Alger
August 31, 2022
Alger is widely recognized as a pioneer of growth-style investing.

Labor Day Shuffle

Since the Covid-19 pandemic, companies have struggled to find and retain talent with the result being stronger wage gains for workers, particularly those who switch jobs. But what will happen to stocks when the Fed ends this wage gain party?

  • As we approach Labor Day, there continues to be a plethora of unfilled positions in the U.S. In fact, there are nearly twice the number of job vacancies than unemployed individuals, creating a favorable dynamic for workers, particularly for those who are switching companies. 
  • According to the Federal Reserve Bank of Atlanta, wage growth for job switchers saw an annual increase of 6.7% vs. 4.9% for those who stayed put, making this the widest gap in at least a quarter of a century. While this may seem encouraging for workers, these wage gains are far too high for the Fed’s target rate of 2% inflation. As a result, the Fed will likely seek to reduce open positions and wages by increasing interest rates, thereby reducing economic activity.
  • As the music fades on the job-hopping musical chairs, history suggests  that investors may find solace in growth and secularly driven stocks as the more economically sensitive value seats could get removed by a weakening job market. 

 

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