As Delta Fades, the Economy Picks Up

There are strong indications that we are turning a corner this month.

Good morning!

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Here are today’s highlights:

• A slew of new tools are designed to improve the hiring process.

• An MIT expert on the future of work says there’s no going back to the office.

• Interior designers find workarounds for furnishings that don’t arrive.

• Carey Smith says less than 1 percent of today’s startups are viable businesses.

THE COVID ECONOMY

There are signs the economy picked up dramatically in October: “The comeback through October is ‘far outpacing’ the progress seen the month before, UBS economists said in a Monday note. The degree of the rebound is also extraordinary. Such month-over-month improvements have only happened about 20 percent of the time historically, the team led by Ajit Agrawal said. The pickup comes from gains across the board.”

• “The Delta wave continued to fade, and daily case counts are now the lowest they've been since late July. The plunge in virus cases led to Americans spending more, with UBS forecasting that sales ‘picked up substantially’ in October.”

• “Credit-card data suggests strong growth in sales of goods, particularly in the electronics, merchandise, and home renovation sectors.”

• “​​Service spending, which is more affected by the virus, likely grew in September and probably grew even faster through October, the team said. Spending rebounded most at arts and entertainment, healthcare, and air travel businesses.”

• “Industrial production broadly bounced back in October after slowing the month prior, the team said. The largest improvements showed up in auto production, goods manufacturing, utilities, and gasoline production.” READ MORE

But your Thanksgiving feast is likely to cost more this year: “Nearly every component of the traditional American Thanksgiving dinner, from the disposable aluminum turkey roasting pan to the coffee and pie, will cost more this year, according to agricultural economists, farmers and grocery executives. Major food companies like Nestlé and Procter & Gamble have already warned consumers to brace for more price increases.”

• “In September, the Consumer Price Index for food was up 4.6 percent from a year ago. Prices for meat, poultry, fish and eggs soared 10.5 percent.” READ MORE

LOGISTICS

Designers are finding workarounds for the inevitable shipping delays: “Manufacturers and retailers say it’s difficult to predict when furnishings will be delivered. ‘We have a container of rugs coming from Morocco that was delayed for weeks in Barcelona—with no real explanation—so we gave all the customers who purchased them a 10 percent discount to try to assuage the anger,’ said Ben Hyman, chief executive of Revival Rugs in Oakland, Calif. ‘We had 200 or 300 customers waiting for a woven-wire chandelier that was shipping from India and was expected in four to five months,’ said Brownlee Currey, chief executive of Currey & Company in Atlanta. ‘It ended up being nine or 10 months. We kept ordering more meanwhile, and when they finally sent them, we got an enormous shipment.’”

• “‘I’m getting more things custom made by local craftsmen—things like small side tables and upholstery pieces—because then you don’t have to worry about shipping,’ said Courtney Sempliner, an interior designer in Port Washington, N.Y. ... ‘We’re fortunate to have a lot of local mom-and-pop craftsmen in Brooklyn, Queens and upstate.’”

• “Ms. Gage, the interior designer in Philadelphia, said a quick way to shave off weeks of wait time is to eschew custom fabrics: ‘Where in the past we might have picked a custom fabric for a sofa and waited for the fabric to get shipped from the manufacturer, now we choose a stock fabric for a sofa.’”

• “If you are shopping online and see that an item you want is in stock, ‘order it immediately. Don’t want until the next day, because who knows if it still will be available,’ said Ms. Budd.”

• “One-of-a-kind vintage wooden furniture from sites such as 1stdibs, Chairish and Etsy are another option.” READ MORE

TECHNOLOGY

Startups are introducing lots of artificial-intelligence tools designed to help businesses hire: “The key: A.I. is not meant to fully automate the hiring process, and most companies that use it stress the importance of pairing high tech with a more human interview process. When used strategically, A.I. recruiting tools have the potential to make hiring less of a pain point.” For example:

• “Eightfold's A.I.-driven platform allows businesses—clients include LG and Capital One—to post jobs, which are then recommended to targeted job-seekers. Unlike technology that looks for specific keywords, the algorithm infers what skills a candidate has from their résumé and matches them with related jobs. There's no automatic filtering that disqualifies candidates for résumé gaps (a common criticism of algorithmic selection), and it can mask names, gender, and race to limit bias in the process.”

• “When you have a job that you needed to fill yesterday, getting candidates in and interviewed ASAP is a priority—which is a process that Scottsdale, Arizona-based Paradox AI aims to solve. The platform exists as a text message-based, conversational bot that walks potential employees through the screening process, so they can get scheduled for an interview in as little as a day.”

