This month’s Global Talent Update reports on the current economic situation in the Eurozone; China’s efforts to stabilize employment; and why some companies are shifting their business from China to Mexico.
The Eurozone’s current economic situation and its outlook are being shaped by economic factors moving in opposite directions, according to a report from Deloitte. On the positive side, the Eurozone managed to get through the winter without energy shortages and severe recession feared by many analysts. Labor markets have continued to thrive, stabilizing consumer expenditure, and economic sentiment has recovered. On the negative side, inflation remains stubbornly high, the interest-rate hike cycle is still ongoing, and geopolitical uncertainty remains high. As a result of these countervailing forces, very moderate growth in 2023 seems to be the most likely scenario.
Current consumer and business sentiment indicators suggest that a recovery is underway. However, it should be noted that behind the improved corporate sentiment are wide sectoral differences: Consistent with the global picture, the services sector seems to be doing better than the industrial sector. The industrial sector suffers from weak orders and abating international demand. Sentiment in the consumer sector is also on the way up. This is likely to be due to the fading energy crisis, even if inflation continues to depress real incomes. In general, consumer expenditure is supported by a robust labor market, which has worked as a stabilizing factor for the overall economic outlook. In fact, at 6%, the Eurozone has reached a record-low unemployment rate.
Read more at Eurozone economic outlook | Deloitte.
China has taken a multi-pronged approach to stabilize employment, scaling up support for fresh graduates, rural labor force, those in flexible employment and other key groups of jobseekers. China International Intellectech Group Co., Ltd. initiated a campaign to facilitate employment for fresh graduates this July. Thanks to this campaign, more than 1,300 companies in diverse sectors including computer software, finance and electronics have offered over 11,000 job openings.
The centrally-administered state-owned enterprise on human resource services forged cooperation with nearly 100 universities to hold exclusive campus recruitment activities in the first half of the year. During the same period, the company also organized 162 online job fairs, attracting around 41,000 enterprises to advertise 175,000 positions.
In order to encourage companies to hire young jobseekers, China has rolled out a subsidy policy for firms that hire young people who graduated from universities within the last two years, as well as candidates aged between 16 and 24 who have filed for unemployment. Effective till the end of this year, the policy will grant the companies a one-off subsidy of no more than 1,500 yuan (about 208.43 U.S. dollars) for each young jobseeker they hire.
As of May, the number of young people aged between 16 and 24 in China had exceeded 96 million, and over 33 million of them have entered the labor market.
According to recent reporting from the New York Times, as American companies recalibrate the risks of relying on Chinese factories to make their goods, some are shifting business to a country far closer to home: Mexico. The unfolding trend known as “near-shoring” has drawn the attention of no less than Walmart, the global retail empire with headquarters in Arkansas. Early last year, when Walmart needed $1 million of company uniforms — more than 50,000 in one order — it bought them not from its usual suppliers in China but from Preslow, a family-run apparel business in Mexico.
Basic geography is a driver for American companies moving business to Mexico. Shipping a container full of goods to the United States from China generally requires a month — a time frame that doubled and tripled during the worst disruptions of the pandemic. Yet factories in Mexico and retailers in the United States can be bridged within two weeks.
During the first 10 months of last year, Mexico exported $382 billion of goods to the United States, an increase of more than 20 percent over the same period in 2021. Since 2019, American imports of Mexican goods have swelled by more than one-fourth. In 2021, American investors put more money into Mexico — buying companies and financing projects — than into China, according to an analysis by the McKinsey Global Institute.
China will almost certainly remain a central component of manufacturing for years to come, say trade experts. But the shift toward Mexico represents a marginal reapportionment of the world’s manufacturing capacity amid recognition of volatile hazards — from geopolitical realignments to the intensifying challenges of climate change.