US Companies Are Furiously Creating Jobs... Abroad

Tyler Durden's picture

Whatever one thinks of the practical implications of the Kalecki equation (and as we pointed out a month ago, GMO's James Montier sure doesn't think much particularly when one accounts for the ever critical issue of asset depreciation), it intuitively has one important implication: every incremental dollar of debt created at the public level during a time of stagnant growth (such as Q1 2012 as already shown earlier) should offset one dollar of deleveraging in the private sector. In turn, this should facilitate the growth of private America so it can eventually take back the reins of debt creation back from the public sector (and ostensibly help it delever, although that would mean running a surplus - something America has done only once in the post-war period). This growth would manifest itself directly by the hiring of Americans by US corporations, small, medium and large, who in turn, courtesy of their newly found job safety, would proceed to spend, and slowly but surely restart the frozen velocity of money which would then spur inflation, growth, public sector deleveraging, and all those other things we learn about in Econ 101. All of the above works... in theory. In practice, not so much. Because as the WSJ demonstrates, in the period 2009-2011, America's largest multinational companies: those who benefit the most from the public sector increasing its debt/GDP to the most since WWII, or just over 100% and rapidly rising, and thus those who should return the favor by hiring American workers, have instead hired three times as many foreigners as they have hired US workers. Those among us cynically inclined could say, correctly, that the US is incurring record levels of leverage to fund foreign leverage, foreign employment, and, most importantly, foreign leverage.

Wonder why the BLS is forced to use such now pathetic trickery as collapsing the labor pool by double the natural rate of growth of the labor pool to make it seem that US unemployment is declining? Simple. The WSJ explains:

Thirty-five big U.S.-based multinational companies added jobs much faster than other U.S. employers in the past two years, but nearly three-fourths of those jobs were overseas, according to a Wall Street Journal analysis.

 

Those companies, which include Wal-Mart Stores Inc.,  International Paper Co., Honeywell International Inc. and United Parcel Service Inc., boosted their employment at home by 3.1%, or 113,000 jobs, between 2009 and 2011, the same rate of increase as the nation's other employers. But they also added more than 333,000 jobs in their far-flung—and faster-growing— foreign operations.

 

The companies included in the analysis were the largest of those that disclose their U.S. and non-U.S. employment in annual securities filings. All of them have at least 50,000 employees. Collectively, they employed roughly 6.4 million workers world-wide last year, up 7.7% from two years earlier. Over the same period, the total number of U.S. jobs increased 3.1%, according to the Labor Department.

Spin on:

The data show that global companies, aided by overseas revenue, are faring better than purely domestic companies during the economic recovery. Nearly 60% of the revenue growth between 2009 and 2011 at the companies in the Journal's analysis came from outside the U.S.

 

Partly as a result, these companies are more likely to focus their resources and people outside the U.S. The nation's largest private-sector employer, Wal-Mart, added 100,000 jobs outside the U.S. last year; its head count in the U.S. has been flat at 1.4 million since 2007.

Spin off: these companies, benefiting from ZIRP in the US, and exporting of inflation, and thus rising prices, and wages in the rest of the world, can fund their foreign operations domestically at virtually no cost, courtesy of the US taxpayers and savers, who are getting the short end of the stick day after day with a savings rate of 0.001%. And, naturally, these companies which only focus on their return on equity and return to shareholders, will in turn take advantage of this arb, and hire cheap labor globally, there where US debt issuance has the most marginal, yet indirect, impact.

In other words, in an ideal world, the offset to soaring US leverage would be that US corporates, with balance sheets sparkling clean, would return the favor for the public sector burden, and hire US citizens who have no interest (i.e., fixed) income, and certainly no dividend income. Instead, the corporates defect most blatantly, an act nobody can blame them for as they do merely what is efficient, and hire foreigners, or those who do not have to suffer the consequences of ZIRP.

Alas, one will read none of this in the WSJ piece which continues as follows:

Economists who study global labor patterns say companies are creating jobs outside the U.S. mostly to pursue sales there, and not to cut costs by shifting work previously performed in the U.S., as has sometimes been the case.

 

"If you want to capture market share in China, you're going to have to hire lots of locals," says Arie Lewin, a professor at Duke University's Fuqua School of Business who has studied outsourcing and offshoring. "You just can't export that stuff."

