I nominate Steven Roach as treasury secretary. He probably wouldn't want the job though. Choosing a qualified treasury and labor secretary is one of the most important aspects of the presidency. I wonder if John Snow is just going to continue to make predictions that turn out to be wrong month after month?
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Global: Coping with the Global Labor Arbitrage
Stephen Roach (New York)
Month in and month out, the basic story really hasn’t changed. The United States remains in the midst of the most jobless recovery in modern-day, post-World War II history. It’s not the lags — especially after a 6% annualized growth spurt in the second half of 2003 and indications of more vigor to come in early 2004. Nor is it a measurement problem — with a small sample of households conveying a truth that a much larger sample of businesses is missing. Let’s face it: The Great American Job Machine has finally met its match.
Nor do I buy the commonly expressed view that the data are simply wrong — that the payrolls-based survey of business establishments simply misses miss the inherent dynamism of risk-taking entrepreneurs whose enthusiasm for hiring can only be captured in the so-called household survey. Yes, the household-based job count is up 1.4 million workers in the 12 months ending January 2004 — well in excess of the paltry gain of 6,000 as measured by the establishment survey. According to the US Bureau of Labor Statistics, a little more than 25% of that discrepancy can be traced to definitional differences between the two surveys — namely a household survey that includes the self-employed, unpaid family workers, and private household staff. But the remainder of the difference could well be a perceptual one — disaffected workers sampled in the household survey who have downgraded their aspirations and simply won’t admit to the tougher reality depicted by businesses in the establishment survey. Yet there is really no comparison in the sampling accuracy of these two surveys. According to the US Bureau of Labor Statistics, the “active sample” of some 400,000 establishments in the payroll data covers about one-third of the total universe of such workers; by contrast, the monthly sample of only 60,000 households covers only 0.0006% of the universe of over 106 million households in the United States. There is no doubt in my mind as to which of these two surveys should be trusted.
I have been criticized for exaggerating the potential impact of this cross-border arbitrage on current US hiring trends. Right now, the metrics are fuzzy, at best. The benchmark estimate of white collar offshoring comes from the IT research firm, Forrester, who calculates that “only” 3.3 million US business processing jobs will shift offshore by 2015. Like all estimates of IT-enabled transformations in the real economy, this one could also be well short of the mark. The details of the just-released January payroll employment survey hint at just such a possibility: Job losses were evident in a host of service sector categories that are prime candidates for offshoring — namely, accounting and bookkeeping (-18,000), business support services (-8,000), architects and engineers (-2,500), legal services (-800), and computer systems design (-600). For these areas, combined, US headcount is essentially unchanged over the past 12 months. At the same time, our calculations suggest that payrolls in America’s IT and information services segment are currently running about 350,000 below the profile of the recovery of the early 1990s — not exactly what would normally be expected of an increasingly IT-intensive US economy. Halfway around the world, anecdotal reports abound of surging employment in India’s IT-enabled export sector. In my view, these two seemingly disparate trends in America and India are not a coincidence — they are part and parcel of the same global labor arbitrage.
morganstanley.com |
