The Concerns Are Growing
More than 60 percent of CEOs expect a recession in the next 12 to 18 months.
Good morning! On Monday, the Morning Report will observe the federal holiday, Juneteenth. See you on Tuesday!
Here are today’s highlights:
Key economic indicators show sharp declines.
The global shipping industry is enjoying its most profitable period in recent history.
What impact would a casino have on NYC and on the gaming industry?
Artbag, a Manhattan institution, is packing up and moving to Florida: “June 30 will mark the end of an era for a particular set of New Yorkers. That is when Artbag, the go-to store for ladies who lunched (when lunch was a verb) and who needed their choicest handbags repaired and restored for those tony lunches, leaves town. Donald Moore, his son, Christopher, and Christopher’s wife, Estelle, will close their Madison Avenue shop and move their handbag sale and restoration business to Coral Springs, Fla. For 90 years, customers have depended on the store, particularly for repairs, which now represent about 85 percent of its business. The clientele has long included a heady list of celebrities, including Jackie Kennedy, Diane Sawyer, Elizabeth Taylor and Cicely Tyson, who have handed over their Chanel, Louis Vuitton and Hermès bags for repair.”
“Christopher’s father, Donald, tall and elegant, with a halo of white hair, and now 80 years old, began working at Artbag in 1959. ‘I started from the ground up … literally,’ he said. ‘I swept the floors and dusted the bags every day.’”
“After hiring Mr. Moore, Hillel Tenenbaum, who owned the store then, took a shine to the young man who, newly married, had come to New York from his family’s farm in Elizabethtown, N.C., with just $60 in his pocket.”
“‘He asked me if I would like to learn to make handbags, and I said yes,’ Mr. Moore recalled. ‘So, every night after work, he took me home and began to show me how to make handbags. I worked from 8:30 in the morning until 10 at night. It can take two days to make a new handbag.’”
“By 1976, Mr. Tenenbaum was willing to sell a small stake in the business to Mr. Moore. Nearly two decades later, in 1993, Mr. Moore had bought out all three partners. That same year he brought in his son. Six years later, Donald Moore turned over ownership to Christopher.” READ MORE
Recession concerns are surging: “More than 60 percent of CEOs expect a recession in their geographic region in the next 12 to 18 months, according to a survey of 750 CEOs and other C-suite executives released Friday by the Conference Board, a business research firm. An additional 15 percent think the region of the world where their company operates is already in a recession. In late 2021, 22 percent of CEOs surveyed by the firm reported seeing recession risk. That total was down from 39 percent a year earlier.”
“In late 2021, 22 percent of CEOs surveyed by the firm reported seeing recession risk. That total was down from 39 percent a year earlier.”
“The survey, which is based on data collected in May, was conducted before the Federal Reserve on Wednesday approved its largest interest-rate increase since 1994 and Fed officials said it was becoming more difficult to tame inflation while avoiding a recession.”
“‘There is this gap between how consumers are viewing this—they’re not as worried as CEOs are,’ Ms. Peterson said. ‘But CEOs are trained to look 12 to 18 months down the line. Most consumers? The next few months, or three to six months, is really what they’re thinking about.’” READ MORE
Key economic sectors are showing sharp declines: “Home construction across the U.S. fell sharply in May, the Commerce Department said Thursday. Factories in the mid-Atlantic region reduced activity for the first time in two years this month, the Federal Reserve Bank of Philadelphia said. And Americans broadly cut spending at retailers for the first time this year in May, the Commerce Department said earlier this week.”
“One closely watched forecast—the Federal Reserve Bank of Atlanta’s GDPNow tracker—estimates that gross domestic product is on track to remain unchanged at an annual rate over the three months through June 30. Output fell at a 1.5 percent annual rate in the first quarter.”
“Those figures suggested that persistent supply shortages, a 40-year high in inflation and the Federal Reserve’s aggressive efforts to tame price pressures by raising interest rates are cooling the world’s largest economy.” READ MORE
Mortgage rates take a big leap: “Rates on 30-year fixed rate mortgages averaged 5.78 percent as of June 16, according to Freddie Mac’s primary mortgage survey, up from 5.23 percent the week before — that’s the largest one-week increase in the survey in three and a half decades. Mortgage rates have jumped more than two and a half percentage points since the start of the year, while the average rate was 2.93 percent this week in 2021.”
