Unrealistic Stock Return Expectations

The June ADP report beat estimates and estimates for private sector job creation in the BLS reading. Let’s see if that matters. We expect it to be relevant because all signs point to a solid BLS reading. For now, we just have the ADP report. It showed there were 692,000 private sector jobs were added which was down from 886,000 and beat estimates for 550,000. According to the BLS, in May, there were 492,000 private sector jobs added; expectations are for 555,000 jobs added in June. As you can tell, the May ADP reading was too optimistic.

Job creation was almost evenly distributed between the 3 sizes of companies (small, mid, large). The goods producing sector added 68,000 jobs, with construction adding 47,000 jobs. The service proving industry produced 624,000 jobs with the leisure and hospitality industry adding 332,000 jobs. Demand for labor within this industry is extremely high. All the jobs lost during the recession should be back very soon. The limiting factor is the supply of labor, not demand. Air travel is above where it was before the pandemic. This industry might even create more jobs in July than it did in June.

2nd place was education & health which added 123,000 jobs. This fall, most remote learning will transition back to the classroom.

Companies need to hire workers as quickly as possible to keep up with demand. Remember, consumers have trillions left to spend. The chart above shows the share of job postings that indicate an urgent need for workers increased from 2.3% on May 14th to 2.5% on June 28th. This is important because even though there have been record job openings, the unemployment rate is still elevated. The more desperate companies are to hire workers, the more they will pay them. With the extra unemployment benefits going away, there is no reason for people stay on the sidelines. This summer will have a ton of job creation.

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Disclaimer: The content in this article is for general informational and entertainment purposes only and should not be construed as financial advice. You agree that any decision you make will be ...

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