🦅 The State of the United States

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Good afternoon everyone and happy Sunday. What a week, huh? We'll be honest, it's impossible to get a read on what's happening overseas. Tons of noise, not a lot of signals coming from Ukraine. The reporting is mixed too. For example, check out this intro from the New York Times: "President Volodymyr Zelensky of Ukraine agreed on Sunday to talks with Russia 'without preconditions,' even as President Vladimir V. Putin further escalated tensions by placing his nuclear forces on alert." There are hopes for diplomacy and fears of a nuclear war packed into the same sentence. Let's hope option one prevails.

In the meantime, we took a slightly different editorial approach with today's newsletter. Rather than focus on individual companies or sectors, we zoomed out to analyze the US as a whole. In turn, we have a super interesting deep dive on how our country has been impacted by the pandemic and what that means for certain cities, states, and regions moving forward. We took a look at:

- US Cities With the Most Young Home Buyers

- US States With Largest Spending Slumps

- US Cities With the Most New Business Applications

Two takeaways emerged, one was a surprise the other was a bit more obvious. The first: Alaska popped up more in this analysis than we anticipated, and not in a good way. The second: More people, money, and jobs are moving south. We hope this edition provides you with valuable contextual knowledge about the shifting dynamics of our country.

REVIEW

US stocks had a bumpy ride last week given the unfolding situation in Ukraine. For weeks markets have been on edge about the evolving geopolitical tensions, but it came to a head last Wednesday when the Dow Jones Industrial Average fell to its lowest level of 2022. Stocks continued to fall on Thursday morning after Russia officially invaded its neighbor, but then ended the day higher. On Friday, the Dow jumped 800 points notching its best day since November 2020, however, markets ultimately finished the week mixed. Multiple countries imposed sanctions on Russia. The US specifically slapped sanctions on Russian banks and over a dozen major state-owned companies. Washington's sanctions also include export blocks on technology which will ostensibly impact Moscow's military and aerospace industries. On the economic front, the core personal consumption expenditures price index jumped 5.2% on an annualized basis. This was above the 5.1% increase economists were expecting. The metric is important because it is the Federal Reserve’s primary inflation gauge. In the week ahead, oil will be in focus. Not only because of what's happening between Russia and Ukraine but also because OPEC+, a group of oil-producing countries, meets on Wednesday. Any decision to increase, decrease, or maintain output will have an impact on energy prices around the world. It's also a big week for data surrounding the US labor market. ADP's private employment is due Wednesday, initial claims are posted Thursday, and February's nonfarm payrolls report is scheduled for Friday. For the week as a whole, the Dow Jones Industrial Average fell 0.1%, the S&P 500 gained 0.8%, and the NASDAQ Composite rose 1.1%.  

PREVIEW

The Chicago Purchasing Manager Index for February is due Monday. This measures the performance of the manufacturing and non-manufacturing sector in the greater Chicago area. January’s index came in at 65.2, which was up from 64.3 in December. January’s index beat expectations and was the highest recorded in three months. Also note the US Department of Commerce will release its advance report on January’s trade in goods.

Tuesday, January construction spending is due. In December 2021 construction spending jumped 9% from a year earlier. Construction sometimes slows during the winter months and the sector has also been negatively affected by delays in terms of materials and supplies. Markit’s final adjustment to this month’s manufacturing PMI and the Institute for Supply Management’s manufacturing index for February are also set for release.

Wednesday, ADP will publish its employment report for February, which provides a look at private hiring in the US. In January companies cut 301,000 jobs. This was a surprise given the fact analyst estimates initially called for a gain of 200,000. Leisure and hospitality accounted for over half of the lost jobs. It marked the first net job loss since December 2020, which analysts blamed on the Omicron variant. The Federal Reserve will also publish its Beige Book.

Thursday, initial jobless claims are due. Last week’s number hit a 52-year low, coming in at 232,000. That was a 17,000 decline from the previous week and means the fewest amount of Americans are collecting unemployment since 1970. Continuing jobless claims will also be reported, as well as January’s factory orders, and the ISM services index for February.

More jobs data is on the way Friday in the form of nonfarm payrolls and the unemployment rate for February. The US Bureau of Labor and Statistics surveys both private and government employers to determine these figures. Nonfarm payrolls rose by 467,000 in January, while the unemployment rate increased to 4%. Also, be on the lookout Friday for this month’s report on average hourly earnings, and consumer credit for January.

