Insights & Advice


I love the nightlife

“Please don’t talk about … all the trouble we’ve been through. Ah, please don’t talk about all of the plans we had for fixin’ this broken romance.” Alicia Bridges

Once upon a time, we enjoyed the conversation and company of others. Sometimes it feels as if we’ve gotten used to avoiding the public. For some, it now seems as if that’s their preference. After what feels like a lifetime of sheltering in place, perhaps we’re ready to mend that broken romance and find love again.

Pole dancing classes are up 56 percent year-over-year, according to the Yelp Economic Average report for the third quarter of 2021. For the more inhibited, dance clubs (up 67 percent), piano bars (up 58 percent), comedy clubs (up 79 percent), speakeasies (up 80 percent), and gay bars (up 38 percent) have all attracted more late-night interest when compared to the same period in 2020.

Other forms of entertainment, like indoor play centers (up 204 percent), stadiums and arenas (up 96 percent), and amusement parks (up 70 percent), show that there is consumer demand for getting out of the house and next to each other. The Yelp data is corroborated by Google mobility data which shows the highest amount of movement in workplaces since the pandemic began. Seated dining through Open Table is also rising, as are box office receipts. Also, oil demand has edged up.

One reason people are getting out more is that there are places to go. As the pandemic began, businesses temporarily closed. Some were initially forced to shut down due to government-mandated restrictions. Some remained closed due to labor shortages and the cost of adapting to social distancing and hygiene measures. However, of all the businesses that temporarily closed in the U.S. since the pandemic, 85 percent have re-opened as of September 30, 2021.

There are re-openings and openings (brand-new businesses). According to Yelp, the total number of new companies opened in the first nine months of 2021 (439,094) is above the pre-pandemic levels for the same period in 2019 (433,243). The new and re-opened businesses show adaptability among small companies to operate under pandemic conditions and pandemic-induced challenges (labor shortages, inflation, supply chain constraints).

Those pandemic-induced challenges are not limited to small businesses. We are starting to see corporate earnings reports from publicly traded companies for the prior quarter. Just about every recent press release for those earnings reports mentions at least one of the terms “labor shortage,” “inflation,” or “supply chain.”

The Delta variant of COVID-19 made those challenges more difficult. According to last month’s jobs report, 1.6 million people were prevented from looking for work due to the pandemic. As you might suspect, there has been a strong correlation between the number of people not working due to the pandemic and the average number of COVID-19 cases during payroll reference periods.

On September 13, 2021, in the middle of the prior month’s payroll reference period for September, there were 285,058 new COVID-19 cases, pushing the 7-day average to 175,822. On October 19, 2021, there were 83,624 new COVID-19 cases, dropping the 7-day average to 79,348, according to the Center for Disease Control and Prevention (CDC). The number of people re-entering the workforce should increase as the number of new COVID-19 cases subsides. This will ease some of the labor shortage and begin to affect supply chain constraints positively. More employees can manufacture and distribute more products. More products translate to a better match between supply and demand, and that softens inflation growth.

It looks as if we’re on the other side of this wave of COVID-19. And while labor shortages, inflation, and supply chain constraint issues are significant, they will eventually fade. Suppose they don’t fade soon enough. In that case, we can tell by Yelp’s re-opening and business formation numbers that even the smallest companies can adapt in the interim. I am betting that vaccinations and natural immunity of the unvaccinated will allow the companies to safely function properly.

Typically, after recessions, consumers are hesitant to spend, businesses hold off on hiring, and laid-off workers are looking for jobs in earnest. This time, consumers spending is robust, employers are eager to hire, but employees aren’t willing or able to get back to work. I am not downplaying the challenges of today. Still, this post-recession scenario is a better setup for U.S. for economic growth than the typical scenario.

Growth for the U.S. economy in 2022 should be a robust 4 percent-plus and about 2.5 percent in 2023. I know things look bleak, but the stock market typically correlates to economic direction, not magnitude. It’s tough out there, but I’m sticking with my equity positions — for now.

I write “for now” not because of the whole legal disclaimer thing. Readers will know that I’m pretty good at changing my mind when there’s new information. We saw that the Delta variant affected the economy in the prior quarter. COVID-19 remains in charge, so I am not quick to dismiss the new coronavirus variant AY.4.2. Francois Balloux, the director of the University College (UCL) London College Institute, asserts that AY.4.2 could be 10 percent more transmittable than the Delta variant. On Wednesday, Oct. 20, 2021, the CDC said fewer than 10 cases were reported in their database. But 1.) I bet they missed, gee, at least a few, and 2.) it’s on the continental U.S. So, yeah, I remain invested in the stock market – for now. I continue to watch the risks.

Allen Harris is the owner of Berkshire Money Management in Dalton, Mass., managing investments of more than $700 million. Unless specifically identified as original research or data-gathering, some or all of the data cited is attributable to third-party sources. Unless stated otherwise, any mention of specific securities or investments is for illustrative purposes only. Adviser’s clients may or may not hold the securities discussed in their portfolios. Adviser makes no representations that any of the securities discussed have been or will be profitable. Full disclosures. Direct inquiries: email hidden; JavaScript is required.

This article originally appeared in The Berkshire Edge on October 25, 2021.