Like US, other nations see a hiring wave
Falling jobless rates signal that the world is leaning less heavily on US consumers to fuel growth.
The German airline Lufthansa is hiring 2,500 new workers. Toyota, with automobile profits and sales rising at double-digit rates, is moving to add 8,000 engineers worldwide. The Japanese electronics company Toshiba plans to hire 1,000 workers in Poland to make flat-panel TV sets.
All this reflects a labor market that has been strengthening this year, not just in the United States but in industrialized nations worldwide, providing jobs for millions of new workers. Unemployment rates in Australia, Japan, and across the zone that use the euro currency have dropped over the past year, according to the Organization for Economic Cooperation and Development, which keeps standardized numbers for industrial nations.
Last week, Germany's government announced a jobless rate that, for the first time since 2002, is below 10 percent. That came as the US Labor Department announced the lowest monthly unemployment rate in five years: 4.4 percent in October.
This pattern doesn't mean the world economy is booming – many forecasters expect the pace of growth to cool a bit in the next year. But it reflects a more balanced global economy, after a period in which countries leaned heavily on US consumers for growth.
"The upturn in Japan has been the most sustainable that they've had since the [economic] bubbles blew up" more than a decade ago, says Jay Bryson, who tracks the global economy for Wachovia Corp. bank in Charlotte, N.C. Economies in Europe have also strengthened, he says, although "it's hard to make a case that consumer spending has really picked up."
The good news is that corporations like Lufthansa and Toshiba are confident enough about the outlook to be hiring, building new plants, and expanding their service operations.
That's a boon for the many workers who have worried about wage stagnation and the migration of jobs to developing nations such as India and China. It also raises hopes for what some call a "Goldilocks" scenario, where the global economy avoids getting too hot or too cold next year.
"Our guess is that global GDP growth ... is going to slow down to about 4 percent next year," adjusted for inflation, Mr. Bryson says. This year the world's gross domestic product (GDP) may end up growing about 5 percent worldwide.
Some economists worry about overheating, with inflationary pressures building up. But others worry about the risk of the global economy slowing too much, as consumers in the US are affected by higher interest rates.
After several years of easy monetary conditions worldwide, central banks have raised interest rates to bring their monetary policy back toward neutral (neither unusually loose nor restrictive).
It's too soon to know for sure, but they may be on course toward that target.
Although unemployment rates have fallen, many nations have a ways to go before job markets could be called unusually tight. The world isn't at the point, for example, where trade unions have the kind of bargaining power to push labor costs into an inflationary spiral.
Consider Germany: After getting as high as 12 percent, the unemployment rate has edged down steadily this year, but remained at 9.8 percent last month. Moreover, most of the people who lack work have been sidelined for a long time. A majority have been out of work for a full year or more.
By that measure, nations like the US and Canada have much tighter job markets, with most people off the unemployment rolls within a few months.
Richard Fisher, who heads the Dallas branch of the US Federal Reserve, said last week that it is "possible that the trend in overall consumer inflation has peaked and is finally headed lower."
Indeed, inflation rates remain fairly moderate worldwide. And even if a tightening labor market causes a pickup in wage growth, that in itself does not push consumer prices up. As long as wage gains are matched by productivity growth, pay can rise without fueling inflation.
In the US, the Fed will be watching those numbers closely, after a sharp slowdown in productivity was reported last week. Meanwhile, worker pay has been rising.
"While the consensus continues to expect [interest] rate cuts at some point in 2007, we continue to believe the next Fed move will be to hike, not cut," Michael Darda, chief economist at MKM Partners in Greenwich, Conn., wrote recently.
Still, many global trends appear positive for workers.
Although high joblessness is still a big problem in Europe, unemployment in the Eurozone has fallen from near 9 percent in 2004 to 7.8 percent in September.
Businesses are investing, trade keeps expanding, and even consumers are spending more in many nations.
In 2000, the US accounted for almost 20 percent of global import demand. Today, thanks to rising consumer class in developing nations, that has fallen to 16 percent, according to numbers from Bank of America Corp.
And since many US companies have global operations, a firm global economy promises to help offset slowing domestic growth in America.
"The global economy will experience a soft landing and milder inflation in 2007," writes Nariman Behravesh, chief economist at Global Insight in Lexington, Mass. "All major regions except the Middle East will see some moderation in growth next year, but only North America will perform significantly below potential."