Global Talent Update - November 2018

GlobeEurope, Middle East and Africa

Negotiations between the U.K. and European Union have taken place over the past several months regarding the former's plan to follow through on the Brexit public referendum and break from the EU as of March 29, 2019, according to BBC News. British Prime Minister Theresa May has, throughout this process, aimed to appease hard-line members of her ruling Conservative Party, while also lobbying for certain trade agreements with EU leaders that will serve as a safety net for the British economy.

This effort hasn’t been very successful: Both pro- and anti-Brexit ministers to Parliament, in addition to other prominent business and political figures, have criticised the deal, and The New Yorker reported that May's own party may soon demand a vote of confidence in her leadership, which could ultimately drive her to resign as PM. In that event, the Labour Party could attempt to form a minority government under the stewardship of Jeremy Corbyn, or a general election would be called.

With November's end approaching, the risk of the U.K. completing its separation from the EU with no deal in place - and Britain thus subject to all of the restrictions placed upon non-member states - is greater than ever before. The consensus among many, regardless of political opinion, seems to be that any deal between the U.K. and EU will be better than no deal. BBC News reported that various agricultural business leaders throughout Northern Ireland, who would arguably be affected the most if a no-deal Brexit were to occur, appear to cautiously support the existing deal given its assurances that the U.K. state can freely export goods into the Republic of Ireland and elsewhere. Northern Ireland is also home to the pro-Brexit Democratic Unionist Party, a conservative group that would likely welcome a no-deal Brexit - further proof of how labyrinthine and polarising this issue has become.

The economy of Germany has generally done well over the last several years, but signs of trouble began to appear earlier in 2018 with declines in the country's manufacturing sector. Most recently, these problems manifested as the economy's first GDP contraction since 2015 - a 0.2 per cent drop between the last two quarters, according to Reuters. Some seem to believe this indicates that more difficulties are soon to come, while others say the issue is being blown somewhat out of proportion, including German Economy Minister Peter Altmaier.

"A 0.2 per cent contraction isn't a catastrophe," Altmaier said to Reuters.

He further pointed out that this decline stemmed almost entirely from external factors - difficult export markets worldwide, the uncertain future of Brexit and a variety of different trade conflicts - rather than economic problems endemic to Germany. Additionally, on a year-over-year basis, GDP grew 1.1 per cent in the third quarter of 2018. The issues Germany is facing should be taken seriously, but it will be equally important for businesses not to act rashly as a result of them, given their potentially transitory nature.

Asia-Pacific

Similar to Germany's current situation, Japan is seeing economic troubles that stem from factors the government (or any institution, for that matter) couldn't have anticipated or controlled. In Japan's case, a series of natural disasters has torn through the country over the course of the year: According to CNN, during early September, a magnitude 6.7 earthquake struck only a few days after the strongest typhoon to hit the nation's shores in 25 years. Taken together, these events killed at least 30 people. Earlier in the year, severe floods and heat waves caused significant property damage in addition to illness, injury and death.

The business closures and other delays caused by these disasters are seen as the biggest factor behind the 1.2 per cent contraction in annualized economic growth that Japan experienced during Q3 of 2018. According to BBC News, industrial production, export sales and domestic spending all suffered. On one hand, some of these declines are likely temporary, but on the other, issues like trade conflicts remain worthy of close attention.

Aside from exporting various manufactured goods, tourism serves as the bread and butter of Thailand's economy. Issues it faces loom large on the country's fiscal well-being. As such, a drop in the country’s tourism dollars, recently contributed to overall GDP growth that fell short of expectations. Citing data from the National Economic and Social Development Board, Financial Times reported GDP expansion of 3.3 per cent during Q3 2018, below Q2's 4.6 per cent growth and less than economists' predictions of a 4.2 per cent uptick.

The NESDB said improvements to the tourism industry should be among the economy's biggest priorities to bring the nation back to its position as a rising economic power in Southeast Asia. Certain factors lie beyond its control, however, such as the trade disputes that could affect its export sales.

Americas

The U.S. labor force experienced a significant surge in October - a welcome return to form after a somewhat sluggish September. According to the latest Employment Situation Summary released by the Bureau of Labor Statistics, nonfarm payroll businesses all over the U.S. added a total of 250,000 jobs during the month. This represented a major increase - practically 100 per cent - over the 118,000 new roles created in September (revised down from an initial 134,000), and one of the biggest months for job growth seen during 2018. Bloomberg reported that October's figure was also considerably greater than the 200,000 new jobs its surveyed economists had expected. Meanwhile, the unemployment rate held steady at 3.7 per cent for the second month in a row.

Ward McCarthy, chief financial economist at the investment bank Jefferies LLC, spoke enthusiastically about the report when interviewed by Bloomberg.

"The labor market is cookin', and that's the bottom line," McCarthy said to the news provider. "What's really impressive is that the unemployment rate would've declined if the participation rate hadn't risen, and that's a good thing. You still have more people coming back to the labor market."

McCarthy's reference to labor force participation, which rose to 62.9 per cent in October, is notable, as many consider it a better gauge of overall workforce strength than the unemployment rate.

By industry, leisure and hospitality created more new roles than any other sector, with 42,000 positions added to its payrolls. Healthcare and professional services were not far behind, however, with 36,000 and 35,000 jobs created, respectively. Manufacturing, construction and transportation also saw considerable gains, with 32,000, 30,000 and 25,000 jobs added. Last but not least, average hourly earnings rose 3.1 per cent on a year-over-year basis, greater than the 2.8 per cent yearly gain seen in September.

Despite a year marked by no small amount of political and financial uncertainty, the Mexican economy showed notable resilience and capacity for expansion during 2018, according to the latest analysis by the International Monetary Fund. In the IMF's annual economic assessment, the organization predicted that overall economic growth - in terms of real gross domestic product - for 2018 would reach 2.1 per cent. This is a modest but noteworthy improvement on 2017's 2 per cent and especially encouraging in light of the decline 2017 saw, falling from 2016's GDP growth rate of 2.9 per cent. The IMF additionally projected that 2019 would be a continuation of upward trends, with initial estimates of 2.3 per cent real GDP growth.

Certain factors are still of concern to Mexican government and financial leaders, such as the high public debt, which is equivalent to 54 per cent of the country's GDP as of 2018. Additionally, there are indications of tension between President-elect Andres Manuel Lopez Obrador and the nation's financial establishment: According to Reuters, the Bank of Mexico hiked its overnight interbank benchmark interest rate by 25 basis points, in what some view as a rejoinder to Obrador's populist-leftist political beliefs.

The national bank issued a statement saying the hike was driven by fear of increased inflation, but acknowledged "markets' concerns regarding both the incoming administration's policies and some legislative initiatives" played a role. It also claimed these issues caused a slight decline in the peso's value.

 

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