Private Client Group

September 5th, 2023

Stocks Rise As Job Market Cools, “Quiet Cutting”, New Businesses Up In U.S

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In this week’s issue of Steady Investor, we explore current events impacting the market, such as:

• Stocks affected by cooling labor market
• Rise in innovation and entrepreneurship
• Latest trends in the U.S. labor market

Stocks Bolstered by Signs of a Cooling Labor Market – The U.S. jobs market showed signs of cooling last month, and that’s been good news for stocks. The Labor Department reported that in July, job openings in the U.S. fell by 338,000 to 8.8 million, which is the lowest level of openings since March 2021 (see chart below).1

Source: Federal Reserve Bank of St. Louis2

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Why are falling job openings good for the stock market? Two words: The Fed. A key sticking point for the Federal Reserve has been trying to cool the labor market since few job openings have put upward pressure on wages. When job openings soared to a record 12 million in March 2022, workers had many options for work, which meant they could easily switch jobs for higher wages or negotiate with employers for better pay. Both actions are inflationary since higher wages lead to higher input costs, upward pressure on prices for goods and services, and more demand in the economy. With the somewhat tighter labor market, the “quits rate,” which measures resignations as a share of overall employment, has normalized at 2.3%. At the height of the tight labor market, the quits rate hit a record 3%. This is factors as good news for the Fed, whose mission is to cool the economy and the jobs market. That makes it good news for investors, who want to see the Fed’s monetary tightening campaign come to an end.

The Land of Innovation and Entrepreneurship – The U.S. economy is far from perfect, with nagging inflation and a weakening housing market. Entrepreneurs and innovators don’t seem to care. Americans are opening new businesses at a blistering clip, with a record number of national business openings posted in the first six months of 2023 (according to Yelp Economics). Every month to start the year has seen at least 15% more new businesses compared to the same month in the previous four years, with 25% year-over-year growth from 2022 and 46% more businesses than the same period in 2019. Of particular strength in new business openings has been in services and hospitality, arguably as Americans put the strong jobs market and higher wages to work. Hotels and travel companies are up 39%, home services up 37%, auto up 27%, and event services up 27%.4

The Latest Trend in the U.S. Labor Market: “Quiet Cutting” – In the spring of 2022, a trend emerged in the U.S. labor market known as “quiet quitting.” The labor market was so tight – with job openings far higher than the number of Americans seeking work – that some in the labor force ‘quietly’ started applying themselves less, either because they were anticipating making a move or because they felt confident that they could easily find another job. Though jobs are still plentiful in many areas of the economy, many technology firms have been seeking ways to cut costs and have been cutting back on the number of jobs they created during the pandemic boom. This has led to what is now being called “quiet cutting,” which means eliminating positions but keeping the workers. Companies like Adidas, Adobe, IBM, Salesforce, and others are engaging in corporate restructurings that sometimes mean eliminating departments or jobs, but they are also eager to keep the talent and avoid paying severance. That has meant some employees are showing up to work to an unexpected announcement: your job is gone but we have a different one for you.5

Protecting Your Retirement Portfolio Through Economic Downturns – As we wait to see how influential events, such as the ones above, can affect the economy in different ways, we recommend protecting your investments in the meantime and creating a retirement portfolio that meets your financial goals.

To help you do this, I recommend reading our guide, 7 Secrets to Building the Ultimate DIY Retirement Portfolio.6 It provides a step-by-step blueprint of our customized investing process to potentially help you build a sound retirement portfolio of your own and pursue long-term investing success.

If you have $500,000 or more to invest, get this guide to learn our ideas on the step-by-step process of building and maintaining a retirement portfolio that will potentially help you reach your goals and enjoy a secure retirement.

Disclosure

1 Wall Street Journal. August 29, 2023. https://www.wsj.com/economy/jobs/job-openings-slip-in-latest-sign-labor-market-is-gradually-slowing-b1cd05f5?mod=djemRTE_h

2 Fred Economic Data. August 29, 2023. https://fred.stlouisfed.org/series/JTSJOL#

3 ZIM may amend or rescind the “7 Secrets to Building the Ultimate DIY Retirement Portfolio” guide for any reason and at ZIM’s discretion.

4 Yelp. August 2023. https://www.yelpeconomicaverage.com/business-openings-report-h1-2023.html?mod=djemRTE_h

5 Wall Street Journal. August 27, 2023. https://www.wsj.com/lifestyle/careers/youve-heard-of-quiet-quitting-now-companies-are-quiet-cutting-ba2c326d?mod=djemRTE_h

6 ZIM may amend or rescind the “7 Secrets to Building the Ultimate DIY Retirement Portfolio” guide for any reason and at ZIM’s discretion.

DISCLOSURE

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts as an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney-client relationship. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.

Any projections, targets, or estimates in this report are forward looking statements and are based on the firm’s research, analysis, and assumptions. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of opinions are subject to change without notice. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed in this presentation.

Certain economic and market information contained herein has been obtained from published sources prepared by other parties. Zacks Investment Management does not assume any responsibility for the accuracy or completeness of such information. Further, no third party has assumed responsibility for independently verifying the information contained herein and accordingly no such persons make any representations with respect to the accuracy, completeness or reasonableness of the information provided herein. Unless otherwise indicated, market analysis and conclusions are based upon opinions or assumptions that Zacks Investment Management considers to be reasonable.

Any investment inherently involves a high degree of risk, beyond any specific risks discussed herein.

It is not possible to invest directly in an index. Investors pursuing a strategy similar to an index may experience higher or lower returns, which will be reduced by fees and expenses.
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