Is Old-Fashioned Personal Service Dead?

This morning we got yet another indication of just how difficult things are for the working person. At 8:30 this morning, East Coast Time, the Bureau of Labor Statistics reported that another 885, 000 filed a new claim for unempoyment insurance. These are people who had not filed before, and adds to the already 22 million who are currently out of work. This number was so bad that it was fully 10% above the most bearish estimate on Wall Street. And represents the very worst Initial Claims number in the past 90 days. Now most of these new claimants are in the Service Sector of the Economy. Just that part of the economy, which had been demonstrating the most amount of growth over the past decade.

This morning we got yet another indication of just how difficult things are for the working person.

At 8:30 this morning, East Coast Time, the Bureau of Labor Statistics reported that another 885, 000 filed a a new claim for unemployment insurance.

These are people who had not filed before, and adds to the already 22 million who are currently out of work.This number was so bad that it was fully 10% above the most bearish estimate on Wall Street. And represents the very worst Initial Claims number in the past 90 days.

Now most of these new claimants are in the Service Sector of the Economy. Just that part of the economy, which had been demonstrating the most amount of growth over the past decade. If we were having this discussion last year, we would have been talking about how well the Service Sector is doing, and the fact that it was the strongest of all sectors.

In fact by February 2020, there were a total of 131 million employed as service sector workers. You know, the health care providers, administrative assistance, stockbrokers and financial planners, and foodservice providers. The ones we had come to rely on to help provide many of the functions of daily living which we took, up to then, for granted.

But no more.

From that high point of 131 million service sector employees, in just 60 days this sector lost 20 million jobs. And although half of those layoffs turned out to be temporary, we're now seeing that some of those people are being laid off for a second, and likely last time.

You see, service sector workers, are literally the front line for any commercial enterprise. They're the supermarket checkout person, the nurse, your waiter. All of those people who we come in contact with constantly.

And that's the problem: contact.

We are living in a new reality. A reality where our political leaders have sought to minimize any form of contact, in their effort to halt the spread of the Covid Virus. And although we can debate the efficacy of those policies. There can be absolutely no doubt that one of the results has been the loss now of millions of jobs in the Service Sector.

As investors we divide the market into 11 different groups. And 4 of these groups are predominantly Service oriented. Those 4 are: Consumer Cyclical Stocks, Consumer Defensive, Healthcare and Financial Services. And while all 4 groups have performed well this year. In fact, Healthcare has been especially strong, ironically on its position as a primary fighter of the Virus. Nonetheless, this continued push toward social distancing, and commercial isolation, does not bode well for our most dominant Economic Sector.

We can only hope and pray, that service, real personal service like we used to know, is able to make a comeback.

Not only would this be a big boost to one of the most important components of the economy.

But it would also provide a much needed psychological boost to us all.

Start listening to The Week Ahead: June 21 - 25.
7:17
Start listening to The Week Ahead: June 21 - 25.
7:17