• “By seamlessly integrating into video platforms like Zoom, Google Hangouts, and Webex, Clovers gives interviewers real-time feedback and, later, allows them to create a highlight reel of a candidate's high points and low points. In this way, the A.I. calls out potential bias as it arises (for example, it may alert an interviewer if they inappropriately ask a candidate if they have children).” READ MORE

HUMAN RESOURCES

Thomas Malone, an MIT professor who wrote The Future of Work, says there’s no going back to the office: “If companies make employees who can do their jobs at home go into the office, it will be harder for them to hire, and other companies will benefit. I was talking to a very senior executive at a major bank, and we were discussing that Jamie Dimon quote that everyone has to absolutely come back. And the executive said, very carefully, ‘That’s fine for Jamie Dimon.’ And I said, ‘What I think you’re saying is that it’s good for your recruiting.’ And he said, ‘That’s very intuitive of you.’”

• And the water-cooler argument? “I actually completely agree that we need those kinds of interactions. What I do not agree with is that you need to be in-person to have them. The right kind of technology can enable them.” READ MORE

Another reason for the labor shortage? Missing foreign workers: “Hundreds of thousands of foreign workers have gone missing from the labor market as the global coronavirus pandemic drags on, leaving holes in white-collar professions like the one Ms. Mahajan works in and in more service-oriented jobs in beach towns and at ski resorts. Newcomers and applicants for temporary visas were initially limited by policy changes under former President Donald J. Trump, who used a series of executive actions to slow many types of legal immigration. Then pandemic-era travel restrictions and bureaucratic backlogs caused immigration to drop precipitously, threatening a long-term loss of talent and economic potential.”

• “Goldman Sachs estimated in research this month that the economy was short 700,000 temporary visa holders and permanent immigrant workers, and that perhaps 300,000 of those people would never come to work in the United States.” READ MORE

The main issue for candidates who turn down job offers? Flexibility: “ManpowerGroup recently conducted a study that found nearly 40 percent of job candidates across the world ranked schedule flexibility in their top three factors in making career decisions. Job site platforms are noting a similar shift. SnagAJob, an online forum for hourly staffers, said that the word ‘flexibility’ is now mentioned in 11 percent of the 7 million job postings on the site. Earlier in the year, the term was included in 8 percent of postings.”

• “After struggling to hire workers for its outlet store in Dallas, Balsam Hill finally opened on September 1. But the very next day, the online purveyor of high-end artificial holiday trees was forced to close after four of its five workers quit.”

• “The main gripe for three of them? Working on weekends. So they found jobs elsewhere with better hours.”

• “Balsam Hill reopened weeks later with nine workers, hiking the hourly pay by $3 to $18 per hour. But more importantly, it changed its approach: Instead of only focusing on the needs of the business, it's now closely working with each employee to tailor their schedules based on when they want to work.” READ MORE

FINANCE

The amount of money venture capitalists are investing in startups is off the charts—but Carey Smith isn’t impressed: “The staggering rate at which companies reach billion-dollar valuations is just one of the ways that venture capital has busted charts this year. ‘We’re looking at $240 billion invested in VC-backed companies this year, which would have seemed outrageous a few years ago,’ says Kyle Stanford, a senior analyst at Pitchbook. ‘There is more capital and more interest in the venture space than there has ever been.’”

• “‘It’s very frothy out there. People are just throwing money around,’ says Carey Smith, the founder of Unorthodox Ventures, an investment firm in Austin.”

• “Smith disagrees that the current VC bonanza is driven by startup innovation, which he thinks has remained more or less flat over time. ‘I would guess that not even 1 percent of today’s startups are viable businesses,’ he says.”

• “Smith says that while VCs expect for many of their investments to be duds, founders can get screwed in the process. Raising a ton of capital at an inflated valuation carries its own risks: If you don’t live up to that standard, future investors may reevaluate your company downward and dilute your equity.” READ MORE

THE 21 HATS PODCAST

I Track Everything You Could Possibly Measure: Several weeks ago, we had a great conversation about how Jay Goltz, Diana Lee, and Dana White track their financials. It was so good that, this week, in episode 82, we decided to put similar questions to Paul Downs and Laura Zander. “It's funny, I was listening to that episode,” Laura says, “and Diana said she's a freak about the numbers. I'm like, ‘God, does that make me a superfreak?’” Laura walks us through how her labor costs can affect what types of yarn she carries, Paul suggests a quick-and-easy ratio that can signal when a business is in trouble, and Jay explains how an hourly performance indicator that he began tracking 30 years ago transformed his business. Plus: Laura tells us how she got a bank loan that’s almost three times the size of the one she couldn’t get last year.

• You can subscribe to The 21 Hats Podcast wherever you get podcasts.

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