Corporate profits are up. Stock prices are up. So why isn't anyone hiring?
Actually, many American companies are — 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 Inc. has hired this year were outside the United States. UPS is hiring at a faster clip overseas. For both firms, sales in international markets are growing at least twice as fast as domestically.
The trend helps explain why unemployment remains high in the United States, edging up to 9.8 percent last month, even though companies are performing well: All but 4 percent of the top 500 U.S. corporations reported profits this year, and the stock market is close to its highest point since the 2008 financial meltdown.
But the jobs are going elsewhere. The Economic Policy Institute, a Washington think tank, says American companies have created 1.4 million jobs overseas this year, compared with less than 1 million in the United States. The additional 1.4 million jobs would have lowered the U.S. unemployment rate to 8.9 percent, said Robert Scott, the institute's senior international economist.
“There's a huge difference between what is good for American companies versus what is good for the American economy,” said Mr. Scott.
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 such as India, China, and Brazil.
Meanwhile, consumer demand in the United States has been subdued. Despite a strong holiday shopping season, Americans are still spending 3 percent less than before the recession on essential items such as clothing and more than 10 percent less on jewelry, furniture, electronics, and big appliances, according to MasterCard's SpendingPulse.
“Companies will go where there are fast-growing markets and big profits,” said Jeffrey Sachs, globalization expert and economist at Columbia University. “What's changed is that companies today are getting top talent in emerging economies, and the U.S. has to really watch out.”
With the future looking brighter overseas, companies are building there too. Caterpillar, maker of the signature yellow bulldozers and tractors, has invested in three new plants in China in just the last two months to design and manufacture equipment. DuPont, which wowed the world in 1938 with nylon stockings and is known as one of the most innovative American companies of the 20th century, sells less than a third of its products in the United States. In the first nine months of this year, sales to the Asia-Pacific region grew 50 percent, triple the U.S. rate. Its stock is up 47 percent this year.
While most of DuPont's research labs are still stateside, it opened a large research facility in Hyderabad, India, in 2008.
A key factor behind this runaway international growth is the rise of the middle class in these emerging countries. By 2015, the num-ber 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,” said Homi Kharas, a senior fellow at the Brookings Institute and formerly the World Bank's chief economist for East Asia and the Pacific.