Mobility USA: in good shape?

As the presidential election approaches and repercussions from the UK’s vote to leave the EU continue, Relocate assesses the state of global mobility and domestic relocation in the USA.

Re:US Focus

See more features about the mobility industry in the Autumn 2016 issue of Relocate magazine on our Digital Issues page.

Having grown faster than was expected in the first quarter of 2016, thanks in part to strengthening export sales of goods and services, the US economy’s performance during the second quarter presented a mixed picture.In its press release for Q2, issued in late July, the US Department’s Bureau of Economic Analysis said that gross domestic product had increased at an annual rate of 1.2 per cent, though it emphasised that this figure was subject to revision.Saying that the US economy appeared to have “lost steam” as it entered its eighth year of expansion, the Wall Street Journal (WSJ) warned that it remained vulnerable in the face of global economic turmoil.Business investment, said the WSJ, had fallen the most in six years, owing to depressed oil markets. On the plus side, consumer spending and real disposable incomes had grown, and the housing market had continued its recovery.July saw construction of new homes rise at its fastest rate in nearly a year, led by growth in apartment building in the north-eastern US. This has increased hopes of an improvement in the economy in the third quarter.Another positive sign was that overall industrial output, which measures factory, utilities and mining production, beat analyst’s predictions, rising by 0.7 per cent.In mid-August, news that US core inflation (used by the Federal Reserve as a key metric for deciding when interest rates should rise) for July was lower than expected, made it likely that rates would remain unchanged for the rest of 2016.Following what it described as “a weak spring”, the Washington Post reported that the US jobs market had added a “healthy” 255,000 jobs in July, with hiring strong across almost every major industry.Said the Post, “Professional and business services added 70,000 jobs, including computer systems designers, architects and consultants. Healthcare employment rose by 43,000, while the financial industry gained 18,000 jobs.“Even the government hired more workers, adding 38,000 positions, primarily in local education. However, mining continued to suffer job losses.”However, the Post added that the labour market’s “remarkable strength” had not been enough to “overpower the broader forces holding back the economy”. Peggy Smith, president and CEO of the Worldwide ERC, says, “With our mobility focus, we keep a close eye on hiring and wage increases, since those are signals of economic expansion. As of early September, three consecutive months of increases showed that the American labour market appears to be moving into higher gear, and the most recent Federal Bureau of Labor Statistics jobs report noted that unemployment was steady at 4.9 per cent.”

Challenges for global mobility

What does this mixed economic picture mean for companies’ relocation and global mobility priorities?Says Dale Collins, chief innovation officer of Graebel Relocation Services Worldwide and current chairman of the Worldwide ERC board, “Economic growth generally acts as a stimulus to relocation, domestically and overseas. When the economy is growing, companies are more focused on how to create new markets, capture market share and innovate for growth, and less focused on reducing spend across all categories – including mobility.
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“At the same time, companies in search of growth need to tap new markets, so they can’t afford not to continue talent mobility programmes. What we’re seeing is companies trying to do more with less, to manage spend while getting the greatest return on investment. That means an increased focus on mobility policies and programme management, and more interest in best practices.”Laurette Bennhold-Samaan, COO of talent development consulting and training provider Aperian Global, is also noticing a continuing focus on cost control combined with the need to invest in talent. “Our clients express their need to continuously reduce costs, address talent gaps and talent management shortages, remain creative and innovative, and better utilise technology.“Those who have mastered how to address and respond to these challenges remain viable and cutting edge. Businesses have been, and will need to, adjust to shifting demographics and workforce preference to build new capabilities and revitalise their organisations.”The major sectors for relocation haven’t changed, according to Dale Collins. “The most active, from a mobility standpoint, continue to be financial services, manufacturing and pharmaceuticals. The technology sector also is a major driver, though, ironically, advances in technology make it easier to do business globally without moving people.“At the same time, companies with the most advanced global mobility programmes believe there is no substitute for being there when it comes to developing new markets, building relationships, and leading people.”

