Where Did The Jobs Go?
Price Rises Continue
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A widespread assumption exists throughout American households today. It is that the American worker is constantly losing jobs as they are outsourced by U.S. based multinational companies to foreign countries with cheaper labor and expenses.
The general consensus is that these jobs are lost forever and that jobs lost during tough economic times will not be filled by American workers when economic growth returns. Rather, those jobs will be added overseas as multinational corporations look to stay lean and agile in order to react swifter if and when another slowdown occurs.
Now don’t get me wrong, for quite a while I was a proponent of camp “stop shipping our jobs overseas.” However, if review clear statistical evidence that supports otherwise, I will certainly keep an open mind.
Industry Comparison: U.S. vs. Foreign Employees
Change (in thousands) From 1999-2008 | U.S. employees of U.S. mulitnationals | Foreign Employees of U.S. mulitnationals |
All Industries | -1,903.4 | 2,358.0 |
Mining | 85.4 | 68.8 |
Utilities | -170.6 | -41.1 |
Manufacturing | -1938.3 | 242.8 |
Wholesale Trade | 140.4 | 126.9 |
Information | -100.7 | 65.5 |
Finance & Insurance | -330.5 | -13.4 |
Professional, scientific and tech services | 176.8 | 283.4 |
Other Industries | 234.2 | 1,625.3 |
Source: Bureau of Economic Analysis
Looking at manufacturing, which is the sector widely regarded as having an exodus of jobs sent overseas, presses the question even further. We can easily see that is where all the jobs have been lost. However, just 242,000 manufacturing jobs were added overseas.
Again, where did all the jobs go?
I’m sure at this point you are wondering the same thing I was; what about all those jobs in “other industries?” The below chart explains:
Breakout of Other Industries Foreign Employment
Foreign Employment in Other Industries (in thousands) | 2008 | Change from 1999 |
Agriculture | 58.6 | -2.7 |
Construction | 52.7 | 14.7 |
Retail Trade | 1,063.2 | 649.5 |
Transportation & Warehousing | 220.3 | 103.3 |
Real Estate & Rental | 75.5 | 24.3 |
Management (non bank companies) | 37.9 | 22.4 |
Admin, support & waste management | 873.2 | 438.8 |
Healthcare & social assistance | 15.8 | 8.4 |
Accommodation & food service | 693.0 | 328.1 |
Misc services | 131.3 | 38.5 |
Total Other Industries jobs | 3,221.5 | 1,625.3 |
As you can see, the manufacturing jobs are certainly not hiding here. In fact, the majority of growth was seen in the retail sector, which is supposed to be America’s biggest employment strength being that we are a SERVICE economy. However, America did add 232,000 jobs in “other industries,” so we didn’t lose the jobs to foreign land there either.
There are dozens of hypotheses on where the jobs have gone. The most glaring one to me is strong growth in productivity, more being done with less people. Assembly lines have fewer humans on them than they did 10 years ago. Technology had made us so much more productive. The data below shows that manufacturing productivity grew every year in the 2000s until the last recession, and then rebounded strongly in 2010.
Major Sector Productivity and Costs Index
Year | Qtr1 | Qtr2 | Qtr3 | Qtr4 | Annual |
2001 | -0.3 | 3.3 | 1.5 | 8.5 | 1.9 |
2002 | 9.8 | 8.9 | 7.2 | 4.4 | 7.3 |
2003 | 9.1 | 4.7 | 7.8 | -1.5 | 6.3 |
2004 | -0.6 | 3.2 | 3.1 | 7.7 | 2.3 |
2005 | 7.5 | 4.3 | 0.6 | -0.2 | 4.7 |
2006 | -0.7 | -0.4 | 3.6 | 4.7 | 0.8 |
2007 | 5.5 | 3.9 | 3.2 | 5.7 | 4.2 |
2008 | 1.2 | -6.5 | -5.5 | -6.8 | -0.4 |
2009 | -2.9 | 5.3 | 12.4 | 6.9 | -0.4 |
2010 | 4.7 | 5.2 | 2.1 | 5.1 | 5.9 |
2011 | 6.3 |
Let’s not forget the increased workload adding to productivity either. Salaried employees are working far more hours now than they did years ago. The 9 to 5 job is a thing of the past. Blackberries and VPN (Virtual Private Network) connections give employees access 24/7.
The good news is that as the economy continues its recent growth trend hiring will continue to pickup (244,000 jobs were added in April). However, due to automation and productivity gains, a large majority of the jobs listed in the above charts are just not going to come back.
Price Rises Continue
In what has become a recurring topic in the Mainstreet Investment Insight letter, let us look at some additional information with regard to the continued rise in prices. The cost increases that I mentioned (in previous issues) would soon be passed to consumers is coming to fruition. Corporations cannot hold off any longer and have pushed aside fears of losing consumers in our rebounding economy.
We have already seen multiple increases from the large staple companies, such as Kimberly-Clark, from the retailers that sell those products, like Wal-Mart. Next up: the fast food restaurants!
The continued rise in commodity costs, such as beef, has now forced their hand as well. McDonald’s and Wendy’s have both announced price increases to their menus.
The following quote is from Wendy’s first quarter earnings report on May 10:
“Margins will be negatively impacted by increases in commodity costs primarily driven by unprecedented beef prices that are affecting the restaurant industry. We have reaffirmed our same-store sales outlook and expect to offset some of these commodity increases with prudent price increases, while protecting transactions and market share," said CEO Roland Smith.
Yet, the Federal Reserve still wants to preach that loose monetary policy is not an inflation catalyst and is not impacting the purchasing power of the American consumer.
Your STILL wishing the Fed would stop the printing press analyst,
Mitch Jaworski