“The climb in mortgage rates, coupled with skyrocketing home prices, has eroded what prospective home buyers can afford, increasingly pushing them out of the market altogether. There are already signs that the market is cooling.” READ MORE
Ocean carriers are charging exorbitant, potentially illegal, fees on shipping containers stuck because of congestion at ports: “Simply put, as ballooning costs hit the wallets of American families, the global ocean shipping industry is enjoying its most profitable period in recent history. In the first quarter of 2022, the biggest carriers’ operating margins hit 57 percent, according to one industry research firm, after hovering in the single digits before the pandemic.”
“In normal times, the fees, known as detention and demurrage, make a lot of sense. Importers who don’t pick up their stuff on time get charged demurrage for storage at the marine terminals. Truckers who don’t return an empty container on time pay late fees, or detention. The purpose of the penalties is to incentivize the various players in the supply chain to keep goods flowing.”
“But as supply chains snarled last year, the ports of Long Beach and Los Angeles ran out of room and became clogged with shipping containers that importers, often big-box retailers and brands, weren’t able to retrieve. Surrounding truckyards and streets were flooded with empty containers, temporarily dumped there by trucking companies that couldn’t get appointments to return them to the ports.”
“‘It’s like renting a car at the airport, and when you try to return it, they’re saying, No, you have to hang on to it for us, and we’re gonna continue to charge you,’ said Fred Johring, the CEO of one of the trucking firms, Golden State Logistics.” READ MORE
The U.S. Supreme Court gives California employers a win: “The Supreme Court on Wednesday sharply limited a state labor law that has authorized private lawsuits on behalf of groups of workers, even if they had agreed to resolve their disputes through individual arbitration. In an 8-1 decision, the court ruled the Federal Arbitration Act preempts or overrides the state law. California is the only state to authorize such private suits as a means of enforcing its labor laws. But in doing so, the state has allowed employees to escape binding arbitration agreements they signed when they were hired, the court said.”
“The justices ruled for Viking River Cruises, which sought to block a broad private lawsuit brought on behalf of one of its former sales agents in Los Angeles.”
“‘This is a huge win for employers and for arbitration,’ said Jack Sholkoff, a Los Angeles attorney.”
“In recent years, business leaders complained that plaintiffs’ lawyers were winning big settlements by filing claims on behalf of hundreds or thousands of employees.”
“A coalition of California employers urged the court to rein in the law, and they hailed Wednesday’s ruling.” READ MORE
What impact might a casino in NYC have on the city and on the gaming industry? “State lawmakers in April approved up to three full-service casinos in the New York City area, a potentially seismic development that officials have touted as a way of attracting new jobs, tax revenue and visitors. A new casino in the city could transform the national gambling landscape, analysts have said, by tapping directly into the country’s largest market. Casino resorts built in the center of large cities are rare. But whether the city and state ever realize the economic windfall that has been promised is far from certain. Evidence from other urban areas suggests that the tax revenue projections of casino companies often prove to be overstated, and that the economic benefits of casinos fade over time.”
“The full cost to communities where casinos are built — including the impact on existing businesses, crime and gambling addiction — can be hard to measure.”
“Local Manhattan officials have long resisted proposals to add casinos, saying they would divert spending from other small businesses while encouraging gambling disorders.” READ MORE
THE 21 HATS PODCAST
I Think You Need to Hire a PR Firm: This week, we welcome a new regular to the 21 Hats Podcast crew: Sarah Segal, founder and CEO of Segal Communications, a public relations firm based in San Francisco. First, Sarah tells Jay Goltz and Liz Picarazzi how she built her firm. Then, Jay and Liz ask Sarah all of their questions about public relations: What can they do themselves? Should they hire a PR specialist or a full-service agency? Should they approach journalists directly or through a publicist? And most important, how much should it all cost? Plus: Why Sarah’s still figuring out how to attract new business.
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