Latest BLS Aggregate Hours Data Continue to Support Pro-Cyclical Thesis

Richard

The Bureau of Labor Statistics on Friday published the March 2012 Employment Situation report, which includes payrolls and hours worked at the industry level through February 2012. With the exception of general med / surg hospitals, aggregate healthcare work hours were slightly down in February as compared to January; however in all cases 6 month moving averages continue to rise. We believe the time series of aggregate healthcare hours worked continues to demonstrate: 1) that demand for healthcare is cyclical; and, 2) that demand is improving from a recent cyclical trough. Because more volume-sensitive healthcare sub-sectors (e.g. hospitals, non-Rx consumables) carry valuations that reflect an expectation of forward demand that is as weak or nearly as weak as trailing demand – in contrast to these robust data which imply a cyclical healthcare demand recovery – we recommend overweight positions in these subsectors

For more detail, please see our recent full-length research notes: “US Healthcare Demand Slow for Cyclical (i.e. Temporary) Reasons …” January 12, 2012; “The Pro-Cyclical Healthcare Thesis …” February 6, 2012; and “Accelerating Growth in Hospitals’, Physicians’ Offices and Other Care Settings’ Labor Hours Signals Improving Healthcare Demand”, March 12, 2012

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