More of Today's Jobs Are Low-Paid
From The Kiplinger Letter, March 29, 2013
It's not just the modest rate of job growth that's worrying policymakers. It's also the quality of the jobs being created. Two-thirds of the jobs lost during the recession were in decent-paying occupations in manufacturing, construction and office administration. But most of the jobs created since then are low-paid positions in home health care, retail sales and manual labor.
At least 28% of workers have jobs that pay poverty-level wages of less than about $24,000 a year, the minimum needed to support a family of four. That's up about five percentage points from 2002, and it's headed higher still.
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The low-pay problem isn't only an issue of equity and compassion: An economy can't grow if too many workers don't have money to spend.
Pent-Up Demand for Home Appliances
-- From The Kiplinger Letter, March 29, 2013Due for a lift: Sales of big household appliances. The average age of washers, dryers, dishwashers, etc., has been creeping up since 2007, with stock market losses and the recession prompting many consumers to put off making big-ticket purchases. With the average age at 5.3 years in 2011 (up from 4.8 in 2006) and likely higher now, many appliances are wheezing, and replacing them can't be delayed for much longer.
Stronger demand is likely to last for a few years, benefiting Whirlpool, GE and other U.S. firms, as well as foreign appliance makers Electrolux, LG and more.
No Sequel for Hollywood's Healthy 2012
-- From The Kiplinger Letter, March 29, 2013Despite sequels to blockbusters such as The Hunger Games and The Hobbit, Hollywood won't repeat the boffo year it enjoyed at the box office in 2012. The Hunger Games and several other successes, including The Dark Knight Rises, Skyfall and The Avengers, helped to establish a record $10.8 billion in revenue from U.S. box office receipts. This year, the total revenue will drop by 7% or so.
Big movies will make money, but expect fewer milder hits that add to the bottom line. Meanwhile, more small theaters will go dark, unable to afford the switch from film to digital video. By 2016, the movie industry worldwide will be all digital.
"Big Soda" Battles Will Continue
-- From The Kiplinger Letter, March 29, 2013The war on large sugary drinks is far from over. Beverage makers will be hit next with a class action lawsuit patterned after the successful suit that forced the tobacco industry to agree to a $206-billion settlement in late 1998. Expect plaintiffs from the health and wellness industry to blame supersize drinks for making many Americans obese and for contributing to diseases such as diabetes. Moreover, New York City is appealing a N.Y. State Supreme Court decision that overturned a city initiative to ban sugary drinks from being served in containers larger than 16 ounces in Gotham restaurants and other venues. In its ruling on the prohibition, the New York court deemed it to be "arbitrary and capricious."
Legal battles will go on for years, and the outcome is highly uncertain. The deep-pocketed beverage industry has too much at stake to shy away from the fight.
Employees to be Wired for Data
-- From The Kiplinger Letter, March 29, 2013Employers can turn to a new tool to help bolster workplace productivity: An electronic sensing badge worn by employees provides insights on employee behavior that can inspire changes to office design, meetings and more. Excess fidgeting by workers at their desks may suggest it's time for new office chairs, for example. And lackluster participation may mean meetings need to be shortened.
Sound Big Brotherish? Worker privacy is protected. The data that's gleaned from sensors is kept anonymous. It's aggregated and used to illustrate broad trends.
Sensor-collected data will also help spread best business practices among companies. Aggregators such as Sociometric Solutions will compile info on, say, how top pizza shops operate successfully and sell it to other pizza shops.
Small Business Administration Seeks New Borrowers
-- From The Kiplinger Letter, March 22, 2013The Small Business Administration aims to attract new borrowers for its programs with a streamlined application process and two big rule changes: One will put an end to a complicated calculation of how much financing borrowers can contribute. The other will allow small firms affiliated with larger ones to qualify for SBA lending.
But the SBA will still have more funds available to lend than are asked for.
When a peppier economy perks up demand, banks will capture most of it. The typically higher yields and shorter terms of commercial and industrial loans are making them one of the fastest-growing and most attractive prospects for banks.
