Jobs Report Eases Concerns
Some economists believe the recession has already begun, but the unemployment rate is near a half-century low.
Good morning!
Here are today’s highlights:
On Wish‚ the Internet’s dollar store, the deals seemed too good to be true.
A glut of fast fashion is bad news for the thrift industry.
A new running shoe is 100 percent recyclable, but you have to buy it on subscription.
THE ECONOMY
The U.S. added 372,000 jobs in June, another strong report: “Hiring in June was near monthly gains logged earlier in the year, the Labor Department on Friday said. Companies added an average of nearly 400,000 workers over the previous three months, keeping the job market on strong footing. The unemployment rate, at 3.6 percent, was near the half-century low reached before the pandemic hit in spring 2020. Employers hired across industries, with government the only major category to shed jobs.”
“The labor market, in which demand for workers far outpaces unemployed people looking for work, has held up stronger than the rest of the economy, which is rapidly cooling.”
“Consumers are starting to pull back on spending partly because of inflation, which is running at a four-decade high. Home construction is slowing as the Federal Reserve attempts to pull down inflation through aggressive interest-rate hikes.”
“Manufacturing production is declining as Americans are reluctant to buy big-ticket items and household goods.” READ MORE
Mark Zandi likes the latest jobs report:
Or maybe the recession is already here: “There’s no need to fret about the timing of a U.S. recession anymore, according to Wells Fargo Investment Institute -- because we’re already in one. The investment strategy arm of the bank says the U.S. is entering a recession in the second half of the year -- in other words, now -- amid inflation that’s faster and more broad-based than expected, weakening consumer sentiment and corporations flagging a shift in spending. That forecast differs from just over a month ago, when the group saw a mild recession and not until the end of this year, but moved up the timing and the severity to ‘moderate.’”
“U.S. GDP fell an estimated 1.6 percent in the first quarter, and real-time data from the Federal Reserve Bank of Atlanta sees a drop of a similar magnitude in the three months ended June 30 -- but the government’s official report of a preliminary estimate won’t be released until later this month.”
“Should that show a negative print, the U.S. would be in a technical recession.” READ MORE
Mortgage rates fall, reflecting recession fears: “The average rate on a 30-year fixed-rate mortgage fell to 5.30 percent, mortgage-finance giant Freddie Mac said Thursday. That is down from 5.70 percent last week. Mortgage rates haven’t recorded such a big weekly decline since December 2008, when the rate fell from 5.97 percent to 5.53 percent.”
“Monthly mortgage payments remain at the least affordable level in years. The typical U.S. household will spend an additional $400 on its mortgage payment each month than it would have in January, according to the Federal Reserve Bank of Atlanta.” READ MORE
HUMAN RESOURCES
Here’s one reason we still have a labor shortage: “A dearth of child care and elder care choices is causing many women to reorganize their working lives and prompting some to forgo jobs altogether, hurting the economy at a moment when companies are desperate to hire, and forcing trade-offs that could impair careers. Care workers have left the industry in large numbers amid the pandemic, shrinking the number of nursery and nursing home employees by hundreds of thousands. At the same time, coronavirus outbreaks have led to intermittent school shutdowns, which, in turn, have made care demands less predictable and increased the need for reliable backup options.”
“In February, about 39 percent of women with children younger than 5 told Stanford’s RAPID Survey that they had quit their jobs or reduced their hours since the pandemic began, up from 33 percent at the same time last year.”
“Economists have long identified a lack of available and affordable child care as a reason that American women do not work more, sometimes by comparing the United States with Canada — which is economically similar in many ways but has more generous child care and parental leave policies and a higher rate of female employment.”
“‘Until 1995, the U.S. was the world’s leader in terms of female labor force participation,’ said Claudia Goldin, an economist at Harvard. ‘Now, this host of countries that we used to think were backward in terms of gender norms have exceeded the U.S.’” READ MORE
As big cities struggle to get workers back to their offices, local economies suffer: “More than two years into the Covid-19 pandemic, exasperation is growing among business, city and community leaders across the U.S. who have seen offices left behind while life returns to normal at restaurants, airlines, sporting events and other places where people gather. Even after many employers have adopted hybrid schedules, less than half the number of pre-pandemic office workers are returning to business districts consistently. The problem is most pronounced in America’s biggest cities. Nationally, office use hit a pandemic-era high of 44 percent in early June, while cities like Philadelphia, Chicago, San Francisco and New York have lagged behind, according to Kastle Systems, which collects data on how many workers swipe into office buildings each day.”
“The divide has created a sense of urgency among politicians and business leaders in these cities, where the stakes are especially high because office workers are the engine of local economies and fuel small businesses.”
