Paragon is a portfolio analysis, risk assessment, and goal optimization tool. The Paragon report uses hypothetical examples in conjunction with forecasts for inflation, economic growth, and asset class returns, volatility, and correlation and provides you with general financial planning information and serves as one tool in helping you develop a strategy for pursuing your financial goals. It is not intended to provide specific legal, investment, accounting, tax, or other professional advice. For specific advice on these aspects of your investments, you should consult your professional advisors.

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Laboring over a labor shortage

The tightest labor market in history is pressuring companies to deploy technology to get more from fewer workers, attract new talent, and automate where possible. Tech is the answer to most—but not all—questions.

Business earns straight “A”s for using tech and other means to navigate labor challenges

Arming workers with better tools:

Tech and digital solutions like Zoom and Webex have permitted workers to continue producing in the pandemic’s remote environment, boosting overall firm productivity and earnings.

Accessing new workers:

Companies are sweetening the pot—especially in lower-skilled jobs—by raising hourly wages, adding bonuses, and enhancing benefits. This can result in higher productivity, higher employee retention, and reduced real estate costs.

Automating certain roles:

A key driver of labor cost savings,
at least over time, is automation,
e.g., texting an order vs. dealing directly with a server. Higher wage costs mean faster return on investment for automation technology.

Historically tight labor market

During a normal cycle, peaks for the unemployment rate come after the end of the recession. During the current cycle, the employment rate had already fallen to 4.2% as of November 2021.

Data as of November 30, 2021. Shading represents recession periods. Sources: Bureau of Labor Statistics, Conference Board, WTIA.

Strong returns hasten retirement*

As markets and retirement accounts do well, workers are incentivized to retire.

Data as of October 31, 2021. *We use the increase in the number of people aged 55 and up who identify as “not in the labor force and do not want a job.” S&P 500 index measures the performance of approximately 500 widely held common stocks listed on U.S. exchanges. Most of the stocks in the index are large-capitalization U.S. issues. The index accounts for roughly 75% of the total market capitalization of all U.S. equities. Sources: Bloomberg, Bureau of Labor Statistics, WTIA.

The rapid recovery of equity markets and, by extension, retirement accounts, worked hand-in-hand with COVID fatigue to quicken the retirement of the largest U.S. generation.

LUKE TILLEY Chief Economist

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CMF 2022 Form Handler