journal.
This article was republished with permission from Money Morning.