Playing Momentum in a Troubled Job Market

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Tomorrow, markets will react to the Labor Department’s release of the October non-farm payroll report. The question is how many jobs the U.S. economy created last month.

Friday’s report comes on the heels of the private payroll report on Wednesday morning. The ADP National Employment Report shows that private employment increased last month by 571,000 positions. This figure beat expectations of 400,000 positions, according to Reuters.

Tomorrow’s report is critical. Last month, the U.S. economy created just 194,000 new positions, well short of the 500,000 anticipated. There are many reasons why the figure fell short.

The market narrative is that an uptick in delta variant COVID-19 cases stymied hiring, supply chain problems are growing, economic growth is slowing, and companies are struggling to find the right people for the job.

Workers remain scarce today. Roughly 10.4 million job openings existed at the end of August 2020, according to the Bureau of Labor Statistics (BLS). But there exists a shortage of highly skilled workers in industries like aviation, healthcare, and engineering. There is also a shortage of temporary and lower-wage workers in agriculture, manufacturing, childcare, and hospitality.

The ongoing shortage might be a burden for macroeconomists and large corporations to solve. But we see an opportunity based on strong momentum for one trend in the hiring markets.

Foundations of the Labor Shortage

The shortage of specialized labor has accelerated in the COVID-19 era. As I noted on Tuesday, a pilot shortage could ground the planned expansion of many airline companies looking to enter new markets and create new routes across the globe. Consulting firm Oliver Wyman predicts that the world could be short up to 50,000 pilots by 2025.

That’s just one job in one industry that is central to the global economy.

Want to know a few others?

• In 2016, the Department of Health and Human Services projected shortages in nine out of 10 surgical specialties by 2025.
• The American Trucking Associations (ATA) projects a shortage of 160,000 truck drivers by 2028.
• The Economic Policy Institute predicts a shortage of more than 300,000 teachers across public schools by 2025.
• The National Association of Manufacturers projects a shortage of 2.1 million manufacturing workers by 2030.
• Data centers will be short about 300,000 workers come 2025, according to the Uptime Institute. And the number of cybersecurity jobs in need of a name on a business card will also be in the hundreds of thousands.

Now, I’ve only listed a handful of industries. I could dig up more figures on more obscure worker shortages like lifeguards, florists, and basic salespersons.

But you get the point. Businesses are struggling to hire people, and that shortage can profoundly impact U.S. supply chains, economic growth, and the future shape of the modern workforce.

The race is on to match up jobs with the right people. Today, artificial intelligence has been deployed to identify individuals who might have skills that fit a position but left such language off their resumes. In addition, the increase in remote-friendly work environments allows people to find work outside their primary area if they can’t or don’t want to move.

But I want to remind you that the human resources business is still a people business. And that is why one company has maintained such strong momentum during this period of labor shortages. Job placement companies remain in very high demand, particularly those that can fill specialized or lower-wage positions.

That brings us to a buy zone stock on TradeSmith Finance: Robert Half International (RHI).

Playing the Staffing and Talent Shortage

High churn and wage inflation are noticeable in the marketplace. So why not look at the companies that benefit from these obvious trends? Staffing specialist Robert Half International helps companies attract new talent in short-term and permanent roles. The company generates revenue from three different segments of staffing.

About 64% of revenue comes from temporary or consultant staffing, helping companies address more short-term to medium-term challenges. About 28% of its business comes from filling jobs in auditing, risk, compliance, and finance. Its final 8% comes from permanent placement.

RHI has a strong reputation, generating revenue when it successfully places a candidate or group of candidates with the client company. It has been in the Green Zone since September 2020, with uptrend momentum since last October.

If you’re looking for different ways to play major macroeconomic trends, don’t overlook the staffing industry.