Party Like It’s 1899 – Jobs Market

In 1982 Prince wrote his iconic song, Party Like It’s 1999 in part to mock the early 80’s period of extreme economic pessimism and heightened fear of nuclear Armageddon. The 1999 date was the biblical end of times – end of the millennium – thus the clarion call to party as if it’s your last. A century prior in 1899 the US was heading into a euphoric growth period having just recovered from the 1890’s Depression with over 12% unemployment. This educational moment is a random analogy that we are today Partying like 1999 (and 1899), but also to note that from 1899 to 1901 the US unemployment rate began one of the most rapid declines in history, falling from 12% to less than 5% in just 2 years. That period of rapid industrialization and job growth may be surpassed today from 2020 to 2022 thanks too the vaccination wave and Uncle Sam’s digital printing press. While stock market comparisons to the “Roaring 20’s” are proliferating today, given the 12 month vertical rise in equities, the jobs market was more calm in the 1920’s compared to post 1899. Can US unemployment fall as fast as it did in 1899 to 1901 following it’s 1890’s Depression? Having fallen from almost 15% to just 6% in less than a year from the April 2020’s nadir, we estimate that this will be a new record jobs recovery.

The strong jobs report last week while the economy was still partially shut down is yet another sign that stellar GDP growth near 5 to 6% in the 1st half of 2021 is going to lead to a much faster recovery than most expect once we are allowed to go out and Party Like It’s 1999 again.  By Memorial Day it’s likely we will reach enough herd immunity for those willing to be vaccinated that social mobility will jump. By Labor Day rapid job growth will soar even faster as Government handouts expire. Significant worker shortages will be a chief concern despite the 8 Million still required to reach so called full employment. As fast as jobs are growing already, when Government Unemployment checks on steroids expire in September, there will be a red hot jobs market as employers scramble to pull people back to work that don’t need a job. We still need another 8 to 10 Million new jobs to reach prior economic capacity trend growth levels. However, with 17 Million already brought back to work in just the past 11  months despite mandated Government restrictions, it would not be surprising to see all those jobs returned to the payrolls by year end. The biggest impediment to maximum job and revenue growth will be training  workers fast enough and inducing job spectators with enough pay to bring them off the sidelines.

With rapidly rising worker incomes and Uncle Sam’s added Trillions to the savings pool, retail consumption has leaped to the highest growth rates on record basis same store sales. Redbook same store sales revenue should begin to plateau at high levels this summer while consumers shift their focus to vacations, bars and restaurants.

Stock valuations this past year have been front running growing expectations of a record boom in GDP and earnings expansion in 2021 and beyond. Long term investors should beware that the stock market will also begin reacting to an anticipated growth momentum peak as the economy is expected to be fully open within 3 to 6 months.

Understandably, Stocks have broken out yet again above another milestone last week. The SP 500 Index jumped over the key 3950 to 4000 barrier on the flood of present and anticipated consumer spending, due to the rapid vaccination campaign. A “temporary” top below 4200 in the SP as early as April or early May is what we are watching for in this ongoing Bull Market. Our hypothetical portfolio is heavily invested and continually moving away from Technology in favor of the reopening sector and European equities. Assuming we have the typical 13 to 14 month first leg of the Bull Market peak in April (May) as growth comparisons peak, we expect an 8 to 15% retrenchment in a mid May to late June low. The trigger for the short term market correction in May/June could be renewed concerns of an overheating economy that leads to multi-pronged worries of a new surge in borrowing rates (10 Year at 2%+), higher Dollar and inflation along with growing calls for a smaller infrastructure package and earlier than expected Fed tightening.

The US has been the place to be for investors during this Bull Markets initial 12 month leg higher. As vaccination rates soar in Europe later this quarter, European stocks should then outperform. As we move into the Summer when Emerging Market immunity should finally soar, that will be the hot sector for the rest of 2021 in our opinion. 





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