The U.S. economy is saddled with massive debt, deficits and trade imbalances. Many predict gloom and doom. But one upside to a weaker dollar is the boost it could give to the U.S. job market.
The U.S. dollar has fallen dramatically against other major currencies over the past few years. A sustained weaker currency will have the effect of decreasing America's consumption of foreign goods and services, while increasing foreign demand for its own goods and services. We already are seeing increased demand for U.S. exports and more visitors entering the country as a result. This adds up to lots more jobs. Jobs in making, packaging, selling, shipping and servicing anything that can be exported, in selling and providing any service that can be offered beyond borders and in anything to do with travel or tourism. This is a big part of the economy. In time it will reduce the trade imbalance and the dollar's value will rise again.
The fall hurricane season boosted job growth in October (which at 337,000 was the largest in 6 months). Retail hiring will keep the numbers high through the rest of the year. Counting October, the U.S. economy has created over 2 million jobs in the past 12 months and has enjoyed 14 months of steady job growth. This has occurred as the U.S. dollar slid to historic lows against the Euro. But have we reached the "tipping point" in the labor markets? Undoubtedly, there is a level that the dollar will reach where it becomes irresistible for foreign consumers (individuals and governments) to buy American. And there is every reason to believe the slide in the U.S. currency will continue for months, even years to come.
There are downsides, of course, but perhaps it is America's turn for a weak currency. Throughout most of the 1990s, the U.S. dollar was a sanctuary for investors around the world. Seen as the world's most stable currency, investors drove its value through the roof. Because the U.S. economy was booming, it could afford to be the elephant in world currency markets. Indeed, it benefited companies and individuals who bought foreign goods and services in record numbers.
Today, the U.S. economy needs the boost a weak currency provides. Even more importantly, it needs to reverse the trend in foreign trade imbalances and work on lowering its annual deficit and overall national debt. A strong economy that creates north of 200,000 jobs per month and discourages spending on foreign goods, services and vacations is what is needed. This, and a stable price for oil under $50/barrel, should put economic growth in the 4-5% range next year.
These ingredients already are converging. As such, 2005 may be a volatile year in organizations large and small. Demand for workers will increase and employees will have options they haven't enjoyed in several years -- lots of employment options. Turnover will increase as workers accept external job offers. No company will be completely immune. Even best-of-class employers have had a difficult time living up to the mantra "People are our No. 1 asset" in the past several years. Following more than three years of layoffs and rapid workforce restructuring, credibility will need to be restored for employers to be viewed as employers of choice again. For many, it will be challenging to convince the best workers to trust them and work for them when those workers suddenly have other options.
So, depending on your industry, the effects of a lower dollar may mean it's back to the 90s for many recruiters. Back to the campus, back to career fairs and back to the drawing board when it comes to designing a recruitment and retention program robust enough for the new reality.
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