US factory, service job exodus not over – studies – Reuters

* Investment in foreign plants rising, domestic falling

* Manufacturing job recovery minimal

* Fewer service jobs remain to shift offshore

By Scott Malone

March 20 (Reuters) – It’s not quite time to pop the
champagne corks and celebrate the returns of jobs that U.S.
companies had been shifting overseas, two studies released this
week warned.

While three straight months of U.S. job growth, bullish
chatter from some of corporate America’s top leaders and reports
of rising wages in China helped paint a rosier picture for
American workers, the recovery in employment — particularly in
factories — could prove a temporary blip as U.S. companies
continue to move manufacturing and service jobs out of the
country, the studies asserted.

The past few months of job growth in the U.S. manufacturing
sector has not begun to make up for the jobs cut during the
2007-2009 recession, a report by the Information Technology and
Innovation Foundation found. It noted that the sector lost 16.3
percent of its jobs — about 2 million workers — during the
downturn, and has since come back by just 1.4 percent.

“What happens today is … companies don’t just temporarily
furlough workers; they actually shut down plants or shut down
whole parts of a plant and then they don’t restart them
afterwards,” said Robert Atkinson, president of the
Washington-based think tank. “That demand gets satisfied by
foreign production.”

The foundation noted that the U.S.-based manufacturers have
shifted their capital equipment spending overseas over the past
decade, a development that the group reasoned would drive
continued migration. Their spending on foreign plants and
equipment rose 53.9 percent from 2000 through 2009, while their
correlating domestic investment fell 27.3 percent.

TIDE MAY NOT HAVE TURNED

This comes even as top executives, including the heads of
General Electric Co and Boeing Co, admit that they
went too far in moving operations out of the United States.

“In the last generation, GE and our industrial peers began
a long-term trend to outsource our supply chain to other
companies,” Immelt said in his annual letter to shareholders,
released earlier this month. “This made sense in an era when
labor was expensive and material was cheap. Today, our material
costs are more important. So we have to control our supply chain
to achieve long-term productivity.”

Boeing CEO Jim McNerney in February fretted that U.S.
manufacturers had gone too far in a “lemming-like” exodus.

“We lost control in some cases over quality and service when
we did that; we underestimated in some cases the value of our
workers back here,” McNerney said.

Those companies are exceptions to the trend, Atkinson said.

“The overall loss-to-gain ratio, losing from offshoring to
gaining from onshoring, that’s in a better position than it was
eight, seven, six years ago,” Atkinson said. “I still don’t
believe that ratio, fundamentally, is positive.”

While executives contend that rising wages in China and
India are making it less attractive to move operations outside
of the United States, a report by the Hackett Group consultancy
suggested that another factor could stem the tide in the service
sector: Fewer jobs remain to move offshore.

By 2016, it forecast, just 1 million service sector jobs
would be left in the United States and Western Europe that could
be shifted abroad, down from the current 1.8 million.

“We’re running out of jobs to actually move offshore once we
get past this next few years here,” said Hackett research head
Michel Janssen. “Companies are moving fast and furious to take
advantage of the labor arbitrage right now.”