America exports unemployment amid slump

America’s deepening recession, which has cost 1.2 million jobs so far this year, is taking a heavy toll overseas. Shrinking consumer demand for imports and less need for outsourcing by U.S. companies are idling workers at Germany’s Porsche SE and Chinese businesses that make toys for Mattel Inc.

Economists say worldwide unemployment may increase to a two-decade high as trade and investment ties that have developed during 20 years of globalization magnify the impact of the U.S. contraction. Without buoyant economies elsewhere in the world to act as buffers, a longer, deeper slump in the labor market is likely.

“In the same way that we were supporting economic activity when we were growing rapidly, the recession in the U.S. is going to be a drag on the global economy and is going to reduce employment in our trading partners,” says Lewis Alexander, chief economist at Citigroup Inc. in New York.

The U.S. Department of Labor may report Dec. 5 that the jobless rate jumped in November to a 15-year high of 6.8 percent and employers reduced payrolls by 320,000, according to economists surveyed by Bloomberg News.

That would bring job losses for 2008 to 1.5 million. “Millions” more may follow in 2009 “if we do not act swiftly and act boldly,” President-elect Barack Obama said at a Nov. 24 press conference. He aims to create 2.5 million new jobs in his first two years in office.

“This is by no means simply a U.S. story,” says David Hensley, director of global economic coordination at JPMorgan Chase & Co. in New York, who expects unemployment to increase in both developed and emerging-market nations.

Worldwide, the jobless rate may rise above 7 percent by 2010 after remaining between 5 percent and 7 percent for two decades, says Kathleen Stephansen, chief global economist for Credit Suisse Holdings USA Inc. in New York.

“The global pie is shrinking rapidly, and when that happens, there is simply not enough business to keep everyone employed,” she says.

Unemployment in Germany, the world’s largest exporter, may start to creep higher after declining for 32 consecutive months, the longest slide since reunification in 1990.

“Improvements in the German labor market will come to an end in 2009 at the latest,” Michael Huether, head of the Cologne-based Institut der Deutschen Wirtschaft, a business- sponsored economic institute, told reporters in Berlin Nov. 24.

Germany’s BASF SE last month announced plans to idle 80 factories around the globe after customers in the auto, construction and textile industries reduced orders. The world’s largest chemical company, which gets a fifth of its revenue from North America, plans to eliminate more than 1,000 jobs and reduce work hours for 20,000 employees, about one-fifth of its labor force.

Heidelberger Druckmaschinen AG, the world’s largest printing-press maker, plans to cut as many as 2,500 jobs, or 13 percent of its workforce, to offset declining demand. The Heidelberg-based company gets about half its sales from outside Europe, including 16 percent from North America.

Volkswagen AG and Porsche said last week they are each temporarily suspending production at their largest plants in coming weeks. Porsche said in a Nov. 26 statement that sales of its trademark 911 sports car in the U.S., the model’s largest market, “can hardly be reliably calculated.”

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