Retail on a Heater
5 Idea Friday: Youth Unemployment (in Canada); Affordable Moves?; Access-A-Ride Mystery; SaaS Strikes Back
retail brings the heat
Canada’s recession, youth unemployment, and the absence of scary signals
affordable movers, and other fun missives from real estate
Access-a-Ride . . . taking us for a ride?
saas-strikes-back
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(2) 💡 Find out more about Random Walk Idea Dinners. High-Signal Serendipity.1. Retail Went On a Heater
Retail has been a very active participant in markets, of late.
And over the past 30 days, at least, they’ve had a very good month:
According to JPM analysis, retail is up 90% on its single-name trading since the beginning of the year, but really since April.
Retail beat all thematic baskets, and all the indexes. Who said stock-picking was hard?
The reality is the retail loves the momentum trade—perhaps retail is the momentum trade—and the momentum trade (especially in AI) has been the trade:
AI + Momentum has been the winning strategy of the year.
Well, good for retail. Let’s hope momentum only goes one way.
ICYMI
2. Of youth unemployment, Canada, and non-leading signals
Just to briefly revisit the topic of youth unemployment, I have stumbled on the perfect solution to the Home Healthcare Shortage Boondoggle:
Both the 65+ yos (especially men) and the youths are dropping out of the laborforce, en masse.
Maybe the olds and the youngs should, y’know . . . hang out?
Canadians, young and restless
But that’s really not the point I wanted to call attention to. It turns out that Canada is (still) having a bit of issue on the youth unemployment front, as well . . . and it bears some remarkable similarities (that may or may not be coincidence).
If you recall, a remarkable thing happened back in 2024, when Canada’s youth unemployment first skyrocketed, and a mainstream media outfit had the audacity to blame the phenomenon on immigration.
Canada’s experience was/is a sort of interesting test-case on the “saturation theory,” of rising unemployment, i.e. that demand for workers could only grow so quickly, and even if immigration might increase demand in the longer run, in the shorter run, there might be some hiccups.
Anyways, we’re hardly in the longer-run yet, so it’s still an open question, but Canada has actually slipped into a recession, and the employment picture for the youngs is absolutely no bueno.
Unemployment is up, especially for the youngest (as it is in the US):
Employment rates are similarly depressed, especially amongst the teenagers, but not so much for the 20-24yos (again, very much like the US):
It’s interesting because the employment rate for 15-24 yos was actually looking pretty good heading into 2026 . . . and then it just fell-apart again.
Weakness is most prominent in the sectors that tend to employ teenagers, i.e. retail trade, food, and accommodations . . . same as it is in the US.
Why is this happening to Canadian youngs? Idk. The Fraser Institute blames a combination of high immigration and increases to minimum wages, which makes sense, I suppose. Can we extrapolate to the US? Again, idk. Canada is much smaller, and has a pretty different economy . . . but it sure is curious.
The good news: it’s middle-aged-and-restless that should trigger the alarm bells
For what it’s worth, historically, youthful unemployment is not that meaningful as a leading signal for a broader downturn (according to the Cleveland Fed):
When unemployment for 35-44 yos starts rising, then there’s some trackr ecord that suggests wider trouble is on the way.
But, fortunately, youthful unemployment has not, historically, been much of a leading signal. I do, of course, wonder whether this “jobless recovery” is a bit different than cycles past, and perhaps more like the previous “jobless recovery,” post-Dotcom, where the youths similarly struggled. We shall see.
In any event, 35-44 yo unemployment is the bad signal, and rest-assured, we don’t have that:
The middle-aged are just fine.
Full steam ahead!
3. Youths Don’t Move to Affordability (and some other migration oddities)
Staying on the youthful theme, this too was surprising, but makes sense when you think about it.
Youths like it pricey
The youths certainly complain about affordability, but when they move, they tend to pick more expensive places to live (unlike the older folks):
GenX and Boomer moves tend to favor lower cost MSA (with an r^2 of 0.26), while Gen Z and Millennials do not…or if they do, then cost explains only a tiny bit of the variance.
Truthfully, no one is really moving, so query how meaningful this is, but it does kind of make sense, especially given the current employment situation.
Younger folks are moving to opportunity, have fewer dependents, and care relatively less about costs. Older folks have more job security (or no job at all), and have either families to support, and/or retirement income to preserve . . . so, for them, lower cost MSAs make sense.
Going to the Midwest
In terms of where people are moving (such that they are), the Midwest is a standout winner:
And, the usual suspects are the standout losers:
Memphis and Orlando are somewhat unusual for the “loser-board,” as is Houston. Actually, Orlando has been losing some people for a bit now . . . quite possibly because people are getting priced-out(!).
Bluegrass in the Red
One final very odd thing.
Kentucky home prices are cratering:
Home prices in Kentucky are negative yoy basically state-wide.
Why? I’ve got no idea. Maybe it’s just giving back some ZIRP gains, like lots of other places. Maybe it’s the auto industry doldrums—Toyota and Ford are both big employers.
It’s a striking picture, though.
Of course, there is no housing shortage, and never was one, so there’s that too. Just for fun, the WSJ’s “related” housing stories:
For a housing shortage, life sure appears to be rough for the folks with the houses.
4. A Funny Thing Happened On the Way to the Access-A-Ride [fraud]
Many moons ago, Random Walk ‘predicted’ that full return to office would never happen, and that office occupancy would resolve at something close to ~65% of prior.
