Labor Day, The Future of Work and a Bull/Bear Battle

For those of you who would prefer to listen, I put together an audio podcast for your listening pleasure.

Labor Day weekend: It’s the unofficial end to Summer. It’s not like it used to be though. Most schools are already back in session. I am no fan of that. School should start on the first Tuesday in September. That’s what I think. I can’t be alone. But Labor Day still represents the final weekend of mass activity at the beach, the lake, or the mountains before settling in for Fall and the mad dash to year-end. It’s going to be a hot one too. The August heat is sticking around in September.

This Friday before Labor Day brought the Job report from the Labor Department. It came as Americans across the country were laboring to get stuff done ahead of the holiday weekend. Friday was all about labor. 315K jobs were created in August. That was expected. It was a steep drop from the whopping 528K job increase in July. Job creation slowed but came in at a solid pace this time. Also important, the unemployment rate ticked up to 3.7% because the participation rate is back to the Covid era highs. That is big. More people are looking for work. That has been a huge problem. Companies from coast-to-coast have struggled to find workers. The struggle might be abating. But unemployment is still very, very low.

New York City was the first to officially celebrate Labor Day. That was in 1882. It was the Industrial Revolution. Heavy machinery filled factories. Production skyrocketed. So did accidents. Labor unions were on the rise, seeking enhanced rights and safer conditions for American workers. Strikes and rallies expanded across the country as organizers fought for better pay. Labor activists pushed for a Federal holiday to honor and recognize the contributions workers made to America’s strength and prosperity. Importantly, the first Labor Day was celebrated 10 years before the Homestead Steel Worker strike in Pittsburgh, which resulted in a riot with the Pinkerton cops. That was a very low point for American business.

As I touch on the history of work in America, I can’t help but think about the future of work too. We live in a disruptive time. Innovation and Covid have disrupted how people work like nothing we’ve seen in our lifetimes. Work from home is not new. But the volume of workers doing it from home is. Throughout the pandemic, employees were working from home or perhaps more visually living at work, as they juggled family and other responsibilities. I view it both ways, depending on the time and circumstance. It seems pretty clear that the hybrid model is the future, where it’s doable. There’s so much that can be done virtually today, thanks to technological innovation. But there’s still no replacement for in-person engagement. Culture and collaboration are essential. Shared experiences are too.

The future of work is going to be tricky. The work/life balance has become a hot topic. Labor relations keep getting tested. Strong opinions are on both sides. Neither are budging. Goldman Sachs just issued a mandate that all employees come back to the office full-time after Labor Day. Most other Wall Street firms have embraced the hybrid model. Apple recently announced a required 3 days per week return to office plan beginning after Labor Day. Apple employees have pushed back. Amazon is allowing flexibility for its nearly 60,000 corporate employees in the Seattle area. But Amazon has over 1.6 Million employees worldwide, most of which don’t have work from home as an option. Their job is to make sure stuff is delivered to everyone else’s homes. You can see the complexity here. This issue will be around for years.

There is a worker shortage in America. There are more job openings than unemployed people. That ratio is nearly 2 to 1. The Labor Department estimates that 60% of Americans are working. That is the current employment to population ratio it tracks. It’s been stuck at that rate for a while. Covid triggered a lot of early retirement. Many Americans have been living on excess savings. That seems to have dried up. During the height of the pandemic, many Americans were making more money by not working. That was not sustainable.

Invention is the mother of necessity. You’ve heard that before. It tends to be true. Artificial intelligence (AI) is all around us. The advancement of kiosks and self-checkout stands at stores and restaurants are replacing people. Clearly some are better than others. For those applying for a new job at a large corporation, there’s a good chance AI screened your resume before it reached a human. I suppose college applications may follow this route too. Facial recognition is being used more and more for security and identification purposes. AI does that. If you use Alexa, Google Assistant or Siri for workplace inquiries and tasks, they all use AI. Even when you drive to work, for those who still do, Artificial Intelligence in your car prevents you from swerving off the road.

Software, Robots and AI are not replacing human labor the way many anticipated a few years ago. The pandemic demonstrated this. Robots can do many tasks, but not all. Robots still can’t do most of the human stuff yet. But they will. Some jobs will definitely disappear. But importantly, new ones that involve working with AI will be born. Work has evolved throughout time. Machines have taken over human tasks since the wheel was invented. That trend is irreversible. Machines replaced humans in the Industrial Revolution. Machines continue to replace humans in today’s Digital Revolution too. 

Speaking of today, the Market continues to be rattled. The Job Report kickstarted a bit of a rally Friday morning which carried over from Thursday’s reversal. Just when things looked like they were unraveling, an oversold rally ensued. Friday’s gains proved short-lived. A midday reversal set in, with rumors of Russia shutting down the pipeline that sends significant gas supplies to Europe. We mustn’t forget, there’s still that. Something we find interesting and perhaps telling though, was that Thursday’s lows were not taken out on Friday. They were tested. They had the chance to puncture them. It didn’t happen. That’s something. We generally don’t put a lot of weight on the Labor Day week’s price action. It was the lowest volume on the year. It’s always low. Friday was the low. Many on Wall Street take off early. That will change next week. 

The Stock Market snapped a 4-day losing streak on Thursday. But it didn’t save the S&P from recording its third straight weekly decline of more than 1%. Things went from overbought to oversold quickly. Investor sentiment reflects that volatility, having gone back to the sourness from June, which was a multi-year high. In fact, the number of Bears is back over 50%. Just 21% consider themselves Bullish. The Bull-Bear spread has only been wider once before, ever. Dare I say, ever is a long time. These are bottom-like conditions, but sour sentiment alone doesn’t drive stock prices higher. Bad news needs to become less bad before it turns good. We don’t think we’re there yet. It’s a process which requires patience, something that’s been in short supply.

September is seasonally the worst month for stocks. October tends to bring bottoms, which set up a year-end rally. That is very possible this year. But 2022 brought a Bear Market. It’s a normal and natural part of the cycle. It’s part of the deal for investors. Bear Markets are definitely not fun. As we have seen, there are some powerful rallies within Bear Markets. We will likely see more. The Job Report had something for everyone. The Bulls see the slowing wage increase and higher participation rate as another sign that inflation is cooling, and a soft landing is doable. That would mean the Fed would be nearing an end to its tightening. The Bears see the job situation as validation that the Fed can’t let up with prices still high and unemployment still near 5-decade lows. Can there be a recession with 5-decade low unemployment? That’s a big debate on Wall Street. There’s a huge tug-of-war between the Bulls and Bears. Expect that tug-of-war to continue throughout September. The Fed meets again in 3 weeks. 

Seeing this Bull-Bear tug and the excessive pessimism abound makes me think of the late Israeli Prime Minister Shimon Peres. He said something so eloquent and so right. I thought I’d share: “Optimists and Pessimists die the same way. They just live differently.”

Enjoy the Labor Day weekend. Speaking of labor, Happy 40th birthday to our own Mike Harris and a big shoutout to his mom Kathy! Well done!

The Market will be closed on Monday, as will our office. We’ll be back, dark and early on Tuesday.


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