 

Jobs added overseas "are not necessarily at the expense of U.S. workers," adds Martin Baily, of the Brookings Institution, a former economic adviser to President Bill Clinton. Mr. Baily says it is "almost inevitable" that the biggest and most successful U.S. companies would look beyond the nation's borders.

One can be sure however, that the topic of job creation geography will be a very tangible one in the upcoming presidential debates:

Where American companies are creating jobs is a hot political issue. President Barack Obama has proposed tax benefits for companies to create jobs in the U.S., and tax penalties for those with large operations in other countries. His tax-overhaul plan—which has no real chance of passing Congress this year—would require, for the first time, that U.S. companies operating overseas pay a minimum tax on their foreign earnings.

 

Republicans, including presumptive presidential nominee Mitt Romney, say excessive taxes and regulations are driving jobs overseas. Mr. Romney has suggested cutting the nation's 35% corporate tax, which he calls, "among the highest in the industrial world," to 25%, lower than the 28% Mr. Obama has proposed.

 

Of the 35 companies in the analysis, 16 added jobs both in the U.S. and abroad, while six of them cut both domestic and international jobs.

 

Seven companies reduced their workforces in the U.S., while expanding them elsewhere. They include International Paper, which has restructured as Americans use less office paper and demand rises overseas.

 

At the end of 2008, more than two-thirds of its 61,700 employees at the 114-year-old industrial stalwart were in the U.S. Since then, International Paper has closed U.S. mills and bolstered its packaging division through acquisitions in the U.S. and Asia.

 

Its total workforce—61,500 at the end of last year—hardly changed. But the location of those employees changed a lot, with 8,000 fewer in the U.S. and 8,000 more in other countries. So did International Paper's revenue.

 

Sales in the U.S. and Europe in 2011 were nearly unchanged from 2008. But revenue from Asia more than doubled over the period to $1.8 billion.

And so forth. While hardly news to most, the reality is that anyone who thinks in economic terms from a practical standpoint (which automatically excludes 100% of Ph.D. economists and 99% of bloggers and armchair econ experts on twitter), the reality is that soaring US public leverage has virtually no incremental return to the US public sector. In fact, as the above chart shows, the returns from additional US debt are roughly 3 to 1 in the benefit of foreign countries compared to the US. But no matter: the Krugmans of the world will keep on prodding anyone who still cares to listen to their ramblings to spend, spend, spend and raise, raise, raise debt as the IRR will ultimately catch up. Well, he is right: for a very specific subset of Americans - those who are shareholders of big multinationals. Unfortunately, the money, once it trickles down to the bottom line, ends up being deposited... just not in the US, but far, far away, preferably in Taiwan, Singapore and HK banks (now that Obama made any American non-grata in Zurich and Geneva) as those same corporate types know very well that the same government which is so generous in giving, will be just as greedy when the time comes to taketh away.

That time is rapidly coming.

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LawsofPhysics's picture

Welcome to the global ponzi.  Don't expect wage growth (and all the other consequences of that) in the U.S. any time soon.

Sudden Debt's picture

Unless you go into politics...

Sudden Debt's picture

Who fucks who and who pays who he?

Dr. Richard Head's picture

I have been unknowingly getting ass pounded since my birth....Banksters, can't live with em.

Oh regional Indian's picture

India's economy has gone from 70% agrarian to 17%  agrarian and 53% Service sector in less than 2 decades.

That is dizzying speed for a nation of over a billion. Just calculate how many farmers have committed suicide in debt to Mossanto et. al., how much land has been taken over by IT parks. Power hungry, poorly designed IT "parks", mostly ill-suited western archicture applied to India, like a gash on the land-scape.

Relevance? That is where the source of the giant sucking sound is. And in Free Trade Zones.

And in massive budgets in MArcom to saturate th eIndian (probably Chinese too) markets. Total advertising BLITZ.

I've said it many times before, even GM is doign really well in India. Car's are pretty good too, especially the one's that came via Opel.

Just one big false paradigm of artificial lack.

ori

http://www.youtube.com/watch?v=t_GsLguye-0&list=UUzTWv2MUocaqZLm3LHNqK-Q...

