Tracking the Turnaround in Company Hiring and Business-to-Business Spending During COVID-19

There’s an ongoing abundance of articles and material being written about the negative statistics around company performance and economic outlook as a result of COVID-19. This article aims to provide a positive spin: a view into how U.S. companies, on aggregate, are turning a corner. While it’s impossible to say if this trend will continue, examining the data as it appears today may provide some insight into what the future holds in the short term.

Alternative data has not only made this type of analysis possible, but it has created ways to perform it accurately. Instead of working with predictions and estimates, raw and unaltered data is our source. Traditional data such as a company’s reported fundamentals suffer from a lack of frequent and timely updates. This is a complete juxtaposition to alternative data sources that can deliver new data multiple time throughout a day.

The analysis below provides information on hiring and spending to see what can be uncovered in terms of what sectors are positioned for success. By aggregating a U.S. company’s hiring and spending by sector, the hope is uncovering which areas of the U.S. economy are ramping up and approaching business as usual. For instance, viewing daily updates on whether a company is hiring or putting a pause on filling new positions can offer a window into what the company perceives to be the future direction of its business. Perhaps they are increasing the job postings on their website to prepare for an upturn in activity. Conversely, a distinct drop in jobs can very quickly show that a company is not a position to increase spending on new employees. In a similar vein to hiring data, a company’s business-to-business spending can illustrate if a company is confident enough in their various business lines to move forward with spending across different segments such as operations, materials for inventory, or transportation costs.

Background

To accomplish the task of “nowcasting” or peaking around the corner as to what’s to come, we’ll leverage two unique datasets available on the Open:FactSet Marketplace (OFM) that provide the type of data described above. OFM is a data storefront that offers a variety of content from ESG and alternative datasets to core data like prices and fundamentals and all are interconnected using FactSet’s proprietary symbology. This interconnectivity is a simple but powerful advantage, allowing ease of use when bringing together data from a variety of sources.

The two datasets that will allow us to perform nowcasting are LinkUp Raw and Cortera’s Spend Insights and B2B Snapshot data. LinkUp Raw provides data on company hiring with job postings scraped from the websites of over 60,000 companies and mapped down to the zip code. Cortera tracks spend and payment behaviors, collected via business-to-business credit transactions. This data is contributed by their Credit Exchange network and captures $1.6 trillion in B2B transactions annually.

Evaluating Percent Changes in Company Hiring

Since LinkUp provides jobs data, we are able to drill down to individual companies to see the jobs they are filling currently and historically. By taking this data, grouping companies together by RBICS Sector classifications, and viewing the average month-over-month percent change in job postings, we’ll begin to see at a high level which areas of the economy are expanding.

Leveraging the RBICS Sector data ensures we are looking and up-to-date and accurate peer groupings. RBICS’ patented bottom-up approach of classifying companies guarantees precision and granularity. This granularity is helpful when you want to see why there is an indication of a turnaround in a specific sector or industry.

In the charts below, we can see hiring changes in June and July. In June, there was already a distinct trend occurring where companies hiring was positive in relation to May. What becomes more pronounced in July is the fact that all sectors, outside of Utilities, were experiencing positive growth in hiring. In fact, 50% of the RBICS Sectors experienced jumps greater that 5%.

Sources: FactSet, LinkUp (as of August 10, 2020)

Taking this a step further, RBICS also offers detailed Industry classifications. By adopting a top-level view of all Industries, we can see that roughly 75% have increased hiring in the past month. When we refine our focus to only the top 15 Industries, a few names immediately pop out: Grocery Stores, Home Builders, and Food and Beverage Services. All Industries that took a noticeable downturn during the initial stages of the pandemic are now in a place where they feel comfortable bringing in new staff.

Sources: FactSet, LinkUp (as of August 10, 2020)

Analyzing Business-to-Business Spending

Cortera’s business-to-business credit network allows them to deliver data on a company’s monthly spending, six days after the month ends. Due to the timing of this article, we’ll focus on June spending data that will still give us valuable insight ahead of a company’s reported financials. In addition to this current spending data, Cortera also offers more granular data on a company’s accounts payable and spending in 45 different categories, giving an insider’s view into the timeliness of a company’s payments to suppliers, the types of purchases that are being made, and most importantly, the overall creditworthiness of a company. 

Similar to LinkUp, we’ll align Cortera’s data with RBICS’ Sectors and Industries to better understand which areas show signs of recovery and growth. Now performing a month-over-month analysis on spending rather than hiring, a view of all Sectors shows that in May, on aggregate, spending increased. June holds an even more positive message with a stark jump in spending within each Sector outside of Non-Corporate companies.

Sources: FactSet, Cortera (as of August 10, 2020)

Viewing the Cortera data by industry brings out its own interesting insights. The majority of Industries are spending more in June than they were in the previous month and a look at the specifics aligns with what we saw in the LinkUp data. Wireless Services has taken a position in the top 15 as well as another beverage-related industry (i.e., Beverages Production). Arts, Entertainment, and Recreational Providers as well as Sporting and Athletic goods saw an increase in spending. With so much news on people looking for different summer outlets outside of the traditional summer vacation, this uptick makes perfect sense.

Sources: FactSet, Cortera (as of August 10, 2020)

Conclusion

There remains a focus on being able to better understand how companies are performing in these unpredictable times. Alternative data provides different angles outside of the traditional routes to assess how a company is holding up in almost real time. From data such as hiring to business-to-business spending, it is now conceivable to track companies in ways that were previously not possible. Additionally, leveraging this data can help measure how far along different sections of the economy are in their journey back to normalcy.