The Eostre Bunny Cometh
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Job Openings were up 31.2% from January 2020 for the least-educated workers and -2% overall in the week ended March 19, per Opportunity Insights; though Time Spent Outside the Home: Workplace is still down 25.9%, at -8.4%, restaurant traffic is at a post-C19 high
Upper-Income households expect unemployment to fall, a strong sign given their influence in hiring decisions, per UMich’s consumer survey; however, undue fiscal largesse from untargeted stimulus could pose a labor supply constraint and delay the jobs recovery
M&A activity has clocked a record pace in the last six months, while bankruptcies, per Bloomberg, have picked up anew; risks remain that optimism regarding restructurings will be overrun by the reality of cost-cutting measures and a continued rise in insolvencies
Some mysteries need not be resolved, especially when chocolate is involved. For historical sticklers, the Easter Bunny’s origins require patchwork forensics. Ancient pagans are said to have celebrated the festival of Eostre, honoring the goddess of fertility and spring whose symbol happened to be the rabbit given its proclivity towards high procreation. In 1700s Pennsylvania, German immigrants introduced to their new country the tradition of the egg-laying, Easter Hare known as “Osterhase.” In exchange for eggs, children would make nests of carrots and barter with hungry hares. In time, the bunny’s generosity expanded to include toys and, yes, even chocolate. Eggs would have been most welcomed having been a forbidden food of Lent since the 13th. Once fasting ended, the egg celebration would commence. As for the scientific mismatch – rabbits are mammals that give birth to live young and don’t lay eggs – let’s just let that one go.
The world of economics and finance is also peppered with its fair share of mysteries. Some are even of the man-made variety. Since the pandemic broke, Opportunity Insights has done a bang-up job of tracking the U.S. economy’s progress. Real-time data include small businesses that are open, consumer spending and a variety of gauges on the job market. In today’s left-hand chart, you see that through the week ended March 19th, Job Openings for the least educated workers are up 31.2% over January 2020 (purple line). Not pictured are Job Openings across the full education-attainment spectrum which are down 2%, while those for workers with the most education are -13.7% (light blue line) over the same period.
We find zero coincidence in Time Spent Outside the Home: Workplace (orange line) remaining in the doldrums, down 25.9% compared to -7.9% across the full range of destinations, which includes Parks, Grocery Stores, Transit and Retail & Restaurants. Parenthetically, that last category has also seen a massive rebound in the last week as stimulus monies get injected into the economy; the latest reading of -8.4% is a post-pandemic high (green line).
We’ve written extensively of what’s at play on the spending front, as in untargeted stimulus. Another unintended consequence of fiscal policy, as it pertains to the labor market on this Nonfarm Payrolls week, is employers battling the opposite of a skills mismatch. A simple drive around the closest place of commerce to your home will tell you all you need know – Help Wanted signs are multiplying like bunnies. Low-skilled positions are going unfilled because the benefits being paid are, in some cases, multiples of what workers would make if they returned to their places of work. Consider the following hypothetical annualized math we featured in a recent Weekly Quill:
Unemployed Single Mother of Two Children The average state weekly unemployment check of $387 * 52 weeks $ 20,124 Supplemental weekly benefit of $300 * 52 weeks 15,600 Childcare tax credit (under 6), paid monthly at $300 *12 3,600 Childcare tax credit (older than 6), paid monthly at $250 *12 3,000 Median rent of ~$1,200 covered via eviction moratorium * 12 14,400 Utility Bill assistance of ~$150 * 12 1,800 ACA subsidized monthly premium of $199 covered * 12 2,388 TOTAL $60,912
Bear in mind, this total does not include the $7,200 in stimulus checks this same household would have collected over the last 12 months. It does beg the question: Who in their right mind will be compelled to fill the open positions?
Call that the supply constraint that could keep unemployment higher than it would otherwise be. As for demand, a record percentage of Upper-Income households are optimistic that the unemployment rate is poised to keep declining (blue line). Credence is due given this cohort is also responsible for hiring decisions.
The flip side is that it’s peak synergy time in Corporate America. Over the past six months, Merger and Acquisition activity has clocked a record pace. Rightsizing headcount is sure to follow; that’s one of the reasons acquiring companies are willing to pay up for targets. And, as you see in the green bars, bankruptcies have picked up anew. During the holiday season’s reprieve, experts in this arena predicted accelerating restructurings into this year’s second quarter. The risk is the optimism will be overrun by the reality of cost-cutting measures and a continued rise in insolvencies.
And finally, there’s COVID-19 scarring. In prior recessions, the Education sector has been largely unaffected. The pandemic has disturbed this long-held convention. What we don’t know is when the trend will be exhausted, or the ultimate number of jobs lost. In just the last week, we’ve seen layoffs announced in Gilbert Public Schools in Arizona, Hillsboro County Public Schools in Florida and Chippewa Falls Area Unified School District in Wisconsin.
We’re duty-bound to share one last bit of anecdata. In the year of its 75th anniversary, the Portland Children’s Museum will be closing for good. New cleaning rules, limited capacity and refilling 50 open staffing positions were cited as being too high a cost burden. Per Laura Huerta Migus, the executive director of the Association of Children’s Museums, “Children’s museums across the country are reporting average losses of more than 70% of the income they had received in years past, and relief from public sources has not been adequate to relieve the impacts of the pandemic on cultural institutions.” We hope you join us in funding your local children’s museum to ensure the next generation’s spring field trips are not yet another COVID-19 casualty.