Foreign-born labor force and shopping force, slowing (confirming my priors)
It's all going according to plan
failing shopper-growth hits fast-food
can’t hire? well, more work and more pay for the workers we got
coming off the bench, senior-style
fewer new people need fewer new shelters
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A little Friday fun-day, with an exercise in confirming my priors. The economy can’t slow, if it was never moving all that quickly to begin with.
Foreign-born shopping force, slowing
As I’ve quipped many times, if the labor force doesn’t grow, the shopping force doesn’t grow either.
Since the labor force growing was a foreign-born story, and the net-new foreign-born story has slowed substantially, then both the labor force and shopping force would slow.
Mr. Amarnath, of Employ America, makes a similar point:
The fast-food restaurant slowdown is likely attributable, in part, to the slowdown in net-new fast-food customers, which is attributable to the slowdown in foreign-born workers.
That certainly confirms my priors. Consumer spending is, in the aggregate, just fine, as best as I tell (or anyone that’s close to transaction data, including all the banks).
But, the ‘growth’ story of the past few years can be glibly summarized as “massive healthcare systems, aka Uncle Sam’s Immigrant Nursing Brigade, and the restaurants and retailers that feed and supply them.”
That story has changed.1
That McDonalds and Chipotle might catch some strays, shouldn’t be surprising.
ICYMI
More hours, more pay
Indeed, one way I thought the story might change is that firms would start doing more with less, or at least more with what they’ve got.
Check out this little nugget from the payroll firm, Paychex:
The number of small business workers is contracting slightly, but weekly hours and weekly earnings are going up.
To quote the report:
We are also observing an emerging trend of employers increasingly relying on their existing talent working more hours.
More work (and pay) for the workers they’ve already got.
That’s consistent with the Dallas Fed survey for a little while back that highlighted the same point: in the absence of fresh, new bodies, firms are going to work their existing employees a bit longer, and pay them a bit more, as a result.
People (and seniors) coming off the bench?
I suppose you could say the plan is “working:”
The foreign-born workforce growth has dropped off substantially, while the native-born workforce experienced a slight upward lilt.
It’s just supply-and-demand, right?
It wouldn’t surprise me at all if this trend too began to mean-revert:
Labor-force participation for seniors has been rising across most of the OECD.
What immediately jumps out? Well, the aged Japan is built different, while pensioners in France ought to be ashamed of themselves.
But, really, the neat part is the big pandemic trend-break for US seniors (who exited the workforce en masse). The ‘pulled-forward’ retirees were almost entirely non-college, and the gap was filled almost entirely by foreign-born labor. Going forward, I would expect the senior participation rates to gradually trend-revert.
Fewer new people, need fewer new shelters
One last thing.
Remember how in our totally not-shortaged housing market, one of the big reasons that we totally don’t have a shortage is that ‘the stork is no longer on our side’?
There is no perma-demand growth for shelter. If population growth slows, and family formation does too, then demand for housing will taper accordingly.
Once again, with feeling:
FHA loan locks to migrants rose sharply during the pandemic and has dropped dramatically since the Spring.
Now, to be fair, FHA mortgages are only a small share of mortgages, and FHA mortgages to migrants topped out at 6%, so this is only a small part of the picture.
But, what’s that? Homebuilders are facing headwinds on the demand side? Even more concessions? The new house premium is all the way gone?
The anxiety is taking the wind out of a prophesied jump in homebuyer demand as mortgage rates decline.
“We would have expected to see a little bigger bump out of the reduction in mortgage rates that we’ve seen,” D.R. Horton Chief Executive Officer Paul Romanowski said on a call with analysts last week. “It truly is choppy.”
Other builders have shared disappointing feedback from the market. Century Communities Inc. in an earnings call said demand is especially weak from entry-level buyers. PulteGroup Inc. said first-time buyer orders plunged 14% in the latest quarter compared with a year earlier.
The ‘housing crisis affordability shortage’ continues to defy any semblance of a shortage.
Curious.
Anyways, as foretold, immigration is a big deal, and a much bigger deal than tariffs. It’s, of course, not the only thing (because there’s almost never one thing), but if you haven’t updated your models to consider what a growth story looks like without shopper-growth, then you probably shouldn’t be thinking about growth stories, one way or another.
Random Walk can’t pretend to know how it all plays out, but the underlying forces at work? That, I appear, to have on lockdown.
Previously, on Random Walk
Private Credit and Insurance, two peas in a pod (reprise), and a chart dump on default rates
five charts on the rise of private credit in life insurance
Energy in 1776
It’s July 4th, so Happy Birthday America, and we’re going to keep it light and only semi-topical.
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I would note that it hasn’t changed for Random Walk’s favorite consumer fintech, Affirm $afrm, who delivered yet another bang-up quarter, beating estimates for EPS by 100%(!).