Reuters.- The labor shortage may be the most intricate of the cost risks facing US companies in the past quarter, and as the earnings season peaks, there are signs the problem will persist, analysts say and strategists.
Finding and paying workers is a challenge that investors are paying close attention to as third-quarter results roll in, with supply bottlenecks and high prices for energy and other commodities, among other key risks to the companies.
The warnings have already come from companies in various industries, including healthcare, with hospital operator HCA Healthcare Inc saying the higher labor costs seen in the third quarter could last longer due to a worker shortage.
Domino’s Pizza cited a driver shortage as it recently reported an unusual drop in sales in the United States, while FedEx Corp also cited higher labor costs in September when it cut its forecast for the full year.
The coming weeks, in which they will report results for most of the companies listed in the S&P 500 index, should give investors more clues about how long labor pressures could persist.
“We will see it emerge in the next two quarters as we try to continue with the reopening,” said Mace McCain, chief investment officer at Frost Investment Advisors. “The reopening was delayed due to the Delta variant, so we have not yet seen the full impact of the labor shortage.”
Goldman Sachs strategists wrote in a note this week that there have been some “tentative signs of improvement in supply chain data and commodity prices,” although a very tight labor market situation could be challenging. ” for many companies for years ”.
“Our economists expect Covid-19-related labor market supply pressure to ease in the coming months, but they forecast a US unemployment rate of 3.5% by the end of 2022, which means businesses will continue. facing many of the challenges of the labor market that they face today ”, they affirmed.
Among companies within the hospitality and entertainment industry, low-cost firms have outperformed their peers for months, Goldman strategists said, noting that in the broader market, “the most asset-efficient companies and work have outperformed their peers in recent years and in recent weeks ”.
Recent economic data has underlined the trend towards narrowness in the labor market.
The latest data showed that the number of Americans filing new claims for unemployment benefits fell to a 19-month low in the week ending Oct. 16, marking a second consecutive week in which claims were down. from the threshold of 300,000.
US companies managed to keep profit margins at record levels in the second quarter, but rising costs have caused some concern among investors.
So far in the earnings period, more robust-than-expected earnings have raised the forecast for year-over-year earnings growth for S&P 500 companies to 34.8%, down from 30% at the beginning of the month, according to reports. IBES data from Refinitiv.
Without a doubt, the labor shortage is good news for people who are unemployed and looking for work. And there are several signs that suggest the situation may be temporary, wrote Thomas Lee, managing partner and head of research at Fundstrat Global Advisors, in a recent note.
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“Labor use is currently 4.9 million lower than before Covid-19,” he wrote. “Has the economy changed permanently during Covid-19 that somehow fewer people working means a tighter labor market? No comment.
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