Cyber Threats Deter Many U.S. Tech Firms From Moving Overseas
-- From The Kiplinger Letter, March 22, 2013Here is another reason more firms are rethinking plans to locate in China:
Cyberattacks traced to Chinese hackers prying into company secrets. The U.S. State Dept.ís clearinghouse for firms planning to move operations offshore is seeing more delays and potential cancellations of American technology firmsí plans to move to China. The heightened risk of getting ripped off will prompt more companies to stay in the U.S. or to consider moving operations to India rather than China
Many firms are already put off by the rising costs of doing business in China. Chinese labor is more expensive today than it used to be, and higher energy costs are raising prices of shipping finished goods from China to the U.S. marketplace. In fact, a recent analysis predicts that by the end of the decade, it will be cheaper to manufacture in the U.S. many products that are meant for American consumers
Employers Catch a Break With Health Insurance Mandate
-- From The Kiplinger Letter, March 22, 2013Employers will get some breathing room on mandated health insurance. If 95% of workers are insured, companies will be considered in compliance with the requirement that all employees be covered. The leeway takes into account that workers start at various times and may be in the three-month waiting period.
Some flexibility on dependent coverage, too. Companies wonít be penalized for not including dependents when the mandate starts in 2014, if theyíre taking steps to provide the required health insurance coverage for dependents a year later.
Expect more folks to opt for traditional Medicare instead of private coverage known as Medicare Advantage, which offers richer benefits than the regular plan. The new health law will gradually reduce Medicare Advantage payments until 2020. On top of that, the administration intends to cut an additional 2.2% next year. The less attractive benefits should lower private plan enrollment to about 17% of all Medicare participants by 2020. Participation reached its peak, 27%, in 2012.
Obama Orders Automated Info Sharing to Protect Against Cyberattacks
-- From The Kiplinger Letter, March 22, 2013To limit damage to the nationís critical infrastructure from cyberattacks, real-time automated info sharing between Uncle Sam and firms will be key. An executive order from Obama proposes to increase the sharing of classified info among the government, power companies, telecom providers and other businesses without delay if thereís an imminent threat. Actually doing it is still a long way off.
First, new security standards must be hammered out by the National Institute of Standards and Technology along with private industry. They will be voluntary and cover the fundamentals, company policies and procedures that safeguard data transmitted over virtual private networks, software upgrades and so on. The goal is to test and shore up existing systems so theyíll be secure for real-time automated info sharing without any worries about security breaches.
Businesses Slowly Recover Post-Fiscal Cliff Scare
-- From The Kiplinger Letter, March 22, 2013Businesses are restocking, albeit cautiously, after selling inventories down late last year, when worry about falling off the fiscal cliff was severe.The drawdown helped shrink GDP growth to a 0.1% annualized rate in late 2012.
The uptick promises a spurt in economic growth in the coming months.
And itís not the only signal of a brighter outlook for the months ahead. Both small and large businesses are more optimistic, foreshadowing better sales and increased capital spending. In addition, industrial production is on the rise, growing at a solid 8.4% annualized rate in Feb., thanks largely to manufacturing. In fact, industry is now operating at nearly 80% of capacity. That's the strongest pace in five years and a level that usually indicates no excess slack in resources.
Feds Watching Kids Apps for Compliance
-- From The Kiplinger Letter, March 15, 2013The feds are getting tough on firms with apps that collect data from kids or aren't clear about their data privacy policies and practices. The Federal Trade Commission, recently zapped social network Path with an $800,000 fine for collecting personal information from children's devices without parents' consent.
Although the feds are mostly interested in apps with big audiences, small firms could be caught in the net. Adopting and publishing policies generated by outfits such as PrivacyChoice and TRUSTe can help companies steer clear of problems.
