Global labor shortage could boost U.S. markets
There are plenty of reasons to be negative about the economy and markets in 2024 and beyond. Calls for recession, skyrocketing national debt, and escalating geopolitical tensions have made investors feel uneasy.
But look at the bigger picture and you’ll find one trend that could become a major driver of the U.S. economy over the next few decades. Oddly enough, that trend is the global labor shortage.
It’s already been difficult for small businesses and big corporations to find workers the past few years. That’s likely to get worse.
Most developed countries around the world are facing declining population growth. Birthrates in the U.S. have fallen nearly 23% since 2007. And it's not just the United States: Canada, Poland, Russia, China, Italy, and Japan have even lower birthrates.
The global growth rate of workers between ages 16 and 64 is trailing total population growth worldwide, as people are living longer. Quite the problem for nations that depend on workers to support their economy and aging population.
To make matters worse, in places like the United States, fewer workers actually have been working. This is especially true post-pandemic. Since February of 2020, 2.6 million American workers have left the workforce and have not returned.
All of this with a current labor market that’s already tight.
In the U.S., there are 1.8 million more job openings now than pre-pandemic, with fewer people willing to work. The U.S. Chamber of Commerce says if every unemployed person in the country found a job, we would still have more than 2 million open jobs. And with 10,000 baby boomers retiring every day, things don’t seem to be getting better any time soon.
Faced with a mounting labor shortage, it’s clear that countries and their economies must become more efficient. Companies across the globe will increasingly turn to automation to counterbalance a shrinking workforce. This includes artificial intelligence and robotics, which can enable organizations to do more with less. Deploying these tools likely will become a necessity for most economies, increasing the demand dynamics.
On the bright side, the changing landscape can become an opportunity for the American economy. Global demand to buy this technology from someone will greatly accelerate in the coming years. Who will they buy from? While you can argue a few different players, the worldwide leader in technology has and continues to be the United States. If the American technology sector can sell its AI and robotics to the rest of the world, it will be a major driver of the U.S. economy and financial markets.
Tom Lee, managing partner at research firm Fundstrat Global Advisors, discusses two known periods of labor shortages between 1949-1967 and 1991-1999. Both of which Fundstrat says led to positive outperformance of the stock market’s technology sector.
According to U.S. Bank, information technology stocks represent the largest sector of the S&P 500 index at nearly 29%. When the tech sector does well, there’s potential to drive investment returns for the broader market.
U.S. innovation, created by our tech sector and exported to the rest of the world, has been a source of prosperity here at home. The global surge in demand for technology should be a tail wind for our country’s economy for decades to come.
Jim Platania Jr. CFP, CPA is a wealth management adviser at Platania Financial Inc., 2 W. Northwest Highway, Arlington Heights. He can be reached at info@plataniafinancial.com or by phone at (847) 870-7526.