EuroWire July 2018

Transatlantic cable

“The USA labour market has tightened to the point where rms are having tremendous di culty nding quali ed and available workers,” RSM chief economist Joe Brusuelas told USA Today . Low unemployment forces employers to raise pay more sharply to attract and retain workers. With unemployment slipping below four per cent, wage growth is expected to accelerate, putting more money in Americans’ pockets. On the minus side (“con”), Mr Davidson notes that if businesses cannot nd enough workers, they will be unable to satisfy all the demand they’re seeing from customers. That means they cannot deliver as many products and services as they otherwise could, which translates into slower economic growth. And slower growth eventually means less hiring. † Another inauspicious aspect of the recent statistics is that unemployment fell in April because there were 236,000 fewer people in the labour force, which includes Americans working and looking for jobs. “That’s not a happy development because a healthy labour market should draw in Americans on the sidelines,” observed Mr Davidson. “It would be more encouraging if the unemployment rate fell because more people got jobs.” On the other hand, the fall-o in job seeking can also be attributed to the number of “baby boomers” (those born between 1945 and the late 1960s) who are retiring from the workforce. This is a long-term trend that will no doubt continue to complicate the USA employment/ unemployment picture. Dorothy Fabian USA Editor

But the company also looks to bene t from the run-up in regional metals prices. Schae er expects to make money from its sales of manufacturing by-products such as steel chippings. Said Mr Heinrich, “The price for this [scrap metal] will rise because of higher steel prices.” (“Higher US Steel Prices Hurt, Help Schae er,” 8 th May) Ms Trentmann also reported that Schae er has negotiated price variation clauses for several components it buys from USA suppliers, which help shield it from some of the e ects of the higher steel prices. Moreover, as its competitors are facing the same challenges, Schae er can pass on at least some of the increase in costs to its consumers – large international auto makers. Making this point, Jürgen Pieper, senior advisor at B Metzler seel. Sohn & Co Holding AG, a German bank, predicted, “The impact of the steel and aluminium tari s will be neutral over time.” † Mr Pieper also noted that the prospect of new trade tari s – as threatened by the USA, the European Union and China – is reinforcing an existing trend to move production closer to where customers are based. Accordingly, Mr Heinrich said that Schae er plans to further localise its production to mitigate currency risks and to limit its exposure to new tari s. Producing locally also helps the company react faster to changing customer needs, he added. This is not to suggest that Schae er is pulling in its horns. Mr Heinrich mentioned, apropos of the $1.67 billion the company has earmarked for capital expenditure projects in 2018, the expansion of existing sites in Vietnam and the USA, and a new factory to be built in Xiangtan, China. † “We still have a positive outlook,” said Mr Heinrich. The company plans to invest six to eight per cent of annual revenue per year. At 8.6 per cent, its 1Q18 investments exceeded that allotment. Low unemployment is a not- unmixed blessing, making it hard for American businesses to hire and retain workers The USA Labor Department announced that the unemployment rate in the nation dropped to 3.9 per cent in April – down from 4.1 per cent in March and its lowest level since 2000. Modest job gains of 164,000 also marked an improvement over the prior month. Taken together, these reports would seem to constitute unambiguous good news for the American economy, and Paul Davidson of USA Today acknowledged that the headlines were impressive. But he cautioned that the situation is more complicated than it looks. Joblessness this low, he wrote, “is actually a mixed bag.” (“The Pros and Cons of US Unemployment Rate Falling Below four per cent,” 4 th May) On the plus side (“pro”), Mr Davidson points out, a low unemployment rate means there are fewer available workers for each job opening. That gives an advantage to job hunters and provides more opportunity to Americans on the margins of the labour force, including disabled people, ex-o enders and the less educated. A tight USA labour market

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July 2018