June 15, 2021
Global Investment Strategy Team
Why we expect hiring headaches to continuecall out end call out
Ratio of hiring to job openings has fallen, while more small businesses report challenges filling jobscall out
We expect labor-market conditions to remain tight in coming months, as strong economic growth collides with a limited supply of available workers. The paradox of worker shortages despite an unemployment rate that is more than 70% above its pre-pandemic low speaks volumes about labor-market dislocations aggravated by booming demand.
Some of the shortfall is structural, including shifts in demand, a chronic shortage of transportation and other skilled labor, and the early retirement of older workers during the pandemic. And some of the shortfall may reflect enhanced unemployment insurance discouraging workers from returning to their jobs and the impact of the pandemic on childcare availability and concern over returning to work.
What it may mean for investorscall out
- Our expectation is that strong economic growth, with labor-market supply constraints, will remain in place through the second half of 2021.
- We expect the unemployment rate to finish the year at 4.7% — more than a percentage point above the pre-pandemic low of 3.5% — for several reasons: the permanent loss of business establishments that closed during the economic shutdown; lingering dislocations between unemployed and labor demand; and structural changes in the economy that were caused by the pandemic.
Risk Considerationscall out
Each asset class has its own risk and return characteristics. The level of risk associated with a particular investment or asset class generally correlates with the level of return the investment or asset class might achieve. Stock markets, especially foreign markets, are volatile. Stock values may fluctuate in response to general economic and market conditions, the prospects of individual companies, and industry sectors. Bonds are subject to market, interest rate, price, credit/default, liquidity, inflation and other risks. Prices tend to be inversely affected by changes in interest rates. High yield (junk) bonds have lower credit ratings and are subject to greater risk of default and greater principal risk.
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