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the Manpower survey
Over the past two years, most of my attention, and the attention of the majority of investors in the US, has been on the employment situation domestically. Reports like the Department of Labor Statistics’ monthly Employment Situation or the equivalent from private payroll company ADP have been scrutinized carefully for signs that a moribund labor market might be showing signs of revival.
The picture that has most recently emerged is of an economy slowly mending, but now generating enough new jobs to not only absorb new entrants into the labor force but also to chip away at the unemployment rate by about 1 one percent per year.
The international employment agency Manpower, in contrast, has for the past half century been producing an increasingly global employment report whose emerging markets content the firm boosted significantly in 2005. Manpower research focuses on corporate hiring intentions over the coming quarter, rather than chronicling the firms’ actions in the recent past. As a result of these emphases, the Manpower survey gives an interesting–and different–perspective for assessing the health of the world’s economies.
a diffusion index
One other factor to note before we begin. Manpower presents its results in the form of what’s called a diffusion index. The company asks all the HR professionals it surveys whether their firms will be hiring, keeping a stable workforce or firing in the coming three months. It takes the percentage of respondents hiring and subtracts the percentage firing. This difference is diffusion index.
If, for example, 60% of respondents expect to be hiring and 30% expect to be firing (with 10% remaining stable), the diffusion index is +30. If 49% are hiring and 50% firing, the diffusion index reading is -1.
the 2Q11 survey results
Here’s what the latest survey has to say:
In the Pacific region, Manpower covers eight countries. The lowest reading comes from Japan, at +10. The highest two are India at +51 and Taiwan at +45. The median reading is +23. (Remember, +23 means that companies hiring outnumber those firing by about 3/2.)
The Indian reading is the highest in the six years Manpower has been surveying that country.
China peaked at around +50 in the December quarter and has fallen to +36 now.
EMEA (Europe, Middle East and Africa)
What a contrast!
Of the 21 EMEA countries Manpower follows, only Turkey (+34) and Belgium (+12) score higher than Japan. Six countries–Austria (-1), Switzerland (-1), Italy (-2), Ireland (-3), Spain (-5) and Greece (-10) are in the minus column. About the best you can say about these results is that they’re an improvement over the figures this region has been posting over the past two years.
Here again, the tale is one of two regions. The median reading for the ten countries surveyed is about +19.
The stars of the region are Brazil, which appears to be overheating at +40, Panama (+22), Argentina (+22), Peru (+20) and Costa Rica (+17).
Only two nations, Guatemala (+6) and the US (+8), are in single digits.
1. Among developed countries, patterns in prospective hiring clearly illustrate the difference in the approaches–accommodation vs. austerity
—of the US and EU governments in dealing with fiscal deficits generated by the financial crisis. The healthiest country in the EU other than Belgium is Germany at +9, which falls one point below the developed world’s multi-decade growth doormat, Japan. Everyone else, ex Greece, is flirting with one side of zero of the other.
The risk to the US is that the country won’t have the political will to rein in stimulus when the time is right. The worry about the EU is that the cure will prove worse than the disease. The near-term growth story, however, appears to favor the US.
2. The contrast the Manpower survey draws between the developed and developing world is very stark. The developed countries of the globe barely break into double digits on the Manpower hiring index, meaning that almost as many employers are laying off workers as are looking to add to their staffs. In the developing world, on the other hand, Manpower scores are soaring. Asia ex Japan is averaging roughly 30. Latin America is close to the same number. Both imply that about twice as many employers are looking to hire as are looking to lay off.
Over the past several months, emerging markets have been underperforming those of the developed world. The idea has been that governments of the former have begun to temper economic growth while those in the latter, especially the US, are still applying extraordinary stimulus. Therefore, on a relative basis stock, markets in the developed world should be emphasized over those in developing ones.
To me the Manpower numbers argue that the preference for the US over emerging markets is a counter-trend movement that can’t last for long.
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