The Bureau of Labor Statistics released today the Job Openings and Labor Turnover Survey (JOLTS) with a mix of good and bad news. Here is a summary of key data from the December JOLTS report:
• Job openings: 6.6 million
• People hired: 5.5 million
• People who left their jobs (total): 5.5 million
• People who left their jobs (voluntarily quit): 3.3 million
• People who left their jobs (layoffs and discharges): 1.8 million
While it is good that job openings are increasing faster than those being hired, almost as many who were hired in January was matched by as many who left their job with the majoring leaving voluntarily – presumably for better opportunities or working conditions. The chart below illustrates last April’s significant drop of job openings that had recovered, but still well below previous levels in 2019.
The Bureau of Labor Statistics Employment Situation Report released on Friday stated the unemployment of those sixteen or older fell by 0.4 percentage point to 6.3 percent in January, while nonfarm payroll employment changed little (+49,000). From the report it stated,
“There were notable job gains in professional, and business services and in both public and private education were offset by losses in leisure and hospitality, in retail trade, in health care, and in transportation and warehousing.”
The same report noted that the civilian noninstitutional population is 231 million with a participation rate of 66.4% compared to January 2020 data of 228 million employed and participation rate of 68.7% (note January 2020 fewer workers but higher participation). Most dramatic is the increase in the number of people not in the labor force. Since January 2020, 5.9 million people have left the labor force. The report did not offer an explanation to the decline, but one would surmise a majority included those retiring and parents with kids choosing not to return to work.
The focus on employment provides insight into the health of the economy as consumer household spending represents 66% of the US economy commerce. We have noted a distinct correlation of employment to consumer confidence. The more of the population that is employed, the higher consumer confidence readings and the higher probability of consumer spending.
While it is good the employment and job markets are improving; they still remain well below pre-pandemic levels.
What Does This Mean to Me?
The year 2020 caused all to reduce their discretionary spending either due to business closures, job losses, or simply being conservative during worldwide disruptions. Many governors still maintain State of the Emergency status with restrictions on businesses challenging economic recovery. Even though these restrictions have remained in place far longer than many intended, the good news is the recovery of businesses and their profits still have more upside, returning to just pre-covid levels. It is difficult to agree with doom and gloomers citing an overextended stock market when the business marketplace is still functioning at comprised levels. The 2020 shutdown of America extended the stock market rally with institutional investors concentrating their portfolios in a narrow list of industries that included technology, communication, and online providers.
The S&P 500 continues to hold well above its 200 Day Moving Average and the topic of many concerned about its extended rally.
However, what is not mentioned is that the top seven holdings of this index are Apple (6.66%), Microsoft (5.58%), Amazon (4.36%), Tesla (1.97%), Facebook (1.96%), and two holdings of Alphabet Inc (1.91% & 1.86%). In total, these seven high-performing stocks represent 24.3% of the index, and understandably why the index continues to power forward. If and when the health restrictions relax (starting with a personal choice mask policy), institutional investors may rotate their portfolios to sectors formally lagging these past 4 quarters that may become the next leaders. Sectors we are paying attention are those industries impacted the worst by covid related restrictions, including retail, dining, entertainment, travel, leisure, hospitality, hotels, commercial properties, events, public forums, conventions, etc., that hopefully will experience recovery this year.
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