laborsightWorld News

No end in sight for labor shortages as U.S. companies fight high costs


Investing.com - Financial Markets Worldwide

Please try another search

ReutersStock Markets17 minutes ago (Oct 26, 2021 06:15AM ET)


© Reuters. FILE PHOTO: A hiring sign is seen in front of a Qdoba restaurant, as many restaurant businesses face staffing shortages in Louisville, Kentucky, U.S., June 7, 2021. Picture taken June 7, 2021. REUTERS/Amira Karaoud

By Caroline Valetkevitch

NEW YORK (Reuters) – Labor shortages may be the most intractable of the cost risks that U.S. companies faced in the latest quarter, and as the earnings season moves into its peak there are signs the problem will persist, some strategists say.

Finding and paying for workers is a challenge investors are paying close attention to as third-quarter results come in, with supply bottlenecks and high energy and other commodity prices among other key risks for companies.

Warnings have come already from companies in several industries, including healthcare, with hospital operator HCA Healthcare (NYSE:) Inc saying higher labor costs seen in the third quarter could stick around longer because of a shortage of workers.

Domino’s Pizza (NYSE:) cited a shortage of drivers as it reported recently a rare fall in U.S. sales, and FedEx Corp (NYSE:) also cited higher labor costs in September when it cut its full-year forecast.

The coming weeks, which bring results from the bulk of companies, should give investors more clues on how long labor pressures could persist.

“We’re going to see it come up in the next couple of quarters as we try to continue to reopen,” said Mace McCain, chief investment officer at Frost Investment Advisors. “The reopening was delayed by the Delta variant, so we haven’t seen the full impact of the labor shortage yet.”

Goldman Sachs (NYSE:) strategists wrote in a research note ahead of this week that there have been some “tentative signs of improvement from supply chain data and commodity prices,” while labor market tightness could be a challenge “for many companies for years.”

“Our economists expect COVID-related pressure on labor market supply will ease in coming months but forecast a U.S. unemployment rate of 3.5% by the end of 2022, meaning companies will continue to face many of the labor market challenges they face today,” they wrote.

Among stocks within the leisure and hospitality industry, low-labor-cost names have outperformed high-labor-cost peers for months, the Goldman strategists said, noting that in the broader market, “the most asset- and labor-efficient firms have outperformed peers in recent years and in recent weeks.”

Recent economic data has underscored the tightening labor market trend. The latest data showed the number of Americans filing new claims for unemployment benefits dropped to a 19-month low in the week ended Oct. 16, marking a second straight week that claims remained below 300,000 as employers hold on to workers amid an acute labor shortage.

U.S. companies managed to keep profit margins at record levels in the second quarter, but rising costs have sparked some concern among investors.

So far this reporting period, stronger-than-expected earnings have raised the year-over-year profit growth forecast for S&P 500 companies to 34.8%, up from about 30% at the start of the month, according to IBES data from Refinitiv.

To be sure, a labor shortage is good news for people out of work and looking for a job. And there are several signs that suggest the labor shortage may be temporary, Thomas Lee, managing partner and head of research at Fundstrat Global Advisors, wrote in recent note.

“Labor usage is actually 4.9 million lower now than pre-COVID-19,” he wrote. “Has the economy permanently changed during COVID-19 that somehow less people working means a tighter labor market? Nope.”

Paul Nolte, portfolio manager at Kingsview Investment Management in Chicago, said labor shortages seem to be more of a problem for some industries than others.

“Customer-facing businesses” that were forced to close during the pandemic lockdowns are having a hard time filling jobs and getting back up to speed, he said, while “manufacturers never quite completely shut down.”

Related Articles

Eli Lilly Earnings Miss, Revenue Beats In Q3

Eli Lilly Earnings Miss, Revenue Beats In Q3
By Investing.com – Oct 26, 2021

Investing.com – Eli Lilly (NYSE:LLY) reported on Tuesday third quarter earnings that missed analysts’ forecasts and revenue that topped expectations.
Eli Lilly announced earnings…

UPS profit rises 23% on e-commerce demand

UPS profit rises 23% on e-commerce demand
By Reuters – Oct 26, 2021

(Reuters) – United Parcel Service Inc (NYSE:UPS) reported a 23% rise in quarterly profit on Tuesday, bolstered by high e-commerce demand that has allowed the delivery firm to…

Computer mouse maker Logitech hit by supply chain problems

Computer mouse maker Logitech hit by supply chain problems
By Reuters – Oct 26, 2021

By John Revill (Reuters) -Logitech International SA shares plunged 6% on Tuesday after the computer peripherals maker reported a steep fall in operating profit and said it was…

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

tp

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button
Close
Close