Small Firms' Futures a Bit Brighter
-- From The Kiplinger Letter, March 15, 2013For small businesses: Note this perverse indicator of economic optimism: They're now less worried about lousy sales than about taxes and regulations, after four years of citing sales prospects as the top concern. Indeed, business is likely to pick up noticeably later in 2013. But little or no growth for the year as a whole. All this, plus improving access to bank credit, foretells rising capital investment by smallsÖa bakery buying an oven, a new computer system for a CPA firm and so on. Smalls' pace of hiring, however, will continue to lag way behind that of bigger firms.
New Power for Freight Carriers: Natural Gas
-- From The Kiplinger Letter, March 15, 2013The next industry poised to gain from the natural gas boom: freight rail. Burlington Northern Santa Fe is beginning to experiment with locomotives that run on liquefied natural gas, not the pricier diesel that they usually burn. With natural gas prices near record lows, other lines will be mulling LNG as well. Overcoming technical issues will take time, and and gas engines aren't cheap, but at least some trains are likely to make the switch to gas in a few years, both to exploit cheap supplies and to meet tighter emissions regs expected in the U.S.
Truckers and barge operators will get a chance to profit from cheap gas, too. Shell Oil and fuel distributor Martin Energy Services plan to set up LNG fuel stations along the Gulf Coast and the Mississippi River, serving both road and marine buyers. Low LNG costs are already convincing a few firms to invest in gas-powered trucks. An expanding network of fueling options will have more of them taking a hard look.
Freight shipping issues will be high on the agenda in Congress this year. Odds are good that lawmakers will authorize new funding for improvements to the nation's system of ports, railways and airports. The objective: Reduce congestion on clogged highways by speeding up freight movement on other transportation modes. Look for new freight funding to come as part of a broader bill, a strategy that backers will employ to obtain passage faster than a dedicated freight bill.
Retail Sales Not as Vigorous As They Seem
-- From The Kiplinger Letter, March 15, 2013More talk in Washington about tax reform, but don't hold your breath. The two parties' ideas about what reform means diverge wildly.
Republicans want revenue-neutral changesÖcurbing deductions and credits but reducing individual and corporate rates, resulting in no net gain or loss for Uncle Sam. President Obama and fellow Democrats want a rewritten code to yield more revenue, softening the blow of spending cuts to trim the deficit.
Republicans aren't likely to budge, even if, in deficit reduction negotiations, Obama offers to pair tax increases with restraints on Medicare and Social Security. They figure they've already given blood by letting tax cuts for high earners expire. Nor are Democrats, who are determined to wring more revenue from taxes.
And the window of opportunity is narrow: If neither side blinks by August, jockeying for position before the 2014 elections will close the opening till 2015. Even then...long odds of reform, as the gulf between the parties will remain wide.
Retail Sales Not as Vigorous As They Seem
-- From The Kiplinger Letter, March 15, 2013There's no doubt that the robust jump in retail sales in February is good news, but a closer look indicates that it may be less heartening than it first seems.
The 1.1% gain over Jan (a whopping 13% increase on an annual basis) came largely from higher gasoline prices plus more sales of building materials and autos, both very variable from month to month. Excluding sales in those three categories, core retail sales rose a more modest 0.4%, an annualized pace of about 5%. That's roughly the rate at which we expect all retail sales to grow over all of 2013.
Moreover, gains were, and will continue to be, disparate: Low-incomers, hit hardest by the loss of the two-percentage-point payroll tax holiday on Jan. 1, are restraining spending, and that will take a toll on low- and mid-tier retailers such as Walmart, Target and dollar stores. To the extent that these households are even holding spending steady, they're doing so by cutting savings or increasing use of credit. And without significant wage hikes, which are unlikely, that can't be sustained.
Upper-incomers' spending is being buoyed, though, by strong stock prices and rising home prices, as well as by dividends and bonuses distributed in late 2012 rather than in 2013 to avoid higher taxes. That's good news because households at the upper end of the wealth spectrum pack an outsize punch in the economy: Those claiming the top 20% of income account for about twice that share of spending.
