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Economics

Why Jobs are Plentiful While Workers are Scarce

In the US and UK, the recent labor market puzzle can be partly explained by mismatch, the pandemic’s effect on women (in the US) and older workers leaving the work force.

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By Carlo Pizzinelli and Ippei Shibata

In the US and UK, the recent labor market puzzle can be partly explained by mismatch, the pandemic’s effect on women (in the US) and older workers leaving the work force.

Almost two years after the pandemic upended labor markets, job openings are plentiful in many advanced economies, yet workers have not fully returned.

The broader trend of plentiful jobs and not enough workers can have major implications for growth, inequality, and inflation.

This gap, in which the employment rate is below its pre-COVID level, is playing out in the United States and the United Kingdom. Despite tight labor markets, as reflected in high vacancy-to-unemployment ratios and job quits, the employment recovery remains incomplete and below pre-pandemic levels in both countries. Now with a possible cooling effect on labor markets caused by the Omicron wave, this trend could be longer than expected.

New IMF staff research uses granular data on employment and vacancies in the US and the UK to assess four commonly held explanations:

  • The effect of generous income support on willingness to seek and take up jobs.
  • A mismatch between the types of jobs that are available and the willingness of people to fill them.
  • Mothers of young children exiting the work force amid continued disruptions to school and childcare.
  • Older workers withdrawing from the labor force.

We found that lower participation among older workers not returning to work is the common thread, and matters most. Mismatch plays a secondary role. The fall in female participation is unique to the US, but quantitatively important.

If the broader trend of plentiful jobs and not enough workers continues, it can have major implications for growth, inequality, and inflation. A continued sluggish employment recovery amid sustained labor demand could constrain economic growth while fueling wage increases. While higher wages would be good news for workers, they could further fuel inflation.

Generosity of income support programs

The first possible explanation is that income support programs during the pandemic allowed workers to be picky, slowing job applications, acceptances and, ultimately, the employment recovery.

However, preliminary evidence reviewed in our paper, including from the recent phasing out of the US federal unemployment insurance supplement, suggests the early removal of COVID-related unemployment benefits had only a modest and temporary effect on getting people back to work.

Mismatch

A second candidate explanation is an increase in the mismatch between the industries and occupations in which the jobless are searching and those with abundant vacancies. Jobs that require in-person interactions, such as in restaurants, hotels and entertainment, have been hit exceptionally hard, while “teleworkable” jobs fared substantially better. Others, like delivery services, even boomed. Could it be that workers who lost jobs in hard-hit industries and occupations struggled to transition into new opportunities, leading to mismatch?

The short answer is yes, but this is just one part of the story. We find that the employment loss due to mismatch during the crisis has been modest and, to our surprise, smaller than during the Global Financial Crisis. We estimate that, as of early last fall, mismatch explains only about 18 percent and 11 percent of the outstanding employment gap versus pre-COVID levels in the US and the UK, respectively.

The She-cession

A third explanation seems more potent, at least in the US. The prolonged school closures and scarcity of childcare services put an extra burden on mothers of young children, pushing many to leave the labor force—the so-called “She-cession.”

We estimate that the excess employment contraction for mothers of children younger than 5 years old compared with other women accounted for around 16 percent of the total US employment gap with respect to pre-COVID levels as of October 2021. That was down from 23 percent in early September, thanks partly to the return to in-person schooling later that month. Meanwhile, there was no such She-cession in the UK, where employment fell less for females than for males. A potential explanation is that in the UK nurseries remained opened throughout the pandemic, easing the tradeoff between work and childcare for mothers of young children.

Withdrawal of older workers

The final and potentially largest contributor to a lag in employment recovery is an exodus of older workers from the labor force in both countries. For some, this may reflect health concerns related to the pandemic. Others may have reconsidered their need to work as housing and financial asset prices grew substantially.

As of September, the rise in inactivity among workers age 55 and up accounted for around 35 percent of the outstanding employment gap versus pre-pandemic levels in both economies. It’s unclear how many of those who retired or quit may eventually return to the labor force.

Beware of scarring

Taken together, mismatch, the She-cession and older workers’ withdrawal from the labor force may account for roughly 70 percent of the US employment gap compared with pre-COVID levels. In the UK, there has been no She-cession, but about 10 percent of the employment gap can be attributed to mismatch and 35 percent to older workers’ withdrawal from labor force.

Further, the outflow of foreign workers after Brexit—accelerated by the pandemic—entailed a progressive fall in the number of those job seekers willing and able to fill open vacancies. Our analysis leaves a potential, albeit mostly residual, role for other factors such as the effect of elevated unemployment benefits and other pandemic-related income support.

If a larger number of older workers permanently retire and a lack of affordable childcare and pre-school opportunities continue to keep some women with young children at home, the pandemic could leave persistent employment scars, notably in the US.

Whether the reason for not returning to work is early retirement or lack of childcare, one common thread exists: US and UK vacancies are highest among low-skill occupations and employment in these jobs remains below pre-2020 levels. The rise in voluntary quits—the so-called “great resignation”—are also greatest for low-skilled jobs. While it remains to be seen how widespread and persistent this phenomenon will be, these facts hint at a possible change in worker preferences triggered by the pandemic.