Sourcing talent

Laurette Bennhold-Samaan points out that expatriates are just one source of talent. Other options are to leverage local or regional talent, use more short-term or rotational assignments, or move parts of the organisation to the location in which the necessary talent can be found.Peggy Smith says, “Our HR and supplier members are bullish on volume, but, as always, there are continued cost pressures. On the supplier side, companies are caught between needing to make investments to remain competitive even as their margins are declining.“From the corporate perspective, there’s the challenge of a changing workforce mobility landscape, with more demands to get the right people in the right place. That can be complicated by other issues – for example, lump-sum assistance and extended business travellers.”
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Jen Tanella is VP of business transformation at relocation management company TheMIGroup. She says there has been a big push towards more of an advisory role in working with corporate clients to help them achieve their business objectives. One of the best examples of this concerns the different types of data and analytics with which the group is providing its clients to give them greater insights into their assignee populations.Clients, says Ms Tanella, are eager to have a more complex profile of their assignees, so they can evaluate more effectively whether their relocation policies are addressing the right concerns for the right people in their organisations.Jen Tanella explains, “We want to be able to apply the data that we gather on our clients’ assignee populations and provide more strategic direction. We are really shifting, with new clients and current clients, by looking at what the profile of their assignee population looks like, and how we can track that data for them in a more cohesive way, and then report on it.”She adds, “When we have our annual business reviews with our clients, we are not just talking about the typical stuff, like how much money they have spent on different policy elements, but we are actually marrying those policies to their assignee or transferee profiles.”

Keeping pace with change

Dale Collins adds that, overall, especially in the US and the EU, we are seeing the underpinnings of a global economy – the free movement of people across borders, free trade agreements and harmonised tax regimes – coming under increasing scrutiny. This, he says, “raises the stakes” for companies whose growth plans depend on mobility.Bill Paxton, COO of Paxtons, which provides removals, relocation and logistics management services across the US and internationally, says, “Positive movement in US unemployment rates, existing home sales, and consumer confidence are all contributing factors to the current business environment and trends in global mobility.
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“According to the American Moving & Storage Association, corporate relocation represents a little over a third of household goods revenue, while the remaining 64 per cent is composed of individuals, military, and the government. While corporate relocation increased in 2015, budgets that had been previously reduced in the recovering economy were slow to bounce back, but that is slowly growing in 2016.“The key is keeping pace with relocation volumes, types, seasonal surges, policies and practices, and what is driving employee relocation. For example, the average age of employees relocating is under 36 years, driving more entry-level and mid-level positions as well as the approach and what’s important to relocating young professionals.”

In search of growth

As expansion into overseas markets continues, where are US companies sending their international assignees?A recent survey of international relocation destinations by Cartus showed that US-based employees were most likely to be relocated to the UK, Canada or China. Other destinations in the Cartus top ten were India, Singapore, Germany, Japan, the Netherlands, Saudi Arabia and Australia.
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“The global search for growth opportunities and talent is continuing to drive mobility, even in the face of macroeconomic headwinds,” says Matt Spinolo, executive VP at Cartus. “At the same time, global companies based in the developing world are looking to tap markets in developed economies like the US, the UK and Europe. That requires talented executives on the ground.“So while talent historically has migrated primarily from developed to developing nations, we’re seeing increasing traffic moving in the opposite direction, too.”The latest annual Corporate Relocation Survey from Atlas Van Lines shows relocations originating in the US going to a number of regions, with Canada (34 per cent), Asia (29 per cent), the UK (23 per cent), Western Europe (22 per cent) and Eastern Europe (22 per cent) making up the top six. The US was once again the top region for intraregional transfers.“Despite comparatively sluggish economies in key markets, global economic integration is increasing, as companies seek new markets to drive growth," says Dale Collins. “Growth is an imperative for companies and brands, and to grow, you must have a meaningful presence in the largest developing economies, like China, India and Brazil."