Some big names in retail and tech will make a showing in earnings calls for the week ahead.

On Monday, video communications service Zoom (ZM) will share its most recent quarterly results. Since its peak during the pandemic the stock has fallen by around 75%. Tuesday, retail giant Target (TGT) will hand in its most recent report card. The company enjoyed a rise of its own throughout the pandemic and, so far, it's been able to sustain it. Wednesday, Dollar Tree (DLTR) will post quarterly earnings. The discount retailer last shared results in November, which were largely in line with industry expectations. Thursday, grocery chain Kroger (KR) is set to post its most recent quarterly earnings before the market opens. Its last report topped Wall Street estimates for both earnings and revenue. Friday, Bitcoin mining company Cipher Mining (CIFR) will hand in its report card for its most recent quarter. Analysts note the extreme volatility observed in the cryptocurrency market has affected mining stocks as well.

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US Cities With the Most Young Home Buyers

Where Are Young Adults Buying Homes and Why Does it Matter?

Young buyers are facing challenges purchasing a home in the current environment. With baby boomers opting to age in place and city-dwellers migrating to the suburbs, demand for new and existing homes is fierce. In January, the median existing-home price for all housing types was $350,300, up 15.4% from January 2021. Meanwhile, according to Lawrence Yun, NAR’s chief economist, the share of first-time homebuyers was just 27% last month, one of the lowest figures observed.

Adults under 25 that are buying homes are an important cohort to keep an eye on, though. Presumably, these buyers have been financially disciplined enough to save up a nest egg for a down deposit. They definitely could have gotten some help from their parents as well. But if they got approved for a mortgage this means their credit is good and they have a job that covers the monthly payments. 

Zooming out, where these young adults decide to buy is a bet not only on their future but also on the future of the cities where they want to live. This isn't a full list, but here are some metros with the most home buyers under 25.

Midwest, South Luring Young Adults With Affordable Housing 

Young adults are purchasing homes across the country, but there are areas performing better than others. States in the Midwest and South tend to have the bigger share of homes owned by adults under 25. For good reason, home prices tend to be more affordable than in big cities. In Iowa, about 10% of the homes are owned by young adults. In California, where home prices are high, the share of young adults with homes stands at around 2%.  

In the Midwest, young homeowners are flocking to small metro areas. Waterloo-Cedar Falls, Iowa, is in first place, Lima, Ohio, in second, followed by Bay City, Missouri, in third place, Cedar Rapids, Iowa, in fourth, and Elkhart-Goshen, Indiana, rounding out the top five.

Young Adults Not Priced Out of All Bigger Cities 

Young adults are also migrating to mid-sized cities in the Midwest and South. Prices are higher but still affordable enough to draw buyers under the age of 25. Fort Wayne, Indiana, is number one, with 11% of homeowners under the age of 25. Ogden-Clearfield, Utah, Lancaster, Pennsylvania, Provo-Orem, Utah, and Peoria, Illinois, round out the top five. 

Even in bigger cities there is affordable housing for young adults. Grand Rapids, Michigan, Salt Lake City, Detroit, Cincinnati, and Buffalo are among the top bigger cities for people under 25 years old. 

Purchasing a home in this current environment is tough enough, but if you are young and starting out it can seem downright impossible. The good news is there are still affordable areas left to buy. Many are concentrated in the Midwest and South and won’t be available for long if the past year is any indication.

US States With Largest Spending Slumps

States Hit Hard by Consumer Spending Declines 

Despite the economic recovery, spending on the part of consumers has been spotty. COVID outbreaks and local policy surrounding these spikes have had a direct impact on spending levels in certain parts of the country.   

Although consumer spending has been rebounding recently, from 2019 to 2020, consumer spending declined 2.6%, which was almost unprecedented. It marked the largest year-over-year decline in consumer spending since the Great Recession of 2008 and 2009.

Given the fact that consumption makes up nearly 70% of US gross domestic product, it's an important gauge to follow. On a local level here are some of the regions and states that saw the biggest declines in consumer spending. 

Mid-Atlantic, West Coast, New England See Big Spending Declines 

The entire country was hit hard by the pandemic, but certain regions were worse off at the height of COVID-19 outbreaks in 2020, particularly ones reliant on tourism and commuters. 

