A Blow-Out Jobs Report
Surprising everyone, the U.S. economy added more than half a million jobs in January.
Here are today’s highlights:
Do layoffs actually save companies money?
Mortgage rates have fallen, and housing is showing some signs of life.
Outsourcing moves from globalization to localization.
In the pet business, is any niche too narrow?
So you’ve won some positive coverage. Now what? “Awareness and credibility, here we come! Right? Not quite. Publication is just the beginning. The bulk of the impact to your brand comes from how you promote the publication. Media coverage serves as a bellwether for what matters in your space: if a reporter or editor cares, that means their readers do – and so will someone in your network.”
“Don’t restrict PR placements to the press page alone – look for other ways to incorporate them across your website. This helps get them in front of more visitors and builds credibility as those visitors explore other parts of your site.”
[Social media] posts from actual people (not from the company account) add a personal touch to your PR coverage and help executives showcase their insight to their wider networks. To keep them authentic, ensure posts are in leaders’ unique voices and invite readers to check out the article in full.”
“A few one-on-one notes can also go a long way toward building important relationships. For example, after announcing a new tech integration, use any ensuing coverage as an excuse to reach out to key executives at your partnering firm. Even if they've already seen it, the conversation can build rapport and enthusiasm for the partnership.” READ MORE
You can now outsource your production to a Chinese company in Mexico: “Scores of major Chinese companies are investing aggressively in Mexico, taking advantage of an expansive North American trade deal. Tracing a path forged by Japanese and South Korean companies, Chinese firms are establishing factories that allow them to label their goods ‘Made in Mexico,’ then trucking their products into the United States duty-free. The interest of Chinese manufacturers in Mexico is part of a broader trend known as nearshoring. International companies are moving production closer to customers to limit their vulnerability to shipping problems and geopolitical tensions.”
“Lizhong, a Chinese manufacturer of automobile wheels, is erecting the company’s first factory outside Asia at an industrial park in Nuevo León. Lizhong’s largest customers, including Ford and General Motors, pressed the company to open a factory in North America, said its general manager for Mexico, Wang Bing.”
“A South Korean company, DY Power, which makes components for construction equipment, is considering northern Mexico as the site for a factory near a major customer in Texas. ‘After going through the pandemic and the supply chain crisis, the China Covid shutdown, many North American manufacturers would like to eliminate the risk,’ said Sean Seo, a Seattle-based executive for DY Power.
“‘Globalization has ended,’ he declared. ‘It’s local-ization now.’” READ MORE
The pace of hiring surged unexpectedly in January: “The American labor market unleashed a burst of hiring in January, producing another wave of robust job growth even as interest rates continue to rise. Employers added 517,000 jobs on a seasonally adjusted basis, the Labor Department said on Friday, an increase from 260,000 in December. The unemployment rate was 3.4 percent, the lowest since 1969. Even as hiring surged, wage growth slowed slightly to 0.3 percent compared with December.”
“The hefty hiring figures defied expectations and underscored the challenges facing the Federal Reserve, which is trying to cool the labor market in its effort to tame rapid inflation. By raising interest rates — on Wednesday, Fed officials did so for the eighth time in a year — policymakers hope to force businesses to pull back on their spending, including hiring.”
“Yet the labor market has remained extraordinarily tight. In addition to the report on Friday, the government released data this week showing that the number of posted jobs per available unemployed worker — a measure that policymakers have been watching closely — rose again in December. “
“And despite a cavalcade of layoffs in the technology sector, the overall number of pink slips has stayed extremely low.” READ MORE
But Mark Zandi isn’t buying it:
In corporate America, CEOs say the leverage has shifted back to employers: “Inside many organizations, there is a shift in sentiment, executives and their advisers say. Employers who felt they had less leverage in the tight labor market of the past couple of years say they have more power in negotiations with employees. Many feel less pressure to hire quickly to avoid losing a top candidate. Others are enforcing in-office attendance mandates that previously were ignored by some staffers. ‘There is a segment of CEOs who are like, All right, I got the power back,’ said Tim Ryan, U.S. chair and senior partner at PricewaterhouseCoopers, adding that he doesn’t share that sentiment personally.”
“As layoffs occur, some employees might be more accommodating to the needs of companies, said Christian Ulbrich, CEO of real-estate company Jones Lang LaSalle.”
“‘This whole concept of working from anywhere went too far,’ Mr. Ulbrich said. ‘I’m all into flexibility and all supportive that work and life has to find a flexible kind of partnership…but that doesn’t translate into, ‘Mondays and Fridays, I always work from home.’”
“For companies, obstacles that bubbled up earlier in the pandemic are beginning to fade. Whereas executives once bemoaned the ‘Great Resignation’ and a steep uptick in turnover, many companies now say staffers are staying in their jobs longer.” READ MORE
Do layoffs actually save companies money? “By some estimates, more than 58,000 workers in U.S.-based tech companies have been laid off in 2023—and that’s just from one industry. More layoffs are almost certain to come, thanks in part to the bandwagon effect, a correction to overhiring in 2021, and what leaders foresee as tough economic conditions ahead. But are layoffs the right answer financially? The data suggests otherwise.”
