As the shocking news emerged that the president and first lady tested positive for the coronavirus, some investors may have wondered if this was the “October Surprise” they feared. Presuming that the President recovers, investors are also absorbing the last employment report before the election. The September jobs report showed that the pace of

Jill Schlesinger 

economic progress is slowing down. The economy added a lower than expected 661,000 new positions, the smallest rise since the job recovery began and a significant deceleration from the spring bounce back. (Note: recent announcements of layoffs from large airlines, Disney, publisher Houghton Mifflin, insurer Allstate, and designer Ralph Lauren, were not included in the September report.)

The U.S. now has 10.7 million fewer workers employed than it did in February. To put that into perspective, for the five years starting in 2015 through 2019, the economy added a total of just over 11.6 million jobs, so the pandemic has wiped out almost five years of job gains. At the current pace, it would take another 16 months for the U.S. to regain the pandemic jobs lost.

The unemployment rate fell from 8.4% to 7.9%, but partially for the wrong reason–the number of people who are in the work force (the “participation rate”) dropped to 61.4%, two percent lower than it was before the pandemic. Front and center of those opting out, are women, especially those with school-age children.

The September jobs report syncs up with findings from “Women in the Workplace 2020”, an annual analysis conducted by McKinsey & Company and Lean In, which surveyed more than 40,000 people across 317 companies from June to August of 2020. McKinsey found that “more than one in four women are contemplating what many would have considered unthinkable just six months ago: downshifting their careers or

BEIJING (Reuters) – China’s exports likely posted a fourth straight month of gains in September as more trading partners reopened their economies, a Reuters poll showed, while imports are also expected to have edged back into growth.

Exports have not been as severely affected by the global slowdown as some analysts had feared, due in part to record shipments of medical supplies and robust demand for electronic products, adding to hopes for a sustained economic recovery.

In September, exports are expected to have risen 10% from a year earlier, according to a median estimate of a Reuters poll of 24 economists. Imports likely rose 0.3% on year, improving after back-to-back decline in July and August.

Exports in August rose a solid 9.5% year-on-year, the strongest gain since March 2019.

Stronger exports could signal a faster and more balanced recovery for the Chinese economy, which is rebounding from a record first-quarter slump thanks to domestic stimulus measures.

A manufacturing survey showed total new orders in September recorded the strongest increase since January 2011, and a gauge for new export orders–which were hit hard by the global outbreak of the coronavirus–rose at the fastest pace in over three years.

“We expect both export and import growth to accelerate further in September. Global growth has continued to recover and strong global housing activity in recent months should support Chinese exports of furniture and appliances,” Goldman Sachs analysts said in a research note last week.

“Import growth may improve in September as well on the back of the solid expansion of domestic activities,” they said.

However, external demand could suffer if virus control measures are re-imposed by trade partners due to a resurgence in infections.

China is meanwhile looking to reduce its reliance on overseas markets for development as U.S. tensions and the pandemic

Yesterday’s JOLTS report for August showed a jobs market that is still just beginning to mend. Hires were up, and layoffs and discharges were down, which is good, but job openings and voluntary quits both declined.

We are far enough along past the worst of the pandemic jobs losses that it is worthwhile to compare the state of the various JOLTS components with the two previous recoveries from recession bottoms in the series’ histories (this is because the JOLTS data only dates from 2001).

In the two past recoveries:

  • First, layoffs declined
  • Second, hiring rose
  • Third, job openings rose and voluntary quits increased, close to simultaneously

Let’s examine each of those in turn. In each case, I break out 2001-19 in a first graph and then this year in a second.

This first graph compares layoffs and discharges (blue) with the 4-week average of initial jobless claims (red):

Figure 1

You can see that, by the end of the recessions, layoffs were already declining and continued to decline steeply over the next 3-8 months before reaching a “normal” expansion level. The turning point coincides exactly with the much less volatile but more slowly declining level of initial jobless claims.

The same has been the case this year, as layoffs and discharges already declined to their “normal” level in May, while initial jobless claims peaked one to two months later and have been declining (slowly) ever since.

Next, here are hires (red) and job openings (blue):

You can see that actual hires started to increase one to two months before job openings.

This year, both made troughs in April, but hires rebounded sharply in May and June compared with job openings.

Finally, here are quits (green) vs. job openings (blue):

Actual hiring started to rise slightly before quits made a bottom.

Thesis

Broadstone Net Lease went public in late September of this year. The company’s diversified portfolio insulates it from covid risks. Its stable properties have been protected by essential tenants, keeping rental collections above 90% for Q2. With a superior portfolio, ample acquisition opportunities post-IPO, and a discounted valuation, Broadstone is positioned to benefit from the K-shaped net lease recovery.

Diversified Portfolio

Broadstone has a highly diversified portfolio consisting of industrial, healthcare, office, restaurant, and retail properties. A majority of BNL’s portfolio consists of industrial (44%), healthcare (20%), and office (10%), all of which are subject to very little negative impact from covid. Each of these three sectors had over 95% Q2 rental collection rates.

Source- 10-Q

These three sectors also provide protection against the growth in e-commerce, a potential long-term threat to the viability and necessity of net lease properties.

Industrial Portfolio

  • Set to benefit from the increasing penetration of e-commerce, as e-commerce is less efficient than brick and mortar in utilizing industrial space. At the end of 2019, e-commerce consisted of just 15% of total retail sales. This number jumped to 25% by May 2020 due to the increased adoption of e-commerce.

Healthcare Portfolio

  • Medical properties have been largely insulated from e-commerce penetration. The country’s aging population will continue to drive demand for such properties.

Office Portfolio

  • While high rise office properties located in urban cores are high risk long-term due to high rental costs and growing adoption of work from home, BNL’s portfolio is concentrated in single tenant properties in non-core markets. Such properties have seen increased tenant and investor demand as the urban to suburban shift may be in early stages, and many companies are seeking suburban, satellite outposts and offices to relocate or expand to.

Lack of Experiential Real Estate

Experiential real estate was viewed

China built its relatively quick recovery through several measures, including stringent lockdown and population tracking policies intended to contain the virus. The government also set aside hundreds of billions of dollars for major infrastructure projects, and offered cash incentives to stimulate spending among its populace. The payoff has been evident, as tourism and spending rebounded during last week’s busy Golden Week holiday period.

By the end of the year, China’s share of global GDP is likely to rise by about 1.1 percentage points, according to a CNN Business calculation using World Bank data. That’s more than triple the share it gained in 2019. By contrast, the United States and Europe will see their shares dip slightly.

All told, China’s economy is expected to be worth about $14.6 trillion by the end of 2020, roughly equivalent to 17.5% of global GDP.

Even without the disruption caused by the virus, China’s share would have ticked up this year, according to Larry Hu, chief China economist for Macquarie Group. But China’s ability to buck the worldwide trend is accelerating the growth in its importance to the global economy.

“The recovery in China has been much stronger than the rest of the world,” Hu added.

A worker in the workshop of a textile company presses out orders for products for the domestic and foreign markets in Haian city, Jiangsu Province, China, on October 3.

A Golden Week boom

The economic improvement has been no more apparent than during this past week, when the country celebrated one of its annual Golden Week holidays. This season’s festivities marked the founding of the People’s Republic of China and the Moon Festival, and was one of the country’s busiest travel seasons of the year.

More than 630 million people traveled around the country during Golden Week, which ended Thursday, according to the Ministry of Culture and Tourism. That’s nearly 80% of the numbers who traveled during the same period last year.

What pandemic? Crowds swarm the Great Wall of China as travel surges during holiday week
Tourist spending, meanwhile, recovered to nearly