How much hardship is the partial federal shutdown going to end up costing furloughed workers? How desperate are those 800,000 employees going to get if this keeps going?
If the stock market is to be believed: Plenty.
Publicly traded pawnbrokers’ stocks First Cash, Inc. FCFS, +0.92% and EZ Corp. EZPW, +1.63% have suddenly started booming since the shutdown began last month.
EZ Corp has jumped 20% in a month, sharply reversing a trend that had seen it plummet all year.
Bigger rival First Cash is up 23% over the same period. (The rise leaves First Cash on a lofty 20 times forecast earnings, and EZ Corp on a mere 10 times). First Cash could not immediately be reached for comment. A spokesman for EZ Corp said the company could not comment because it was in the “quiet period” before reporting financial results.
While the broader stock market indexes have also risen during that time, both stocks have handily outperformed the market during the rally.
Stock prices are generally considered a forward-looking indicator by economists.
Is the bounce due to the shutdown? Are investors betting that furloughed federal workers will soon be pawning their family silverware to pay the rent? “Yes,” says sector analyst John Hecht at Jefferies & Co., who follows the stocks. His interviews with companies in the industry have already produced “anecdotal data” that this is happening, he adds.
This comes after the spectacularly tone-deaf remarks of Commerce Secretary and Wall Street tycoon Wilbur Ross, who is worth an estimated $700 million and said he could not understand why any furloughed federal workers might have to visit food banks.
Yes, many workers have been granted easy loans by credit unions and other financial institutions during the shutdown, which has been running since December 22. But many others haven’t. And for many more, the help being offered isn’t going to be enough to meet all their bills.
And that’s the thing about emergency money. Unless you’re getting a helping hand from a bank or credit union, it’s expensive. First Cash reports in company filings that the Military Lending Act and related federal regulations “have prevented the Company from offering its pawn services and its short-term unsecured credit products to members of the military or their dependents because none of the company’s products carry a military annual percentage rate of 36% or less.”
Eric Rizer, the owner of the Royal Pawn pawnbrokers in the Virginia suburbs of Washington, D.C., says he expects business to start rising sharply if the shutdown lasts much longer. He says federal workers are telling him they have enough emergency funds to carry them through two pay periods, “or maybe three,” he says. After that, “we’re going to see a serious influx,” he says.
Get a daily roundup of the top reads in personal finance delivered to your inbox. Subscribe to MarketWatch's free Personal Finance Daily newsletter. Sign up here.