Upbeat North American job market a good sign
Inextricably linked – that’s how Richard Francis, director of Standard & Poor’s Sovereign Ratings Group on Wall Street in New York, sees the relationship between the prospects for strong growth in Barbados’ tourism industry and the resurging American job market.
“Obviously, if you don’t have a job in the United States, you are not likely to go on a vacation and I think there will be a lag in the Caribbean,” he told the BARBADOS BUSINESS AUTHORITY recently.
The economic and credit-rating analyst who monitors Caribbean economic performance added: “Once unemployment starts trending down in the United States, you can expect an increase in the tourism sector in the Caribbean,” and that, of course, would include Barbados.
How then is the job picture shaping up in the United States and its North America neighbour?
When the American economy added 227 000 jobs in February but the unemployment rate remained at 8.3 per cent, due largely to the fact that nearly 500 000 people who were on the sidelines of the labour market for more than a year had started looking for work or had actually found jobs, there was a flurry of positive forecasts on the employment front.
“There is no real cloud in the silver lining” of the February job report,” asserted Steven Blitz, chief economist of ITG Investment Research.
“Companies are more interested in converting people from temp to full time,” added Tig Gilliam, chief executive of the Adecco Group North America, a staffing company.
“That’s really a good indicator” because temporary hiring rose by 45 000 jobs in February.
Robert Reich, a former United States secretary of labour, said that February job numbers, the third month in a row of job gains, were “well in excess of 200 000 is good news for President Obama and bad news for Mitt Romney. Jobs are coming back fast enough to blunt Republican attacks against Obama on the economy”.
The Federal Reserve Banks of New York and Philadelphia believe much of the job growth in the months ahead would come in manufacturing, which is growing in the north-east. Over the past year manufacturing added 227 000 jobs, 31 000 of them in February alone.
That’s good news because factories fuel job growth.
The demand for heavy equipment needed by the mining and agricultural sectors is keeping factories humming at a time when automobile demand is keeping a steady pace.
“Day by day, we’re restoring this economy from crisis,” said President Barrack Obama the other day after touring a manufacturing plant in Virginia.
But manufacturing alone isn’t the only bright spot on the horizon. Job gains are expected to come in the information technology sector. A survey of more than 2 000 executives conducted by the Corporate Executive Board, a research firm, showed that the IT sector – computer hardware, software and services companies – planned to boost hiring in North America in 2012. The February numbers showed that they added 10 000 jobs during the month.
Overall, optimism is running higher this year than in 2011, with 66 per cent of the executives expecting their companies to increase their revenues compared to 57 per cent a year ago.
But some of the expected gains may be offset by reductions in government employment and losses in the financial services area. Added to that is the effect rising gasoline prices would have on consumer spending.
Only nine per cent of the decision-makers in state and local governments are expecting to hire more people while 71 per cent indicated the reverse, meaning they were reducing payrolls.
Among executives in banking, insurance and real estate, the picture is far from bright. While 42 per cent said they expect to let go more employees this year, only 27 per cent said they were opening up more positions.
In health care, a sector that employs thousands of Barbadians and other West Indians across the United States, especially in New York, 33 per cent said they would either increase hiring or hold the line on jobs while 37 per cent planned to lower the staff count.
At least two-thirds of the executives in energy said they wouldn’t cut jobs while 31 in consumer-oriented firms said they would shed workers.
Next door, Canada, which provides Barbados with thousands of tourists every year, is expecting the economy to shift to a higher gear in 2012 and put more people back to work.
Reinforcing the fact that like Barbados, Canada keeps an eye on what happens in the United States, Royal Bank of Canada said the other day that the rebounding American economy – rising job market, low interest rates, stronger corporate balance sheets and higher commodity prices – should propel the Canadian economy, so much so that gross domestic product is expected to grow by almost three per cent this year and in 2013.
Craig Wright, chief economist at RBC Economics, said the outlook for labour was brighter and he estimated that Canada’s jobless rate would fall to 6.9 per cent by the end of next year.
“We expect the run rate in monthly job gains to be about 30 000 higher [in 2012] than 2011 monthly pace,” he said.
Still, S&P’s Francis isn’t forecasting any sudden or vigorous burst of economic energy in Barbados and the region, cautioning that the pace of growth in the Eastern Caribbean would be slow and gradual.