Discover more from The 21 Hats Morning Report
More Labor Regs Are On the Way
The proposals will address overtime pay and who counts as an employee.
Here are today’s highlights:
The unemployment rate fell to its lowest point in decades.
Should Texas Pete’s hot sauce have to be made in Texas?
A convenience store chain is opening a technology hub to support startups.
PE firms are rolling up funeral homes.
The Biden administration is preparing to release new regulatory proposals: “President Joe Biden’s appointees are poised to dramatically reshape the work lives of tens of millions of workers and the businesses that employ them. The Department of Labor, National Labor Relations Board and Equal Employment Opportunity Commission — each operating on a separate track — are readying to push out new regulations and rules on everything from overtime pay to who counts as an employee. The packed agenda will allow Biden to champion his pro-worker agenda as his re-election campaign heats up and the president works to tamp down grumbling from some segments of organized labor, most notably the United Auto Workers.”
“This summer the [Department of Labor] has proposed safety standards for coal miners’ exposure to hazardous silica dust, completed a requirement that employers using anti-union consultants disclose their federal contractor status, and sent over language for several regulations to the OMB’s Office of Information and Regulatory Affairs — typically one of the final hurdles before public release.”
“DOL also has several closely watched policies that have not yet been finalized, including a revamp of the regulations that govern prevailing wage standards for federally funded construction projects, commonly known as Davis-Bacon, that has idled for nearly a year and a half since the initial proposal was released in March 2022.”
“But above all, employers are bracing for the unveiling of new DOL rules potentially expanding overtime pay requirements for millions of workers and a tighter definition of which workers can be classified as independent contractors instead of employees.”
“Both will inevitably face court challenges — including some that may seek to invalidate DOL’s policies by contesting [Julie] Su’s ability to serve as acting secretary — and have been the subject of intense lobbying from both business groups and labor unions.” READ MORE
Hiring remained strong in July: “U.S. employment increased at a solid pace in July while wages rose at a faster-than-expected clip, consistent with sustained labor demand that’s at the root of renewed momentum in the economy. Nonfarm payrolls increased 187,000 last month following a similar increase in June, a Bureau of Labor Statistics report showed Friday. The unemployment rate unexpectedly dropped to 3.5 percent, one of the lowest readings in decades.” READ MORE
An NFIB survey finds there’s still a labor shortage for smaller businesses: “NFIB Chief Economist William Dunkelberg reports that ‘42 percent (seasonally adjusted) of all owners reported job openings they could not fill in the current period, unchanged from June. The share of owners with unfilled job openings far exceeds the 49-year historical average of 23 percent although it is 9 percentage points lower than the record high of 51 percent last reached in May 2022.’”
“Openings now appear to be especially plentiful for those above the entry level. Mr. Dunkelberg adds: ‘Thirty-six percent have openings for skilled workers (up 1 point) and 18 percent have openings for unskilled labor (unchanged).’” READ MORE
Businesses are planning on pay raises of 3.8 percent for 2024: “The new projection, from compensation data and software company Payscale, is actually the same 3.8 percent prediction employers made last year, but companies ultimately needed to pay out more because of the tight labor market. Of course, that market is now tightening — albeit slowly — and that is reflected in pay plans for 2024. While 78 percent of employers believe their 2024 salary budgets will increase or stay the same compared to 2023, another 22 percent expect to lower their salary budgets. That's up from 9 percent a year ago. Even so, experts say many employers will find it hard pressed to dial back too much on raises when push comes to shove.” READ MORE
A lawsuit filed in California will determine whether Texas Pete’s hot sauce has to be made in Texas: “A federal judge is allowing a lawsuit claiming Winston-Salem’s Garner Foods misleads consumers by implying that the name ‘Texas Pete’ on its hot sauce is made in that state when it’s actually made in North Carolina. California Central District Judge Maame Ewusi-Mensah Frimpong denied a motion by Garner Foods to dismiss the case brought last fall by Phillip White, who bought a $3 bottle of Texas Pete hot sauce and claimed he was misled to think it was made in or had some connection to the Lone Star State when in fact the sauce is made in North Carolina.”
“White, represented by attorney Ryan Clarkson of Malibu, who has brought similar cases against other consumer-products companies, alleged in the Sept. 12 complaint that Garner’s labeling violates laws against false advertising and unfair competition. The complaint cited not only the name but a white star and a cartoon cowboy with a lasso on the label.”
“The judge cited case law saying brand names can be misleading in the context of the product being marketed, as they require little thought by consumers who don’t have time or interest in reading about the product.”
“Garner Foods issued a statement saying it will defend itself and referring to the brand’s origin story: When a hot sauce the Garner family developed for its barbecue restaurant needed a name, it first considered ‘Mexico Joe,’ but opted for a U.S. state associated with spicy foods and the nickname for one of its family members. The company noted the story is on the brand’s website.” READ MORE
A Philadelphia convenience store is testing a 100-percent digital format: “Wawa has converted one of its University City locations into a fully digital experience with no shelves, a test format that comes as the Delaware County convenience store giant's Philadelphia presence continues to evolve. The Wawa location at 3300 Market St. on Drexel University's campus underwent a six-day renovation before reopening on July 26. In the new store format, all items must be purchased on the Wawa mobile app or on the in-store touch screens, and the orders are then fulfilled by associates behind the counter.”
“When the Wawa opened in September 2018, Drexel said the 8,760-square-foot location was Wawa's ‘newest and largest urban design prototype in Philadelphia,’ with both indoor and outdoor seating, third-party delivery and mobile ordering through the Wawa app.”