 

^^^ me, caveat emptor ;-)

 

Gully Foyle's picture

Oh regional Indian

You understand that India is planned to be the next US economically. TPTB needs to build up your middle class and increase purchasing power.

India benefits by a nice ratio of young to old that doesn't start changing until the next century. Unlike China and the industrial nations.

Welcome to the future.

DoChenRollingBearing's picture

@ Sudden Debt

At this point, I as an American would NEVER START a new business here.  Too many regulations and pits to fall into.

If I owned or ran a large company, I would operate it to maximize shareholder profit in an ethical manner.  On behalf of the OWNERS of the business.  Hiring foreigners is just as humane as hiring Americans.  Foreigners are people too.  If they work for lower wages, they likely are POORER than Americans.  They might work harder...  What's wrong with that?

But, the US government certainly does not need to subsidize that behavior.  Our .gov should not subsidize anything!

LawsofPhysics's picture

Good post, and if your company failed I would expect that you and your shareholders pay back your creditors with your own personal wealth.  No bailouts, period.

DoChenRollingBearing's picture

I had three (small) companies that I owned fail.  I did not stiff anyone.  I lost the money fair and square.  No bailouts for me.

Belarusian Bull's picture

You should also note, that American workers just do not the desrve the wages they get.

This is the main reason why jobs are moving from rich countries to poor countries.

KK Tipton's picture

"But, the US government certainly does not need to subsidize that behavior.  Our .gov should not subsidize anything!"

Not subsidizing...they are *direct* shareholders of said mega corps. Talk about double dipping!
Our US Govt. (fed AND local) *directly* profit from overseas investments.

 

See here for just a taste:

http://cafr1.com/

"Do you know how many trillions of dollars YOUR Local and Federal Government has invested with Mexico, China, the old Soviet block countries? Investments held in foreign currency? Government investments that greatly profit from that cheap labor abroad and a lower dollar.
Investments that profit even more when the dollar drops in value due to foreign currency exchange rates?"

"Could it be that our own Government over the last several decades has been promoting to those fortune 500 companies, of which Government owns most through Bond - Loan investment / stock ownership [EXAMPLES: 82% stock ownership of Microsoft Corporation, Disney 61%, AOL - Time Warner 58%, EXXON 72%] to manufacture abroad so that Government would realize greater returns on their investments at the Peoples of the USA's expense in jobs and wealth retention."

"In the 60's, most government investment funds were restricted to a cap of 5% to a maximum of 10% invested outside of the USA. By 2000, that restriction has been increased in many a case to over 45% and in some cases no restriction at all per percent of International investments held.

Is the big picture coming into view for you yet? I sure hope so! Correction is needed!"

"The GROSS INCOME IS HOW MUCH?
That is right, government is making much, much more than you ever thought. The figures are on this and "their" sites. Look and you will see.
Keep in mind, Government only wants you to see one side of the picture; coin; etc. The DEBT, you will turn your back to the debt in fear or disgust and look the other way.
Then look at how much money they have to hire; buy off; and control; the BEST Marketers; Psychologists; Strategists; Takeover Specialists; Entertainment Propagandists; etc.; etc.; etc;.

 

Follow the money indeed!

 

 

Zero Debt's picture

One domestic business you may consider if you want to hire lots of people is selling cancerogenic drinks. Because, which are the two companies adding most job in the US in this chart?

A total of roughly 100,000 jobs have been added by two companies: COKE and PEPSI. What is their product line? The active ingredient in coke is phosphoric acid, which is linked to low bone density, chronic kidney disease and kidney stones, not to mention the sugar and artificial coloring and flavoring such as 4-methylimidazole that causes lung, liver or thyroid cancer, or leukemia in lab mice and rats. Fancy a healthy diet? Try Coke Zero, packing aspartame, acesulfame-K, caffeine, E331 and phenylalanine. Pepsi employs similar ingredients, including phosphoric acid, citric acid, sugar, sweeteners etc.

Cue Michelle Obama appearing on the Banker's Club as a Pepsi Spokesperson in 10, 9, 8 on the campaign trail...