“Before they save an employer money, they cost a bundle. For example, Microsoft announced it would take a $1.2 billion charge to earnings to account for its layoffs’ immediate costs, including severance payments, benefit extensions, accrued vacation, and other costs that may be contractually required. That’s $120,000 per laid-off employee.”
“Economic conditions are cyclical, and employers often want to refill empty seats when downturns end. Doing so takes more time and money since new employees require onboarding and training before they’re fully productive.”
“It’s impossible to quantify, but companies can’t function at their best in a knowledge-based economy without the unwritten institutional know-how employees possess. And most of what leaves won’t come back.”
“Productivity will sag before, during, and after layoffs, ultimately hurting profitability. Anxiety, rumors, and false information will proliferate. Those who remain will think more about themselves and less about the company, and time spent gossiping and preparing résumés will mushroom.” READ MORE
Businesses around the country are trying to take advantage of the tech layoffs in Silicon Valley: “The Chamber of Commerce for Greater Philadelphia is working on a campaign to attract and retain tech talent in the city. A shortage of tech talent exists in most places, said Sarah Steltz, the chamber’s vice president of economic competitiveness, and Philadelphia wants to welcome displaced tech workers who may have been laid off. ‘Philadelphia has not had the same profile of being a tech ecosystem’ as some other cities, Steltz said. But local companies now see ‘a unique opportunity to try to build the concentration of tech talent we have here in our region.’”
“The burgeoning life sciences and biotech industries in Philadelphia are going to need more skilled technologists, added Claire Greenwood, executive director of the chamber’s CEO council for growth.”
“Also hiring are existing local brands that build their own tech and need workers to do it, she said. Wawa is one of those companies. The Delaware County-born convenience store chain wants to turn a former storefront in Center City into a training center for tech workers.”
“One thing that may help employers and job-seekers ease the hiring process — in tech roles especially — is meeting in the middle when it comes to remote work. ‘We’re overwhelmingly seeing the employers looking for on-site candidates,’ [Brittany] Nisenzon, of Robert Half, said.’” READ MORE
Mortgage rates have fallen to the 5-percent range for the first time since September: “The housing market hasn’t seen the rate with a five handle since a brief blip in early September. Before that, it was in early August. The rate started this week at 6.21 percent and fell sharply Wednesday after Federal Reserve Chairman Jerome Powell said inflation ‘has eased somewhat but remains elevated,’ which was a shift from previous language. That sent bond yields lower, and mortgage rates loosely follow the yield on the 10-year Treasury.”
“Lower rates already appear to be juicing buyer interest. Pending home sales, which measure signed contracts on existing homes, rose in December for the first time in six months. They gained 2 percent compared with November, according to the National Association of Realtors.” READ MORE
In the pet business, it would seem no niche is too narrow: “Bow Wow Weddings is a full-service pet care company serving Pennsylvania and the surrounding region. The team specializes in assisting with dog owners' wedding day needs, offering customizable packages that include transporting, chaperoning, and watching the couple's ‘Dog of Honor.’ The company was founded by Philly native Myles Ragin and Pittsburgh native Don Valentine, two dog-loving friends who met in finance classes at Robert Morris University. Working as accountants during the day, the pair started Bow Wow Weddings in December 2021. Over the next year, they booked only a handful of weddings with close friends and family, but the team is now ready to fully launch and expand to the masses.”
“Wedding services start at a flat rate of $125 per hour for one pet, which includes chauffeuring the dog to and from the venue, as well as taking care of exercise, food, and drink for the animal.”
“Options for unique add-ons include aisle escorting, photo assistance, and house sitting. Couples can even rent doggie clothing, so their canines can match with them in tiny tuxedos or dresses.”
“Based on previous inquiries and consultations, the team has compiled their services into customizable wedding packages, which range from ‘The Chihuahua’ for $599 to ‘The Great Dane’ for $1299. Bow Wow Weddings can be booked for engagements and vow renewals, too.”
“While Bow Wow Weddings currently serves the greater Philadelphia and Pittsburgh areas, including New York City, Delaware, Maryland and New Jersey, the company hopes to expand and is open to destination weddings.” READ MORE
THE 21 HATS PODCAST
This week, Shawn Busse, Paul Downs, and Jay Goltz go right to the bottom line. Shawn points out how easy it is for businesses to fool themselves into thinking they’re more profitable than they really are. Paul talks about how margins can vary from year to year, especially if an owner decides to invest in improving the business—as Paul’s doing right now. Jay says he’s long sought a 10-percent profit margin but so far, he hasn’t managed to get there. Plus: Shawn explains how he solved his accounts receivable problem. And have you looked at the 401(k) accounts of your employees lately? If not, there’s a good chance you’re going to find that they’re not saving a whole lot. Is that just the employee’s problem, or is it also the owner’s problem?
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren