Yesterday, we talked about whether the labor market would balance in the short term. We also discussed whether there were enough people outside the labor force who might move back in, with higher wages and other inducements, to provide enough bodies to not only fill the current vacancies but also provide enough of a cushion to prevent further dislocations in the future. Although it is close, so far the numbers suggest there are enough people out there to do that. In the next year or so, jobs and employees should move back into a rough equilibrium.

A couple of weeks ago, we left off our discussion on the labor market with the conclusion that the labor market shifts were real and reflected underlying changes in both the demographics and demand for jobs. Knowing that, however, doesn’t tell us what is likely to happen in the future. So, let’s think through the factors that will determine just that.

Yesterday was an interesting day. Yes, the headline declines in the stock market made it interesting, and that news is certainly part of it. Still, that kind of volatility is normal. We haven’t seen it for a while, but if you look back, it’s no big deal. In fact, markets are ticking back up again.

It was about three weeks ago that I ended the regular coronavirus updates as the medical news had improved sufficiently that the country had largely reopened and the virus was under control. Since then, unfortunately, we have seen infections tick back up, and it is clear that—from a medical perspective—the virus is still with us. Thus, this update discusses where we are now and what it might mean going forward.

As regular readers know, I largely steer clear of politics. Political beliefs are largely beyond argument (on both sides), so it’s not a good use of time to put out arguments that go against someone’s convictions. Yet, in economics and markets, we do have to deal with the facts, as we saw recently with the pandemic. Regardless of where you stand on the vaccine, for example, the facts are what they are. And that is where we now find ourselves with climate change.

My colleague Sam Millette, senior investment research analyst on Commonwealth’s Investment Management and Research team, has helped me put together this month’s Market Risk Update. Thanks for the assist, Sam!

My colleague Sam Millette, senior investment research analyst on Commonwealth’s Investment Management and Research team, has helped me put together this month’s Economic Risk Factor Update. Thanks for the assist, Sam!

As we close out the first half of the year, we know a couple of things. First, the U.S. economy is almost entirely reopened following the pandemic shutdown. Although we are not yet fully back, the healing process continues. The story for the rest of the year in the U.S. will be about managing the risks, staying open, and growing our economy. As we are largely past the pandemic, the challenge ahead will be keeping the progress going.

As we head into the second half of 2021, the virus appears to be contained at the national level. The declining medical risks have been good for the economy, with consumer and business activity back to pre-pandemic levels. Markets have celebrated the good news by hitting all-time highs. We're on the road back to normal—but will risks like labor shortages, supply-chain gaps, and inflation derail the recovery? Watch my 2021 Midyear Outlook video to find out.

June was a mixed month for the markets. In the U.S., the Nasdaq and the S&P 500 were up, but the Dow ticked down. We saw the same trend internationally, with developed markets falling even as emerging markets moved ahead. On the economic front, business confidence remains at or close to all-time highs. Still, the problems of success (labor shortages and supply chain issues) loom large.