 

Ripped Chunk's picture

+ 10,000   Indeed sir. The only place where real income (bribe $$) is growing.

goldfish1's picture

It's a national disgrace. The congress should be impeached for treason and the corporations assets taxed at 75%.

tempo's picture

Jobs are not created in the highest cost most regulated (sue baby sue) nations.  Its just that simple.  To top it all off, the central bankers believe that are doing great good w ZIRP and people would not be able to eat w/o them.  Now Corporations, union, retirees, students want the FED to do more because of fear.  This will go on for years.

Dr. Richard Head's picture

Want a cherry on top of the cupcake of stiffled job creation?  Have a bureaucracy provide "guidelines" that will punish employers who don't wish to hire convicted felons should those felons happen to be minorities. 

http://www.eeoc.gov/laws/guidance/arrest_conviction.cfm - EEOC Updated Guidelines (no public comments allowed) release on April 25, 2012

Additionally, use these guidelines to place the burden of proof on the employer that they were not discriminating, even if the candidate never applied to the job because they were concerned their criminal record would preclude them from the job. 

Goner's picture

As I read the article nothing illegal or even immoral is being done by the corporations. In fact I only see problems with our government. It spends to much and creates hurdles\ expenses to doing business in America. Of course a company is going to put more money into the areas that are actually making them money.

Add a 75% tax and company's move everything overseas and/ or add a 75% tax to every product they sell and pass the cost right back to the consumer. That should solve the problem, right? (/sarc, just so everyone knows)

pkea's picture

the "LAw" doesn't represent truth or morals, it is rather, in its form it exists in the US, quite often is immoral....the products many TNCs produce are immoral(arms, ICBM support, ICBM controlling satellites), that's the age we live in....

People should consume less, Asia should change their labor laws , the list can go on. The slippery slope of human nature is too easy to take

Diogenes's picture

If a person works overseas they have to pay income tax on the overseas earnings and corporations are supposed to be people.

Dangertime's picture

That should entice growth of business operations in the US.

Clayton Bigsby's picture

I have an idea to get some job growth right here in the good old U.S. of A - and no, it's not building the death star - it starts with K and rhymes with "eystone Bipeline"...

LawsofPhysics's picture

What does that have to do with wages again?  Fucking nothing, the pipline will be built by an international oil company who will employ hungry engineers from around the world (who actually know how to do math) and will work for less with fewer benefits.  Wake the fuck up.

Sudden Debt's picture

But those people will be eating from a hotdog stand operated by a American!

LawsofPhysics's picture

Why?  Did that American turn off the television?

ihedgemyhedges's picture

Of course not,  He skipped his mortgage payment to buy an iPad, so now he can watch Kardashian reruns all day from his hot dog stand........

Vampyroteuthis infernalis's picture

Yeah, it won't be so funny when these foreign countries go belly up and wipe out these multicorps overnight. Or maybe, it would be hilarious!

toady's picture

I would watch that reality show!

earleflorida's picture

the money made in the 'gold rush' was from the selling of shovels, pans, and beans --- plus,plus hookers

the money to be made in fracking gas, will also be made in the necessities of shovels, pipes, and beans --- plus, plus hookers 

jus_lite_reading's picture

Fair enough but all I see is a lot of complaining and protesting (OWS anyone?) about all these evil companies and their corrupt practices yet these same people that talk the big talk and make all the noise are the same ones who buy the latest iPhones, iPads and plasma TV's...

How many REALLY have the "backbone" to buy only when necessary and are as selfsufficient as possible? How many REALLY Reduce, Reuse and Recycle? I would say less than 5%... 

 

falak pema's picture

65% in Germany, nation wide for ALL types of municipal waste, goes to energy or recycle.

Harbanger's picture

He was talking about being frugal.  Not about recycling.

falak pema's picture

well before being frugal lets recycle and then be more frugal, that means we don't junk reality of today before preparing for tomorrow. 

jus_lite_reading's picture

The global elite want us to spend and spend and spend some more. That means consuming. They created this throw away society because it means more money in their pockets (why do you think Apple decided on the "less sturdy" glass for their iPhones?) regardless of the impact on the environment. (Don't get me wrong, I'm NOT a tree hugger) They want and NEED us to be CONSUMERS, and truthfully, this is NOT sustainable for the earth or our children. 

Are you in?

