Summer is winding down. I can feel it in the air and see it in the daylight shadows. In many ways, this summer has been the nicest I’ve had in years. The weather in the upper Midwest was nearly perfect, my college kids were both working jobs that were meaningful to them and we had a nice long visit from our Spanish “exchange daughter” we haven’t seen for three years.
Our summer fun consisted of some long weekends and a staycation, almost all spent in the beautiful state of Michigan. From New Buffalo to Mackinaw to Copper Harbor, the Michigan harbor towns were all packed to the gills with people sharing the same ideas as my family. With all the horror stories and high prices of air travel right now, I think the good old American road trip is the ultimate winner this year.
With all these people seeking summer fun, for businesses in harbor country summertime is “game time.” While I don’t know for sure, I would imagine the boutiques, restaurants, pubs, coffee and ice cream shops in these towns plan on making about 75% of their revenue between Memorial Day and Labor Day each year. Like most, my family is in back-to-school mode now, and I will surmise the harbor country is about to get much sleepier. I certainly won’t be there to see if I’m right.
Which is why it is in these “localish” tourist towns, the still disrupted labor market is on its starkest display. Of course, the “help wanted” signs are ubiquitous at this point, but beyond this cry for help it’s the way business are adapting to the new labor reality that is most interesting and concerning. From being closed Monday to Wednesday, to having shorter open hours, to just being closed altogether.
Perhaps the most curious thing I saw was a sign on a popular harbor country coffee shop that said, “Staff went to a wedding closed until Wednesday.” While I can respect the work/life balance, the loss in revenue for four days in the middle of July for this shop had to be substantial.
The question of “where are the workers” continues to baffle employers and experts alike. While perhaps six months to a year ago, some of the poorly thought out COVID federal unemployment and stimulus checks were easy to blame, those programs are now far in the rear-view mirror and yet the labor market, especially in the service industry, remains in disarray.
I have an anecdotal theory going back to my days as the president of the School Advisory Council at our Catholic school. Our enrollment was trending lower at the time, which can be catastrophic for a private school, and we had to figure out why. As part of the study process, I reached out to a contact I had at the public schools in the same town. It turned out the public-school enrollment was trending lower as well, even at a time when the town itself was clearly growing. We termed this trend the “kindergarten drought” as there appeared to simply be fewer kindergarteners in our town. Well, those kindergarteners at the time are now 19-22 year-olds, who just happen to be very valuable to the service industry, especially bars and restaurants.
If this were true, we might be able to see it in other areas of the economy as well. A quick Google search turns up a related clue. According to a Forbes article, college enrollment, which of course is 19-22 year-olds, has also been trending lower over the past three years with now 1.3 million fewer college students enrolled than in 2019.
I am the first to admit, this theory and evidence is highly anecdotal, but one piece of hard evidence I did find in my research pertains to what may come next. While indications of there being fewer young adults was speculative, the stats on the number of 4-18 year-old children behind them was clear. There are simply fewer kids on deck as well (source: U.S. Census).
Fewer young workers could be exasperating the inflationary trends we are experiencing now, and fewer young people in general could lead to slower economic growth in the future. Occasionally economic trends can sneak up and smack us on the head. This one will merit close observation.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Stock investing includes risks, including fluctuating prices and loss of principal. Precious metal investing involves greater fluctuation and potential for losses. Past performance is not a guarantee of future results. Dividend payments are not guaranteed and may be reduced or eliminated at any time by the company. Marc Ruiz is a wealth advisor and partner with Oak Partners and registered representative of LPL Financial. Contact Marc