Higher Labor Prices are a Short-Term Problem

The past few years have seen soaring wages due to strong worker demand. Today, some workforces are pushing wages higher following the latest bout of inflation. While wins for workers sound bad for companies in the short-term, there’s a long-term benefit.

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  • Happy workers are more likely to stick around. That lowers the costs of hiring new employees. And a happier workforce is one that can be more productive and attentive to protecting a company’s brand.

    Recent pay deals include workers in Las Vegas. The news didn’t help Wynn Resorts (WYNN) when the casino operator reported earnings last week.

    However, reaching a deal avoids a strike and worker shutdown which could have hit earnings hard in the fourth quarter.

    Shares are up over 10 percent so far this year, and revenues are up 88 percent, even as the casino hasn’t turned a profit. Keeping operations going should help the move towards profitability.

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  • Wynn just started a dividend with a 1.1 percent yield as well. That’s a strong vote of confidence that the casino’s prospects are looking up, even if labor market fears have led to a small drop now.

    Action to take: Investors may like shares as a rebound play after last week’s pullback. Shares can likely see low-double-digit returns in the coming weeks.

    For traders, the January 2024 $90 calls, last trading for about $3.05, could see mid-to-high double-digit gains on a rebound in the coming weeks.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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