Red States Are Winning Economically
It’s about mass migration, remote work, and the search for cheaper housing, better weather, less traffic, and lower taxes.
Here are today’s highlights:
The labor market is still tight, with big companies handing out summer pay increases.
The move to reshore manufacturing from China is accelerating.
Amazon is selling a CRM system, and Gene Marks says it could be worth your consideration.
Early in the pandemic, there was a sense that suburban office parks might be big winners.
Red states are doing better economically than blue states: “The pandemic has changed the geography of the American economy. By many measures, red states—those that lean Republican—have recovered faster economically than Democratic-leaning blue ones, with workers and employers moving from the coasts to the middle of the country and Florida. Since February 2020, the month before the pandemic began, the share of all U.S. jobs located in red states has grown by more than half a percentage point, according to an analysis of Labor Department data by the Brookings Institution think tank. Red states have added 341,000 jobs over that time, while blue states were still short 1.3 million jobs as of May.”
“To track each state’s progress toward normal since the pandemic began, Moody’s Analytics developed an index of 13 metrics, including the value of goods and services produced, employment, retail sales and new-home listings. Eleven of the 15 states with the highest readings through mid-June were red. Eight of the bottom 10 were blue.”
“Behind those differences is mass migration. Forty-six million people moved to a different ZIP Code in the year through February 2022, the most in any 12-month period in records going back to 2010, according to a Moody’s analysis of Equifax consumer-credit reports.”
“The states that gained the most, led by Florida, Texas, and North Carolina, are almost all red, as defined by the Cook Political Report based on how states voted in the past two presidential elections. The states that lost the most residents are almost all blue, led by California, New York, and Illinois.”
“Remote work allowed many workers to move to red states, not because of political preferences, but for financial and lifestyle reasons—cheaper housing, better weather, less traffic and lower taxes, the analysts said.” READ MORE
Despite fears of recession, big companies are handing out summer pay increases: “To address inflation and to retain workers in what many executives say remains a tough labor market, some large employers are raising salaries or doling out special bonuses. Exxon Mobil gave U.S. employees a one-time payment in June equivalent to 3 percent of their salaries. PricewaterhouseCoopers says it will hand out raises in July to reflect its performance in its fiscal year that just ended. Microsoft told employees this spring it planned to nearly double its global budget for merit-based raises. The moves, often planned months in advance, come at an unusual time for American businesses.”
“Some executives have expressed concerns in recent weeks about a possible economic slowdown, and companies such as cryptocurrency exchange Coinbase Global and Netflix have recently laid off workers.”
“Even so, many corporate leaders say business is strong and that higher pay is needed to reward employee performance, keep up with pay at rivals and to reflect that staffers are paying more for gasoline, groceries, and other daily living expenses.”
“Overall, companies have on average increased base pay in the U.S. by 4.8 percent so far in 2022, and about a third of employers are considering or planning midyear raises, according to a survey of more than 300 large employers conducted in May by Pearl Meyer, a compensation advisory firm.” READ MORE
The move to bring manufacturing back from China appears to be accelerating: “The construction of new manufacturing facilities in the U.S. has soared 116 percent over the past year, dwarfing the 10 percent gain on all building projects combined, according to Dodge Construction Network. There are massive chip factories going up in Phoenix: Intel is building two just outside the city; Taiwan Semiconductor Manufacturing is constructing one in it. And aluminum and steel plants that are being erected all across the south: in Bay Minette, Alabama (Novelis); in Osceola, Arkansas (U..S Steel); and in Brandenburg, Kentucky (Nucor). Up near Buffalo, all this new semiconductor and steel output is fueling orders for air compressors that will be cranked out at an Ingersoll Rand plant that had been shuttered for years.”
“Scores of smaller companies are making similar moves, according to Richard Branch, the chief economist at Dodge. Not all are examples of reshoring.”
“Some are designed to expand capacity. But they all point to the same thing -- a major re-assessment of supply chains in the wake of port bottlenecks, parts shortages and skyrocketing shipping costs that have wreaked havoc on corporate budgets in the U.S. and across the globe.”