US still a mobility magnet

Year after year, the US features as a top relocation destination in major global mobility surveys. Where are the moves coming from and why, and what are the main industry sectors?Among Cartus’s clients, the top three countries sending volume into the US are India, Canada and the UK.“The vast majority of the volume from India,” says Matt Spinolo, “continues to be IT-related technicians and professionals. Some of these employees work for IT firms that sell consulting, customisation, and installation projects to other firms, and some are in-house IT technical staff.“There are some oil-related transfers from Canada back to the US as the low world market price of oil shutters development projects and slows other production sites with high costs. Additionally, Canada has become a source of software-development talent, and some of our volume relates to companies repositioning talent to support new projects elsewhere.”Of the UK, Matt Spinolo says, “Our clients seem reasonably active both in and out, and our volume is a mix of financial, IT, industrial and consumer goods firms rotating talent.”China, Brazil, Singapore, Mexico, the Netherlands, Australia and Germany complete the Cartus top ten.

Embracing diversity

Diversity is playing a key role in the run-up to the US election, as Laurette Bennhold-Samaan explains. “According to the Pew Research Center, the US voters this year will be the country’s most racially and ethnically diverse ever. Nearly one in three of those eligible to vote will be Hispanic, black, Asian, or from another racial or ethnic minority, up from 29 per cent in 2012.“Much of this change is due to strong growth among Hispanic eligible voters, in particular US-born youth.“The US is accustomed to diversity, as currently most expatriate assignments globally are to the US. If a president is elected who embraces less diversity, we may perhaps see a decline of interested expat talent wanting to take on US assignments.“Even with the potential for the first woman president and the voter population being more diverse, there is an ever-growing need to better understand our own lens of culture – how we view each other and the world – in order to live and work together effectively.”
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Credit: Tom Evans and No. 10
Commenting on the historical significance of Hillary Clinton’s nomination for the presidency, Peggy Smith says, “There is synchronicity with this timing that may or may not be coincidental when we look at what’s happening in the corporate arena.“Diversity and inclusion are pivotal points for many companies these days; it’s well documented that those companies that successfully incorporate these two elements in their strategies outperform those that don’t.“We are increasingly more transparent, so gender and pay equality are scrutinised more closely. And just as organisations need to integrate systemic practices to build a female talent pipeline, so does our government.”However, with women comprising only 20 per cent of today’s international assignees, it’s clear that gender equality still has some way to go.Currently based in TheMIGroup’s London office, global account manager Tina Abdulla is herself an expat. She understands the challenges and lack of expatriate assignment opportunities women often face.Referring to the recent PWC report Modern Mobility: Moving Women with Purpose, Ms Abdulla says, “You are faced with companies that want to have top talent employees and want to be globally strategic, but they may not actually be utilising their full potential.“The 71 per cent of women who want to go on global assignments could be some of the company’s top talent or future global leaders, but companies are not tapping into that talent pool, which is a key strategy when looking at global mobility and demographics.”Tina Abdulla adds, “Perhaps the most compelling case for companies seeking to engage their female employees in their mobility programmes is the PWC finding that 64 per cent of women indicate that international assignment opportunities are critical for an employer to attract and retain them.“With the ongoing war for talent, this information becomes invaluable for HR and mobility teams.”