To minimize the risk of scarring to employment, addressing the pandemic remains key, so workers are fully able to return to the labor market. So are well-designed training programs to reduce risks of mismatch, and—particularly in the US—expanded childcare and preschool opportunities.

 

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Economics

5 Top Consumer Stocks To Watch Right Now

Are these consumer stocks a buy amid the earnings season?
The post 5 Top Consumer Stocks To Watch Right Now appeared first on Stock Market News, Quotes,…

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5 Trending Consumer Stocks To Watch In The Stock Market Now         

As we tread through the earnings season, consumer stocks could be worth watching in the stock market this week. This would be the case since a number of big consumer names such as Costco (NASDAQ: COST) and Macy’s (NYSE: M) will be posting their financials for the quarter. As such, investors will be keeping an eye on these reports for clues on the strength of consumer spending amid this period of high inflation.

However, despite the soaring prices across the economy, it seems that consumers are surprisingly showing resilience. According to the Commerce Department, retail sales in April outpaced inflation for a fourth straight month. This could suggest that consumers as a whole were not only sustaining their spending, but spending more even after adjusting for inflation. Ultimately, it could be a reassuring sign that consumers are still supporting the economy and helping to diminish the narrative of an incoming recession. With that being said, here are five consumer stocks to check out in the stock market today.

Consumer Stocks To Buy [Or Sell] Right Now

Nordstrom

retail stocks (JWN stock)

Starting off our list of consumer stocks today is Nordstrom. For the most part, it is a fashion retailer of full-line luxury apparel, footwear, accessories, and cosmetics among others. The company operates through multiple retail channels, boutiques, and online as well. As it stands, Nordstrom operates around 100 stores in 32 states in the U.S. and three Canadian provinces.

Yesterday, the company reported its financials for the first quarter of 2022. Starting with revenue, Nordstrom pulled in net sales worth $3.47 million for the quarter. This marks an increase of 18.7% from the same quarter last year. Its Nordstrom banner saw net sales rise by 23.5% year-over-year, exceeding pre-pandemic levels. Next to that, its Nordstrom Rack banner saw a 10.3% increase in net sales from last year. Besides, net earnings were $20 million, with earnings per share of $0.13 for the quarter. Considering Nordstrom’s solid quarter, should you invest in JWN stock?

[Read More] Best Stocks To Invest In Right Now? 5 Value Stocks To Watch This Week

The Wendy’s Company

best consumer stocks (WEN stock)

Next up, we have The Wendy’s Company. For the most part, it is the holding company for the major fast-food chain, Wendy’s. Being one of the world’s largest hamburger fast-food chains, the company boasts over 6,500 restaurants in the U.S. and 29 other countries. The chain is known for its square hamburgers, sea salt fries, and the Frosty, a form of soft-serve ice cream mixed with starches. WEN stock is rising by over 8% on today’s opening bell.

According to an SEC filing, Wendy’s largest shareholder, Trian Partners, is looking into making a potential deal with the company. Trian said that it is considering a deal to “enhance shareholder value.” Also, the firm adds that this could lead to an acquisition or business combination. In response, Wendy’s stated that it is constantly reviewing strategic priorities and opportunities. It added that the company’s board will carefully review any proposal from Trian. Given this piece of news, will you be watching WEN stock?

[Read More] 4 Semiconductor Stocks To Watch In The Stock Market Today

Foot Locker

FL stock

Another stock investors could be watching is the shoes and apparel company, Foot Locker. In brief, the company uses its omnichannel capabilities to bridge the digital world and physical stores. As such, it provides buy online and pickup-in-store services, order-in-store, as well as the growing trend of e-commerce. Some of its most notable brands include Eastbay, Footaction, Foot Locker, Champs Sports, and Sidestep. Last week, the company reported its results for the first quarter of the year.

For starters, total sales came in at $2.175 billion, a slight uptick compared to sales of $2.153 billion in the year prior. Next to that, Foot Locker reported a net income of $133 million. Accordingly, adjusted earnings per share came in at $1.60, beating Wall Street’s expectations of $1.54. CEO Richard Johnson added, “Our progress in broadening and enriching our assortment continues to meet our customers’ demand for choice. These efforts helped drive our strong results in the first quarter, which will allow us to more fully participate in the robust growth of our category going forward.”  As such, is FL stock one to add to your watchlist? 

Tyson Foods 

TSN stock

Tyson Foods is a company that built its name on providing families with wholesome and great-tasting protein products. Its segments include Beef, Pork, Chicken, and Prepared Foods. With some of the fastest-growing portfolio of protein-centric brands, it should not be surprising that TSN stock often comes to mind when investors are looking for the best consumer stocks to buy. 