“‘I’ve always said, this is just economics, people are going to realize that the savings they thought they had aren’t real,’ [Kevin Nolan, CEO at GE Appliances] said in an interview, ‘and it’s going to be better and cheaper to make them here.’” READ MORE
This is not a good time for suburban office parks: “There was a time early in the pandemic when it seemed that suburban office parks might emerge as the winners in a restructuring of work. They’re the perfect setting to do business for people who don’t want to get too close to one another, or to hold working lunches. And they stood to benefit from several early pandemic assumptions: that workers would shun elevator buildings, that people would flee cities, that density was over. ‘Essentially none of those have played out,’ said Christian Beaudoin, head of global research advisory for the commercial real estate firm Jones Lang LaSalle.”
“In JLL data, vacancy rates in the first quarter of this year were higher for suburban offices than for the central business districts in Chicago, Charlotte, Detroit, Philadelphia, Tampa, and Washington.”
“The firm estimates that 57 percent of suburban office space nationwide is so old as to be functionally obsolete. In the New Jersey suburbs of New York, that figure is 72 percent, among the highest in the nation.”
“Suburban offices built between the 1960s and 1980s were already struggling before the pandemic, with their aging mechanical systems and the changing tastes of millennials.” READ MORE
Gene Marks suspects you may not know that Amazon offers a CRM system: “Amazon Connect is not a full CRM. It’s a contact and call center solution. Its target market is call centers and businesses that provide customer support. If that’s something you’re considering then you’ll be pretty amazed by the platform’s breadth of features. I was. The application provides telephony services using its own built-in softphone. It will send email and SMS messages to customers. It will handle appointments and billing reminders. It does predictive dialing, using machine learning technology to determine between a live customer, a voicemail greeting or a busy signal. It comes with chat, contact routing, queuing, analytics, and case management. It will manage customer profiles, service forecasting, capacity planning and scheduling. There are rules, automation, AI and other workflow tools.”
“For so long, ‘CRM’ has focused on sales people. But my better clients have realized that the best way to grow your company is not just by obtaining new customers, but retaining your existing customer base while expanding the products and services you provide to them.”
“There is a strong argument to make that investing in a call center product like Amazon Connect is a better marketing strategy than only focusing on the sales and marketing features of a CRM.”
“CRM does stand for customer relationship management, right?” READ MORE
There’s really no reason not to use multifactor verification: “Too many small and medium-size businesses rely on usernames and passwords alone to secure their systems, leaving them vulnerable to cyberattacks that could otherwise be prevented, government officials and cybersecurity chiefs say. Multifactor authentication, in which a login attempt is verified by additional layers of protection such as the use of codes sent by text messages, phone calls or dedicated apps, is a relatively simple defense against hackers.”
“Yet a survey of around 1,400 small and medium businesses globally conducted by the U.S.-based nonprofit Cyber Readiness Institute, and published Tuesday, finds that 55 percent of companies haven’t set up multifactor authentication.”
“Of those that have, only 28 percent require employees to use it.”
“‘We know nearly all account compromise attacks can be stopped outright, just by using MFA. It’s a proven, effective way to thwart bad actors,’ said Karen Evans, managing director of CRI, which was established in 2017 to provide cybersecurity resources to smaller companies.” READ MORE
Boundless Robotics has developed a system that makes it easier to grow marijuana at home: “The Boston-based startup has developed Annaboto, an indoor cannabis growing system that uses artificial intelligence to manage the growing cycle. ‘You add water, push a button, and that’s it,’ said Carl Palme, chief executive and founder. The $1,000 Annaboto system features a 3D-printed base and an overhead tripod with grow lights and a camera. It also connects to the owner’s WiFi service, so that the user can control it with a smartphone app. Anonymous data about each unit’s performance is shared with Boundless Robotics, which can use it to train the AI system and continually improve its performance.”
“Annaboto is a hydroponic system, meaning there’s no soil involved. A cannabis seed is placed in tap water that’s mixed with custom-blended fertilizer that’s automatically dispensed by the device.”
“When the Annaboto user types in the location of the device, it uses local water quality data collected by the Environmental Protection Agency to deliver the correct blend of fertilizer.”
“In Massachusetts, high-quality cannabis costs around $350 an ounce. Palme said that a single plant grown at home could produce two ounces of cannabis buds.” READ MORE
THE 21 HATS PODCAST
Kurt Wilkin Hates Business Books. So He Decided to Write 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 wrote 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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