“Wawa CEO Chris Gheysens told the Business Journal last year that the Drexel location was the highest food-service store in the entire chain pre-pandemic.”
“As the chain closes some of its Center City stores, it is finding alternative uses for two of the vacant storefronts. In January, CEO Chris Gheysens told the Business Journal that the company plans to convert the space at 19th and Market streets into a technology hub that will bring startups together to provide tech solutions for the company.” READ MORE
Not all downtowns are struggling: “Several cities with diverse downtowns — meaning, a healthy mixture of office space, housing, attractions and so on — have nearly returned to (or even exceeded) their pre-pandemic foot traffic rates. That's based on anonymized mobile phone activity analyzed by the School of Cities at the University of Toronto. San Diego, for example, is at 88 percent of its pre-pandemic foot traffic. That's partially because the city's downtown has long been diversified, and partially because tourism has rebounded, says William Fulton, UC San Diego Design Lab visiting policy designer. Cities with downtowns that almost exclusively catered to office workers are struggling mightily to recover in the remote and hybrid work era. New York is at 67 percent of pre-pandemic foot traffic, and San Francisco is at a measly 31.9 percent.”
“Salt Lake City's post-pandemic foot traffic rate — nearly 140 percent, meaning it's grown even beyond 2019 levels — is particularly remarkable. Dee Brewer, executive director of the local Downtown Alliance, said the area's rapid population growth and Utah's strong economy have helped the downtown thrive.”
“‘I've seen a huge relocation from coastal cities and other areas, and I think that's a credit to the livability and the economy here,’ Brewer told Axios Salt Lake City's Kim Bojórquez. Brewer estimates Salt Lake City's downtown population will double to 10,000 people by mid-2025.”
“One of the boldest post-pandemic downtown revival plans yet comes out of Boston, where officials are offering tax breaks of up to a staggering 75 percent to developers who transform office space into residential housing. ‘This program will help us take advantage of the opportunity we have to rethink downtown as a space where people from all over come together to collaborate, create, live and play,’ Boston Mayor Michelle Wu said in a statement.”
“‘It's too early to say whether Boston's plan will work; applications won't even open until this fall. But it's at least a sign that officials there recognize that workers probably aren't coming back downtown en masse, as some had once hoped.” READ MORE
Boston’s Chinatown, despite a high turnover of businesses, is recovering well: “Three years ago, when Covid closures bruised businesses all over the city, few would have predicted that Chinatown would be the neighborhood springing back at such a fast clip. The restaurant-dense enclave was hit particularly hard, as it struggled to overcome a wave of anti-Asian prejudice after the virus first emerged in China in 2020. But now there are barely any vacant storefronts, and businesses say they’re busy.”
“‘There is some turnover,’ said Ye Huang, an attorney who represents businesses in Chinatown. ‘But that’s pretty much normal.’ It’s a change that generally remains hidden behind the scenes, as business owners come and go, quickly replaced by new ones who carry on the business. Storefronts stay the same and the business on the front end operates as normal.”
“And that’s another reason why businesses have pulled through. They’re unique, with supermarkets, specialty shops, and herbal medicine stores selling products that their mostly Asian customers can’t find at Whole Foods or CVS. And those customers will sometimes travel up to an hour to get there.”
“‘My wife shops at Ming’s Supermarket,’ said Huang, the attorney, who lives in Wellesley. ‘She was telling me that their produce is very fresh and can last for one or two weeks. Ming’s Supermarket’s pricing is also very reasonable compared to other supermarkets.” READ MORE
In yet another industry, private equity is killing it: “The death industry is at a crossroads. Their historic business of preserving a body, displaying it, and then overseeing its burial is collapsing. Rising inflation, declining religion have overturned the fundamentals of the small family businesses that have dominated the mortuary industry at the same time that cash-fueled private equity interests are rolling them up into juggernauts. The biggest growth business, cremation, relies on vast quantities of fossil fuels and volatile costs. At the same time, the Federal Trade Commission has the industry sweating over price transparency.”
“The year 2015 marked a special milestone in the funeral industry, according to the National Funeral Director's Association. After decades of growth, it marked the first time the national cremation rate overtook the casket-burial rate. The group doesn't expect that growth to slow down anytime soon.”
“Another main factor, Mitchell explained, is that the average cremation is simply much cheaper than a traditional burial. As the 2022 NFDA Cremation & Burial Report explained, ‘Typically, cremations cost 40 percent less than funerals with burials.’”
“Additionally, as the Kaiser Family Foundation revealed in a September 2022 report, funeral homes are increasingly being purchased by funeral home chains and private equity-backed firms — around one-in-five funeral homes are currently a part of a chain — leading to concerns from consumer advocates that prices for funeral-related services could continue to be pushed up as private equity-backed firms have historically done in the past.” READ MORE
THE 21 HATS PODCAST
What’s Going to Happen to My Business? This week, Jay Goltz tells us that, on second thought, he did learn something important watching HBO’s “Succession.” He still wants to work as long as he can—even if that means dying at his desk—but he now realizes, thanks in part to Logan Roy, that he needs to put a plan in place in case he were to get hit by that proverbial bus. This realization was also furthered by hearing the sad story of a 51-year-old entrepreneur who died in his sleep recently, leaving his wife to figure out how to keep their bank from calling its loans.
As part of his hit-by-a-bus plan, Jay says he’s crossing streets very carefully, but also considering creating a board of advisors that will be able to offer advice to his survivors. But that’s a little tricky because, as you may have noticed, Jay’s not exactly a board-of-advisors kind of guy.
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Thanks for reading, everyone. — Loren