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Tuesday, May 11, 2021

This recovery flips the financial crisis playbook on its head.

In Monday's Morning Brief newsletter, Sam Ro made a crucial point that is worth revisiting: this recovery does not have a demand issue.

In fact, we see time and again that a lack of supply is what continues to hold back the economy. This might seem like a simple observation. But demand outstripping supply is the exact opposite of how things played out following the financial crisis.

The post-crisis economy was about too much — too much debt, too much housing, too much interdependence, too much, too much, too much.

The post-pandemic economy is taking shape as one in which there is not enough — not enough housing, not enough workers, not enough cars, chlorine, or crypto.

And this inversion of what is driving this cycle can help explain what we're seeing from the labor market to the housing market to the stock market and beyond. And perhaps helps make sense of why everyone — professional investors, the general public, politicians, and so on — seems perplexed by today's state of affairs.

The key point Sam made about the jobs report is that last Friday's clunker of a jobs report did not reflect a lack of desire for employers to bring on new workers, but an inability to bring on new workers. Ahead of that report, we argued that, "If the recovery out of the financial crisis was defined by PhD's working at Starbucks because there were so few jobs to go around, this recovery is being shaped by businesses that can't keep the lights on because workers are so hard to come by."

April's jobs report seems to have reflected some of these dynamics. And then on Monday we saw two major public companies make announcements about efforts to try and retain and recruit workers. Some might even say entice.

Chipotle (CMG) announced it would raise wages for restaurant employees, introduce referral bonuses, and offer a path to a six-figure salary in less than four years. These are not moves you announce when finding work has come easy.

Tyson Foods (TSN) also cited labor supply issues in three of its four major business lines in its earnings report published early Monday. On Tyson's earnings call, COO Donnie King said that in addition to higher wages the company is looking at new models for assigning shifts to offer more clarity around employee schedules in an effort to stem the absenteeism that remains higher than normal among its workforce.