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March 08, 2021

Economy Watch: Goldman Sachs Predicts ‘Hiring Boom’

A surge in jobs in the hard-hit hospitality and leisure sector could help spur the forecasted rise, which would be a boon for promo.

By  Christopher Ruvo

A hiring surge is in the cards for the United States, and that could be great news for the promotional products industry.

Goldman Sachs, a New York-headquartered global investment banking, securities and investment management firm, has issued a forecast that says the U.S. unemployment rate could drop to 4.1% in 2021. A falling unemployment rate is a good thing because it means more people are employed.

Woman shaking hands with man in a meeting.

In particular, Goldman Sachs believes hiring in the leisure and hospitality sector is poised to bounce back in a big way. That could bode well for promo, as workers will need uniforms and potentially related branded company collateral and swag.

If the sector is hiring, that would mean that it’s also rebounding from pandemic-driven lows, suggesting that clients in the niche will likely be apt to invest more in marketing to capitalize on potential patrons who are ready to be out and about enjoying themselves after lockdowns and a year of minimal movement.

A key reason Goldman Sachs expects “a quick labor market recovery is that two-thirds of remaining pandemic job losses are in highly virus-sensitive sectors, where employment should rebound as the economy fully reopens,” Joseph Briggs, a Goldman Sachs economist, wrote in a note. “The sharp increase in the virus-depressed leisure and hospitality category in the February employment report provided an early hint of things to come.”

Last month, the sector increased its payrolls by 355,000 jobs. That accounted for nearly all of the 379,000 non-farm payroll positions added in the U.S. in February, the Labor Department reported on Friday, March 5.

Currently, the U.S. unemployment rate is 6.2%, elevated from the pre-pandemic rate of 3.5%, which was a 50-year low. The rate was as high as 14.8% in April 2020 as sweeping societal shutdown measures aimed at checking the spread of the virus compelled businesses to shed payroll.

But now, Goldman Sachs thinks hiring will accelerate significantly – so robustly, perhaps, that the predicted 4.1% rate could even be surpassed this year, with U.S. employment reaching to near pre-COVID levels, the firm predicted.

“The main reason that we expect a hiring boom this year is that (societal) reopening, fiscal stimulus and pent-up savings should fuel very strong demand growth,” Briggs said.

Congress is on the cusp of approving President Joe Biden’s $1.9 trillion coronavirus economic stimulus plan, which includes direct payments to households and billions in additional grant/loan opportunities for struggling small businesses. On the weekend of March 6-7, the Senate approved a revised version of the bill that the House had previously approved. The House could vote on the revised version on Tuesday, March 9. It’s expected to pass as Democrats hold a majority in the House and support the plan.

As for household savings helping to spur spending and thus hiring: According to Berenberg Economics, Americans saved $1.4 trillion in the first three quarters of 2020, or about twice as much as during the same time frame in 2019, The Wall Street Journal has reported. Berenberg noted that equates to about 10% of 2019 household spending.

Meanwhile, the Federal Reserve Bank of New York performed an analysis that determined that U.S. consumers stored more than a third of their first stimulus checks, which began going out last spring. Some 36% of the payments were saved, 29% spent and 35% used to pay off debt. The survey also found that consumers expected to spend an even smaller percentage of subsequent stimulus payments, while using a larger amount to address personal debt.

Notably, the Commerce Department reported that the percentage of after-tax income that Americans saved was 12.9% in November 2020, up from 7.5% in the same month the year prior.

“In this unusual recession, governments have been unusually generous, people have not been able to spend the money, and hence they have the money and will to spend,” Holger Schmieding, chief economist for Berenberg, told the Journal. After restrictions lift and people begin to circulate regularly in society again, “there will be a lot of spending — my guess is the beaches will be crowded, the pubs will be crowded” and, “by May and June it will be in full swing,” Schmieding said.