“From April 2020 to March 2021, 26,300 New York City small businesses closed permanently, according to a report the mayor released in the spring.” READ MORE
RETAIL
Consumers are using BNPL to cover everyday expenses: “That's a concern for economists and consumer advocates, who say the surge in the use of these services, coupled with a lack of transparency and little regulatory oversight, leaves them wondering just how much debt Americans are actually getting into. While other household debt, such as credit card spending and auto loans, is gathered and tracked by the Federal Reserve, Buy Now, Pay Later (BNPL) data is not included because the financing is typically provided by non-bank sources and not yet reported in a comprehensive manner to credit bureaus.”
“That means there's no publicly available database of BNPL-related consumer debt levels, transaction volume, delinquency rates, and fees and interest charges.”
“‘They're buying cleaning supplies, they're buying socks, they're buying sneakers, they're buying everyday household items,’ he said. ‘When people start revolving everyday purchases like groceries, you know there's a problem.’” READ MORE
A glut of fast fashion is threatening local thrift stores: “Last year, the online consignment store ThredUp received more clothing than any other year since its founding in 2009, with many of those items coming from fast-fashion retailers, the company said. Compared with 2020, there was a 186 percent increase in the number of items listed from Shein and a 75 percent increase in pieces from PrettyLittleThing, a ThredUp spokeswoman said in an email. ‘There’s all these clothes out there, but it’s just that they may not be as durable as you would like,’ Mr. Minter said. Because of fast fashion, more than 60 percent of fabric fibers are now synthetics, derived from fossil fuels.”
“‘This is alarming for the generations of women who have been thrifting for decades as a way of filling their closets affordably with garments made of high-quality materials.”
“‘I’d say that the golden age of thrifting is over,’ Megan Miller, 65, said in an interview. ‘The ability to find high-quality, well-made things is definitely on the wane.’” READ MORE
ECOMMERCE
On Wish, the Internet’s dollar store, many deals seemed too good to be true: “There were unbelievable bargains on ‘bestdeeal9,’ a store hosted on the e-commerce platform Wish, including a $2,700 smart TV being sold for $1 and a gaming computer advertised for $1.30. But none of the offers were real, and Wish knew it. The company, an online novelty emporium that had more than $2 billion in sales last year by dangling hard-to-believe discounts, created bestdeeal9 as an experiment. Listings that had been removed for violating Wish policies were reposted on bestdeeal9 and used in part to track whether shoppers complained when their orders never arrived.”
“Employees working on the project repeatedly pushed executives to take down the store, arguing that it was both illegal and unethical, according to three employees familiar with the project who spoke on the condition of anonymity to discuss company matters.”
“More than 213,000 people made purchases from the store, according to an internal document reviewed by The New York Times, though the document did not say how many received their items.”
“Since its founding in 2010, Wish had many of the hallmarks of a classic Silicon Valley success story: started by a young coder and his college friend, rumored to have turned down a $10 billion acquisition offer from Amazon and described by Recode as an app ‘that could be the next Walmart.’” READ MORE
PRICING
This running shoe is 100 percent recyclable, but it’s only available by subscription: “In June, On began shipping the first 10,000 pairs of its latest model, starting with U.S. customers. The Cloudneo is pitched as ‘the shoe you will never own.’ Instead, runners pay $29.99 a month for an endless supply, provided they return worn-out pairs to be recycled. On executives say this arrangement will lock in a supply of raw material for new shoes, reducing waste.”
“The subscription model encourages people to treat shoes as a service, like Netflix or Spotify, not a one-off purchase. On’s terms and conditions require subscribers to pay a penalty if they end their subscription without returning the shoes.”
“Beat-up shoes returned by customers will accumulate in warehouses until there are enough to be shipped to Italy, where an Arkema recycling plant will clean the shoes, grind them up and melt them into plastic pellets.”
“The recycled material, topped up with fresh feedstock, will be turned into fabric and foam in plants in China and Taiwan, before returning to Vietnam for assembly.”
“On’s investment in the project has been in the double-digit millions of Swiss francs, Mr. Coppetti said. Right now, On’s recycled shoes cost more to make, he added, but that could change if the system expands and becomes more efficient.” READ MORE
THE 21 HATS PODCAST
Kurt Wilkin Hates Business Books. So He Wrote One: This week, in a special bonus episode, Kurt talks about how he helped build several businesses, including most recently a recruiting business called HireBetter, and explains why he hates most business books. It has to do with the attention deficit issues he, like many entrepreneurs, tends to experience. So when he decided to write a business book of his own, he kept it short, and he structured it so that you can find the parts that are most relevant to you and skip the rest. It’s called “Who’s Your Mike?” and it features chapters on the kinds of hiring and management challenges all entrepreneurs confront.”
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