People often asked where the jobs are with all the money sloshing around by the Fed. The fact is, there are plenty of jobs around, with companies hiring in the thousands. To know what is going on, the following three articles should provide a clue:
- Foxconn Hiring 400000 Additional Workers Over the Next Year
- Citigroup to Increase China Workforce to 12,000 in Three Years
- India Inc to step up hiring in next 3 months
When reading the news article on Foxconn, the company which builds the iPhones and a lot of the laptops for US consumers, the CEO did mention the thought of opening a factory in the US. Nonetheless, the key point to his idea was to build a ‘fully automated’ factory, which translates to – hiring as few people as possible.
It is of no secret to employees of many high tech companies that when their employers laid off people and then announced hirings when time got better, the employees who were laid off were US employees, and many of the newly hired ones were in other parts of the world. A lot of people think this is unfair, but they seem to forget that capitalism tends to re-allocate resources in growing markets, and that profit is a formula of revenue minus cost, where labor cost is a major cost component for most companies in the US.
Since congress re-election is getting closer, we hear more from politicians how they plan to create jobs. Some seem to focus on the idea of tax cuts, hoping that all the money will be spent instead of being saved, just like how it was before the bubble bursted, while a lot seem to think that investment in green tech will lift the job markets up. There are also some who believe that new industries such biotech or social networking will save the day.
While I am not sure how many people green tech industries will get to hire (although I see plenty of competition around the globe, and the US is not really a clear leader on green tech yet), I sincerely doubt biotech or new internet companies can provide a lot of jobs. On biotech, I know very few who work in the industry except for sales and marketing people who are not PhDs, and we also know that Facebook, the company every internet start-up aspires to become, has over 500 million users with only a thousand plus employees. These are hardly the formulas for large scale employment.
With another phase of quantitative easing coming, we can be assured that risky asset prices in emerging markets will continue to be propped up. Sans a trade war, of which the US will not see much benefit from it even if it hurts others more, hiring should remain strong in other markets. We shall see how congress after re-election will do, in order to shift hiring back to US’s favor.
* In the Foxconn news article, we are seeing real shift in resource allocation for companies from coastal cities to inland cities in China. In time, this will help China getting a stronger and more distributed economic base, and investors should take note and seek out Chinese companies with strong foothold and growth in inland Chinese cities.
This article originally appeared at benzinga.com.