With restaurants, bars, movie theaters, and other entertainment shuttered, consumers stopped spending. This part of the economy was also slower to come back because it wasn’t considered "essential" in some areas.

Areas that relied on commuters also took a big hit during the pandemic. Without workers coming into offices, spending on transportation, food, and entertainment fell off a cliff. As a result, most of the states hit the hardest were located in the Mid-Atlantic, West Coast, and New England. 

Alaska in First Place 

So which states saw the biggest decline in consumer spending during the pandemic? Alaska is in first place with consumer spending declining 5.4% year-over-year in 2020. That amounts to a decline of $2,760 per consumer.

Massachusetts was in second place with consumer spending dropping 5% or $2,762 per consumer. Rounding out the top three is Hawaii with a 4.7% drop in consumer spending. New York, which was hurt early on by the pandemic, experienced a 4.6% decline in 2020 consumer spending, while it dipped 4.6% in Minnesota. 

Many states, particularly ones that rely on commuters and tourists to grease the economy, saw a big decline in consumer spending as the pandemic rapidly spread. The good news: with cases declining, consumers are out spending, which bodes well for a more broad-based economic recovery in 2022 providing prices increases don't stunt this rebound.  

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Has your furry friend taken over the back of your car? Fur, drool, or food everywhere? Have territories been marked? It’s probably time to make a change.

DEKOHM’s dog car seat cover may be exactly what you need to keep your vehicle clean from Fido’s antics. The cover is anti-scratch, waterproof, and non-slip. You can be confident your seats will remain protected.

It’s also fully detachable, so you can adjust the cover to suit your car’s unique dimensions. There are several different ways you can set the cover up, whether you simply want to cover the seats or you also want to have a barrier. 

If you’re headed on a long road trip or simply want regular protection, DEKOHM’s dog cover will be an essential accessory for your car and your pup.

Best of all, it's 30% off for a limited time.

US Cities With the Most New Business Applications

Entrepreneurship Isn’t Dead in America 

The pandemic hit small businesses disproportionately, with many forced to shutter their stores, some permanently. According to the Federal Reserve, about 200,000 businesses faced closures during the height of the pandemic, with small businesses bearing most of the brunt. Those that did survive had to reinvent themselves, many turning to online selling for the first time ever. 

Despite all the closures and challenges, the nation’s entrepreneurial spirit was strong during the pandemic and remains so today. Between 2019 and 2020 the US Census Bureau reported a 25% increase in new business applications. The strength seen in 2020 carried over into last year as well. Of the business applications awaiting approval, roughly one-third are for enterprises that have a good chance of growing into a business that has staff and payroll.

Southeast Sees Surge in Business Applications 

When it comes to the industries getting attention from this new crop of business owners, retail is in the lead. From 2019 to 2020 the number of applications to start a retail business soared 59%. Those servicing the transportation industry were in second place, accounting for about 35% of the new business applications. 

New business applications rose across the country since the pandemic but there are pockets seeing more strength than others. The Southeast is one example. This region has seen the strongest increase in new business applications with Mississippi, Georgia, and Louisiana in the lead. Combined those three states accounted for more than 55% of all the business applications. Alaska and North Dakota performed the worst, with new applications showing only single-digit percentage growth.

Retail, Transportation Businesses Aplenty 

Of the areas in the Southeast teeming with entrepreneurs, small metro areas are doing the best. The top three small cities with the most applications are all in Georgia: Albany, Columbus, and LaGrange. In fourth and fifth place are Hammond and Tuscaloosa, Louisiana. New business applications in these small cities are up anywhere from 78% to 90%. Large cities also have their fair share of new business applications, particularly in Memphis, Atlanta, New Orleans, Cleveland, and Chicago. 

The pandemic has taught countless Americans how to pivot and adapt. Many are trading their day jobs for the dream of business ownership. Applications to start new businesses have been surging since the pandemic and it doesn’t look like things are calming down anytime soon, particularly for entrepreneurs residing in the Southeast.

This communication from The Street Sheet is for informational purposes only. It is not intended to serve as a recommendation to buy, sell, or hold any security and is not an offer or sale of a security.  Information contained within should not be perceived as a research report and is not intended to serve as the basis for any investment decision. Any third-party views reflected herein do not reflect the opinion of The Street Sheet. All investments involve risk and the past performance of a security does not guarantee future results or returns. There is always the potential for financial loss when investing in securities or other financial products. Investors should consider their investment objectives and risks before investing.