 

toady's picture

It isn't a 100% game. I like to think I'm in you 5%, but my wife still runs on the consumer treadmill occasionally. She has a weakness for clothes, especially shoes. I've managed to redirect her to clothes for our boys. They are pretty rough-n-tumble, so they go through them pretty quick, and the articles that do make it through the grind get passed down to a couple of younger nephews.

I guess I'm saying reduce, reuse, etc, but spend as needed too.

jus_lite_reading's picture

Same here. Even my grown children are always tempted by conmercialism to "NEED" the newest gadget and thing but they see the futility in it all AND the fact that by their CONSUMING they support this corrupt system.

q99x2's picture

If the companies are creating jobs overseas and not in the US then they are not US companies and must be forced to pay tarrifs and taxes accordingly.

LawsofPhysics's picture

Unfortunately, these same companies own congress. 

pkea's picture

The correct term for what these TNCs created in their essence would be totalitarianism.

 

what we have pretty much everywhere, particuarly in the US ( perhaps excluding only a few scandinavian countries) well described by Herbert Marcuse, in his 1964 book One-Dimensional Man, about a society in which, in his words, "…liberty can be made into a powerful instrument of domination. Free election of masters does not abolish the masters or the slaves

cougar_w's picture

I've been thinking recently that America is now less a nation and more a corporation. And all the registered corporations are just its subsidiaries. If you allow yourself to think of it like that then a lot of really creepy observations begin to make brutal sense.

It is perhaps the ultimate expression and final damnation of the corporatist interpretation of the 14th Amendment; the spirit of the corporate creature became the nation it was once the child of.

I fail to see how such a situation can result in anything short of a full-on Fascist state. That's not even hyperbole, the observation follows from first principles.

GeneMarchbanks's picture

'I've been thinking recently that America is now less a nation and more a corporation.'

That is entirely correct indeed. You can also make a similar argument for the City of London except in strictly banking form. These are not nations by any stretch of the imagination.

Corporations have taken over and we have allowed it to happen by submitting to the corporate beast.

‘Corporations aren’t citizens or neighbors or parents. They can’t vote or serve in combat. They don’t learn the Pledge of Allegiance. They don’t have souls. They’re revenue machines. I don’t have a problem with that. I think it’s absurd to lay moral or civic obligations on them. Their only obligations are strategic, and while they can get very complex, at root their not civic entities. With corporations, I have no problem with government enforcement of statutes and regulatory policy serving a conscience function. What my problem is is the way it seems that we as individual citizens have adopted a corporate attitude. That our ultimate obligation is to ourselves. That unless it’s illegal or there are direct practical consequences for ourselves, any activity is OK.’ --DF Wallace


Disenchanted's picture

 

 

Dissecting the New Age - The Trinity of Global Empire

 

Any American who thinks they are living in a free country does not
have a clue.


The fact is that the United States corporation is controlled from the
City of London, by the Crown, which is not the British Monarchy as
many believe, but rather the private corporation that is the inner
'City of London' itself, also commonly known as "The City" or "The
Square Mile." This square mile that makes up the center of Greater
London has its own mayor, laws, courts, flag, police force and
newspaper. It is the heart of the global financial system.

Matthew D. Jarvie

valkyrie99's picture

Yes, this is pretty close to my views...maybe the US being more of a leveraged buyout victim turned into a subsidiary shell corp. that the parent companies - big multinational players - plan to load with debt and risk that’s  more advantageous to their positions then its' own as they don't really care if the shell company is left standing in the end...

newworldorder's picture

RE: cougar_w

Its not only the US that is being molded in the image of a Corporation. Look at all large multinational companies, regardless of their governance domicile country. They look the same, have the same interests, are governed by the same interlocking elite, use the same banking system and are  by in large ruled by mostly unelected or compromised political entities. International law inforcement comes courtecy of the US Military and they dont have to pay for it.

KK Tipton's picture

"Unfortunately, these same companies own congress."

Actually, congress owns stock in these companies. Symbiotic relationship.

US fed and local government investments profit heavily when said companies send labor overseas.
They then hide said profits (in plain sight) with a variety of  mechanisims.
All "totally legal" according to the laws they make themselves you know.

This funnels cash upwards to the .001%

See my post above.