Well, it appears as though I was nearly all the way right, but not quite:
Office visits are ~70% of what they once were, nationally, give or take ~10pp.
Off by ~5pp, but well within the margin of error. So, pretty darn close. But yeah, hybrid remote work, which is good and healthy, has remained pretty sticky, and some major metros haven’t really recovered from all their dysfunction, which has pushed some action out to the ‘burbs.
New York, for its part, is basically as back-to-the-office as one supposes it will ever be:
New York is a mere 10% off its pre-pandemic level, which considering all the headwinds, is pretty darn good.
But, RTO wasn’t really the point. Transit volume was the point. And it’s definitely a bit different than before:
Interestingly, the only NYC transit that has really returned to normal is commuter traffic: bridges and tunnels, and the LIRR (although Metro-North is still a little behind).
By contrast, subways and busses have much less ridership than they used to . . . and even more strangely, Access-A-Ride is ~40% more popular than it was in 2019, and it’s been climbing steadily since 2022.
Before diving into Access-A-Rides, just a brief observation about the Subway:
Weekday ridership has recovered less than weekend ridership, which is consistent with the RTO story (maybe)?
But on weekends, there is a major outlier:
Bronx subways are way under-utilized on the weekend.
I do wonder why that is, and I genuinely can’t think of any good reason . . . did some tourist attraction disappear, or maybe did the Bronx-native tourists (such that it had many) go somewhere else? Idk. Fare evasion might also be a factor—the MTA noted that the Bronx was the worst offender for Bus-fare evasion, so it could be that.1
But back to Access-A-Ride.
Call me callous, but it’s hard not to notice yet another reimbursable service requiring a special, albeit somewhat squishy, medical designation, with substantially above-trend utilization. Rider pays a $3 subway fare, while the transit authority bills taxpayers ~$40/ride (per the MTA’s own estimates). Oh, and back in ‘22, the city started allowing Uber and Taxi drivers to provide access-a-rides.
I mean, is it possible there are more disabled people in NY than before? Sure. Is it also possible that there were too few access-a-rides and now there’s some appropriate right-sizing? I suppose that could be.
But . . . by far, the most likely explanation for the majority of the variance is that city leaders are once again plundering the already-strained fisc to hand out benefits to their constituents, under the cover of feel-good, sanitized headlines like “High Paratransit Customer Satisfaction.” I mean, if I was getting $3 uber rides all over the city, I’d be pretty satisfied too, I think.
Is that definitely what’s happening? Of course, I can’t say for sure, but the only on-the-record explanations I can find are some versions of “The MTA is proud to say we’re making Access-a-Rides way more accessible,” and so they have.
5. SaaS Strikes Back
It’s been a bad year, but a good week, for software companies:
IGV 0.00%↑ (a big software ETF) has kept pace with SMH 0.00%↑ (a big semis ETF) for the month, and in the last day, has actually outperformed.
Software > Semis certainly wasn’t on anyone’s bingo card a month ago, and of course, a good week does not a trend-reversal make, but hey, let software have its victory lap.
There were actually a few software pleasant surprises, recently. NCNO 0.00%↑ nCino, one of the banking software companies that Random Walk flagged a little while back, did a little beat and raise. Snowflake SNOW 0.00%↑(which isn’t really SaaS) had a dynamite release, as well.
More broadly, the share of software companies on the upswing . . . is on the upswing:
More than 60% of the $IGV’s constituent software stocks are trading above their 50-day moving averages.
Who knows? Maybe now that the model providers are beginning to pass through more of their costs to customers, investors are beginning to doubt whether everything can, in fact, be vibe-coded quite so easily? Honestly, it’s silly to speculate about what others might be speculating.
What’s not speculation, however, is some actual data from Stripe on revenue volume from the top 100 SaaSCos on Stripe:
December had a big scary dip . . . and by April, “pay-in volume,” was not only back on trend, but slightly above it.
No SaaSpocalypse in Stripe’s data. Not yet, at least.
On a somewhat related note, it’s still under-appreciated the extent to which companies became lean-mean-profit-generating machines, when rates went up:
More than half of Enterprise Unicorns are now profitable (up from ~10%).
Of course, these techcos became profitable, largely at the expense of growth—more than 35% of them are growing less than 10%/year . . . but at least 2/3rds of them are profitable (and climbing).
There are really three observations to be made here:
SaaS may not be dead in Stripe’s Top 100 . . . but nigh on 40% of enterprise tech unicorns growing less than 10%/year (and rising) is hardly a bangup story.
these are clearly valuable companies, insofar as they are profitable and growing, but they are surely not as [paper] valuable as they were before. What exactly happens to these companies, remains an interesting question.
this, more than anything, explains the downturn in youthful tech hiring (and tech hiring more broadly): companies have made a deliberate effort to get lean, and those efforts are ongoing
That’s it. Neither Saas nor Saasicorns are dead . . . but it’s not all roses, either. Definitely some roses, tho, so that’s good.
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 was also kind of curious if that pattern was replicated on weekdays, as well—because the Bronx was actually an early back-to-work normalizer, given all the in-person service and healthcare workers—but the MTA doesn’t do borough-breakouts for weekday ridership, and I’d have to recreate it all by subway stop, and I’m not that curious.