by Jason Norris, CFA
Executive Vice President,
Equity Research and Portfolio Management
Earlier this week, my family and I were out to dinner when we saw a sign on the front door of the restaurant that read: “Being short staffed is the new pandemic… Thank you for your patience with us.” While we are familiar with the standard “help wanted” signs, specifically in the service sectors industry, you may have noticed a recent addition to these signs: signing bonuses. As the U.S. economy reopens and people are getting vaccinated, the Leisure and Hospitality segments are seeing a high demand for service while simultaneously struggling to entice workers. The supply and demand of labor is evident on ZipRecruiter, which recently reported that 20 percent of their job postings offer a signing bonus, up from 2 percent in March.
Photo by Tim Mossholder on Unsplash
While the employment picture continues to improve, we are seeing a record number of job openings, both reported by the U.S. Bureau of Labor Statistics, as well as the U.S. Small Business Survey. The chart below highlights the number of job openings relative to the number of people unemployed.
Source: Federal Reserve
Today’s U.S. Bureau of Labor Statistics jobs report showed good momentum in hiring as 850 thousand people were added to the payrolls. Over 40 percent of these gains were in the Leisure and Hospitality industry, however, this sector is still short workers. One of the most cited reasons for people staying out of the labor market is the enhanced federal unemployment benefits, which are set to expire in September. However, there are 22 states that have currently opted out of the program and a couple more will do so in July. Additionally, concern over coronavirus transmission is leading people to opt out of returning to work. Finally, childcare shortages continue to plague working parents, forcing some to wait until school is back in session in the fall. As we move throughout the summer and into the fall, we hope that small businesses are able to attract the workers they need to stay in business.
Schools Out
Speaking of school, Evercore ISI recently conducted a survey on school spending intentions. Parents are expected to spend 32 percent more this year for school costs. This spending is across the board on supplies and apparel. With the savings rate over 12 percent, which is double the long-term average, U.S. consumers have the money for a strong back-to-school season. With people getting back to work, pent up demand, and above average savings, we believe that exposure to the U.S. consumer is key when investing in equities.
Halfway There
2021 was one for the record books. With the S&P 500 returning over 14 percent in the first half, it was the thirteenth best first-half performance in the post-World War II era. Therefore, what should we expect in the second half?
Source: Strategas
The chart above highlights that even when stocks achieve over double digit returns in the first half of the year, historically, their overall returns perform better then the average. We believe this trend will continue as the global economy opens up and corporate profits continue to grow.
Week in Review and Our Takeaways:
Stocks were strong this last week with the S&P 500 rising over 1 percent as economic data showed healthy momentum
The bond market has put inflation concerns in the rearview window as the 10-year U.S. Treasury yield dropped below 1.45 percent