Brexit implications

Where Brexit is concerned, the picture is complex and uncertain, particularly because there is no precedent for the UK government to follow in its forthcoming negotiations, since no country has ever before left the EU. David Everhart, president of Aperian Global, is based in London. “It is still unclear what the full impact of Brexit will be to US companies invested in the UK,” he says. “Some US-based firms, mostly financial services companies, announced very quickly in the wake of the vote that they planned to move jobs from London to Europe, but few have yet taken much action.“Because the British pound has fallen in value, international tourism remains very strong. The overriding sentiment seems to be ‘let’s wait and see’. The disaster scenarios predicted before the vote have not yet happened, and the FTSE and other stock markets have fully recovered or are above their pre-Brexit levels.“There is a growing feeling of confidence in London that, at least in the short term, the Brexit vote will have less of a negative impact than originally feared. For US companies in the UK, the best advice is pay very close attention to trends going forward, but don’t panic.”As Dale Collins points out, this wait-and-see attitude means that corporate decisions on growth and investment are being put on hold.“It’s far too early to tell what impact Brexit will have,” he says. “The UK and the EU potentially have as much as two years of negotiation ahead of them as they decouple. And this disengagement isn’t happening in a vacuum – there are other dynamics at play within the EU. There could be further disruptions.”He adds, “There’s a lot of uncertainty in the world right now, with the US presidential election playing a destabilising role as well. At the same time, uncertainty and dynamic change, like Brexit, heighten the need for thoughtful talent management planning and strategy, with flexible mobility programmes that can be adjusted or redirected as circumstances evolve.“The best substitute for a crystal ball is the ability to foresee a range of policy outcomes that impact mobility, and to have a game plan for each.”Bill Paxton says, “While US banks and the financial services sectors have the largest potential shift at risk, at Paxton we have seen normal assignment activity in and out of the UK, but have not seen any of our current clients exiting the UK to other EU member states.“One of our US financial clients with major operations in the UK has seen increased assignments to and from the UK/US and the UK/Asia in support of their strategic growth, not necessarily due to Brexit.”Cartus suggests that the fall in Treasury rates that followed the Brexit vote may result in an all-time low for US mortgage rates. Low rates could cause increased demand for homes as well as loan refinancing.

The rise of rentals

Although there has been an upturn in home sales across the US, the question of whether to rent or buy continues to be a hot topic in corporate relocations, Bill Paxton is finding.“According to a 2015 Worldwide ERC transfer survey,” he says, “renting has become a common choice, especially among younger working Americans. reports that nearly six out of ten Millennials say that affordability, with ‘inherent freedom’, is a key reason for choosing to rent. Bill Paxton adds, “Corporations support with relocation assistance existing homeowners who wish to purchase in the new location, even though more than half of companies report seeing an increase over the past three years in the number of home-owning transferees choosing to rent, as the Worldwide ERC survey showed.“For US inbound assignments, most corporations are still staying clear of new home purchases, and encourage assignees to rent. In the US, most assignees will even sign their own leases. Permanent transfers to the US are more likely to purchase. We must remember, though, that relocating homeowners represent a small portion of the overall US housing market.”Exchange rates are among the factors affecting the current housing picture for international assignees. Says Dale Collins, “A stronger dollar obviously makes inbound moves to the US more costly for companies in the UK and Europe, but they really don’t have any choice.“Across virtually every industry sector, the US market simply is so huge that international companies cannot opt out, even in the face of less-favourable exchange rates. Currency-driven costs for mobility are a rounding error compared with the opportunity cost of a diminished presence in the world’s largest economy.“For inbound moves to the US, the housing-cost calculus is similar to currency impacts. Even if housing costs are on the rise in key US cities, the question is: can your company afford not to be here?”Rising property prices in some parts of the country are impacting employees relocating domestically.“I’ll give you two examples from Colorado, where Graebel is based,” says Dale Collins. “Charles Schwab has built a 47-acre campus in south suburban Denver that ultimately will employ 4,000 people – more than three times as many as its San Francisco headquarters, where housing costs are through the roof.“And Google is building a new campus in Boulder, with plans for up to 1,500 employees. Housing in Boulder is not cheap, but Boulder and nearby towns are much more affordable than Mountain View and surrounding communities in Silicon Valley.”

For more news and features about the mobility industry, visit our Mobility Industry section.

The following sections may also be of interest: International Assignments, Human Resources

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