Earlier this month, Tyson Foods provided its fiscal second-quarter financial update. The company’s total sales for the quarter were $13.1 billion, representing an increase of 15.9% compared to the prior year’s quarter. Meanwhile, its GAAP earnings per share climbed to $2.28, up 75% year-over-year. According to Tyson, these financial figures are a reflection of the increasing consumer demand for its brands and products. To top it off, the company was also able to reduce its total debt by approximately $1 billion. Thus, does TSN stock have a spot on your watchlist?

[Read More] Stock Market Today: Dow Jones, S&P 500 Rise, Wendy’s Stock Gains On Potential Deal

DoorDash

food delivery stocks (DASH Stock)

DoorDash is a consumer company that operates an online food ordering and delivery platform. In fact, it is one of the largest delivery companies in the U.S. and enjoys a huge market share. The company connects hundreds of thousands of merchants to over 25 million consumers in the U.S., Canada, Australia, and Japan through its local logistics platform. Accordingly, its platform allows local businesses to thrive in today’s “convenience economy,” as the company puts it.

On May 5, the company reported its first-quarter financials for 2022. Diving in, it posted a revenue of $1.5 billion, growing by 35% year-over-year. This was driven by total orders that grew by 23% year-over-year to $404 million. Along with that, it reported a GAAP gross profit of $662 million, an increase of 34% year-over-year. The company said that it added more consumers than any quarter since Q1 2021, due in part to the growth of its DashPass members. The growth in Monthly Active Users and average order frequency has helped it gain share in the U.S. Food Delivery category this quarter as well. Given DoorDash’s performance for the quarter, should you watch DASH stock?

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The post 5 Top Consumer Stocks To Watch Right Now appeared first on Stock Market News, Quotes, Charts and Financial Information | StockMarket.com.

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Economics

Philly Fed: State Coincident Indexes Increased in 50 States in April

From the Philly Fed: The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for April 2022. Over the past three months, the indexes increased in all 50 states, for a three-month diffusion index of 100. Additiona…

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From the Philly Fed:
The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for April 2022. Over the past three months, the indexes increased in all 50 states, for a three-month diffusion index of 100. Additionally, in the past month, the indexes increased in all 50 states, for a one-month diffusion index of 100. For comparison purposes, the Philadelphia Fed has also developed a similar coincident index for the entire United States. The Philadelphia Fed’s U.S. index increased 1.1 percent over the past three months and 0.3 percent in April.
emphasis added
Note: These are coincident indexes constructed from state employment data. An explanation from the Philly Fed:
The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing by production workers, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average). The trend for each state’s index is set to the trend of its gross domestic product (GDP), so long-term growth in the state’s index matches long-term growth in its GDP.
Click on map for larger image.

Here is a map of the three-month change in the Philly Fed state coincident indicators. This map was all red during the worst of the Pandemic and also at the worst of the Great Recession.

The map is all positive on a three-month basis.

Source: Philly Fed.

Philly Fed Number of States with Increasing ActivityAnd here is a graph is of the number of states with one month increasing activity according to the Philly Fed. 

This graph includes states with minor increases (the Philly Fed lists as unchanged).

In April all 50 states had increasing activity including minor increases.

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Economics

Finding Shelter in an Inverse ETF

As the old saying goes, “What goes up must come down.” Indeed, up until the recent selling wave caused by Russia’s war against Ukraine and the continued…

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As the old saying goes, “What goes up must come down.”

Indeed, up until the recent selling wave caused by Russia’s war against Ukraine and the continued effects of supply chain disruptions amid the COVID-19 pandemic, tech stocks, including semiconductors, were the darlings of the investment world. That is, it seemed as if the sky-high valuations of some tech stocks were sustainable in an atmosphere of seemingly perpetual growth.

That, of course, was not the case, and the too-good-to-be-true valuations were quickly brought down to earth by the forces of inflation and tight monetary policy. As a result, the tech-heavy Nasdaq entered a free-fall that has not yet found a bottom.

At the same time, that does not mean that we should abandon the sector as a lost cause. One such way to play the sector during its downhill slide is the exchange-traded fund (ETF) Direxion Daily Semiconductor Bear 3X Shares (NYSEARCA: SOXS).

As its title suggests, this is an inverse ETF, meaning that it is built to go up in value when its parent index goes down. Specifically, SOXS provides three times leveraged inverse exposure to a modified market-cap-weighted index of semiconductor companies that trade in American markets by using swap agreements, futures contracts and short positions.

While the index’s holdings are weighted by market capitalization, the fund’s managers cap the weights of the top five securities in the portfolio at 8% each. The weight of the remaining securities is capped at 4% each.

As of May 24, SOXS has been up 0.37% over the past month and up 24.73% for the past three months. It is currently up 60.47% year to date.

Chart courtesy of www.stockcharts.com

The fund has amassed $258.15 million in assets under management and has an expense ratio of 1.01%.

In short, while SOXS does provide an investor with a way to invest in an inverse ETF, this kind of ETF may not be appropriate for all portfolios. Thus, interested investors always should conduct their due diligence and decide whether the fund is suitable for their investing goals.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

The post Finding Shelter in an Inverse ETF appeared first on Stock Investor.

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