The Strongest Economic Rebound in Decades
While the economy has cooled in recent weeks, it surged in 2021’s fourth quarter—and is expected to pick up again as omicron fades.
Here are today’s highlights:
The four-day work week is getting lots of attention but few takers.
Some seasonal businesses are no longer seasonal, which presents a hiring challenge.
A warning from the FTC: Don’t play games with your negative reviews.
In a wild Twitter thread, a startup CEO accuses Stripe and Y Combinator of behaving like mob bosses.
THE COVID ECONOMY
Economic growth accelerated dramatically in the fourth quarter to a 6.9 percent annual rate: “The Commerce Department on Thursday said U.S. gross domestic product, the broadest measure of goods and services, accelerated in the fourth quarter from a 2.3 percent annual rate in the prior three-month period. That marked the sixth consecutive quarter of growth since the pandemic caused a short but severe recession in spring 2020. Economists had estimated the agency would report that GDP expanded at a 5.5 percent annual rate in the fourth quarter, according to a Wall Street Journal survey. ... As a whole, 2021 marked the strongest economic rebound in decades. Output grew 5.5 percent in the fourth quarter compared with the same period a year earlier. That marked the biggest gain since 1984, when output rose 5.6 percent.”
“But the economy appears to have cooled in recent weeks because of the pandemic’s omicron variant ...”
“Data from Affinity Solutions, a firm that tracks consumer spending, shows that overall, consumers continued to spend in the first half of January, said Chief Executive Jonathan Silver. While spending growth slowed, it hasn’t fallen, a sign consumers aren’t too spooked and should keep output growing, he said.”
“Output is expected to pick up later this year as omicron fades, supply problems ease and workers return to work, economists say.” READ MORE
Interest-rate hikes will likely make payments on cars, mortgages, and credit cards higher in March: “Buying a house or opening a credit card could get much more expensive in just a few months as the Federal Reserve plans its first interest rate hikes since the beginning of the pandemic. The move will touch everything from today's red-hot inflation to the price of paying back credit card debt. After nearly two years of near-zero rates, the Fed is pivoting. Progress toward economic recovery and the highest inflation in four decades has prompted the central bank to start reining in its loose money policies intended to support the economy through the worst of the pandemic.” READ MORE
Some seasonal businesses are no longer seasonal: “That's true for Kelly Woods Vaughn, owner and CEO of boutique hotel Riverview Inn in Colonial Beach [Virginia]. These days, she says she's seeing an influx of people from spring break in March all the way through November as opposed to Labor Day. ‘We were incredibly busy,’ she says, speaking of this past summer into fall. ‘My husband and I were working 16-hour days at the Inn.’ Vacation rentals are also booming. During off-season periods Clark Twiddy, president of Twiddy and Company, a vacation rental company based in Corolla, North Carolina, in the northernmost region of the Outer Banks, says demand is up more than 20 percent as compared to pre-pandemic levels and, in early January, bookings were up 300 percent. To be sure, this is one of those good problems to have—too much business, that is. However, given the ongoing labor crunch amid the Great Resignation, being in a situation of needing to hire workers when workers are scarce is hardly enviable.”
“Some businesses are dealing with increased demand by adopting new technology—and they're not going back. ‘The hospitality industry truly has changed,’ says Woods Vaughn. She started using no-contact, digital check-in services last year because they allow current staff to focus on other aspects of the business, such as the overall health and management of the Inn.”
“Some businesses are better equipped to hire quickly, especially those that usually focus on hiring locally and have pre-existing training programs, notes Henley Vazquez, co-founder of Fora, a New York City-based startup that offers data-driven travel recommendations.”
“When in doubt, consider including job postings in marketing materials and beefing up your referral network.” READ MORE
Four-day work weeks are getting rave reviews, but they’re not catching on: “In a bid to attract top talent, tech startup Bolt and Japan-based Panasonic recently announced they’re doing four-day weeks. This spring, 35 companies in the U.S. and Canada, including Kickstarter, a few nonprofits and even an RV manufacturer, will test shorter weeks with help from 4 Day Week Global, a nonprofit founded in New Zealand in 2018. They're piloting a similar program in the U.K. Yes, but: Each time a company does this, it gets a lot of attention — but, overall, the needle isn't moving. In January, there were just 1,700 job postings advertising four-day work weeks for every million listed on Indeed.com. ‘There are not a lot of clients looking to do this,’ Bill Schaninger, senior partner at McKinsey, tells Axios.”
“A four-day week is more humane, Kickstarter vice president John Leland said. ‘We think it’s better for employees. It gives them time back.’”.
“Galyn Bernard, co-CEO of Primary, a children’s clothing retailer that started giving employees Fridays off during the pandemic, says that the company functions better this way.”
“People are reducing meeting times and getting more done, according to Jennifer Christie, chief people officer at Bolt, which gives employees Fridays off.” READ MORE
For some reason, Amazon’s existing warehouse workers aren’t crazy about those $3,000 bonuses going to new hires: “Amazon management responded by doubling overtime pay for all warehouse employees during the peak holiday season, the note said. For the BFI4 warehouse specifically, Amazon made another small concession, providing $150 cash bonuses to workers with five or more years of tenure and a $50 cash bonus to the rest. The BFI4 site's leadership told employees they raised concerns with Amazon corporate leaders, and were allowed to increase overtime pay.”
“‘We realize this small cash bonus is not as lucrative as the signing bonus, but that is all our site budget could afford,’ the managers said, according to the screenshot obtained by Insider.”
“The clash over pay shows the difficulty of managing a sprawling workforce in the face of unprecedented labor shortages.” READ MORE
The FTC has fined a fashion brand for suppressing negative reviews: “The Federal Trade Commission said on Tuesday that Fashion Nova, a popular fast-fashion clothing site, would be required to pay $4.2 million to settle allegations that it had suppressed customer reviews that gave products less than four out of five stars. The agency said the case was its first involving a company’s efforts to conceal negative reviews. Fashion Nova used a third-party product review system that held lower-starred reviews for approval before they could be posted, the F.T.C. said in a complaint. As early as 2015 and as late as 2019, Fashion Nova automatically posted four- and five-star reviews to its site but did not approve or publish hundreds of thousands of lower-starred, more negative reviews, according to the complaint.”
“While ecommerce has boomed, particularly during the pandemic, the ecosystem of online reviews remains relatively crude.”
“The F.T.C. has sought to police companies like the skin-care brand Sunday Riley for posting fake reviews online in recent years, though this is the first instance of the agency’s challenging ‘review suppression.’” READ MORE
Ami Kassar notes that the government is paying attention to how businesses spend Cares Act money: “Recently, a woman from Oklahoma was charged with, and pleaded guilty to, Cares Act Main Street Lending Program fraud. Specifically to ‘bank fraud and money laundering related to a loan obtained through the Main Street Lending Program.’ Like most, the woman said she would only use the funds for working capital and payroll. But, as it turns out, she used the money to remodel her home and buy a fancy new car. In total, the woman faces 40 years in prison, $1.25 million in fines, and $250,000 in restitution. While I doubt she will spend anywhere near that amount of time in prison, this should serve as a warning to anyone who took Cares Act Money.” READ MORE
In a Twitter thread, Ryan Breslow, CEO of payment company Bolt, makes the case that Stripe and Y Combinator are the mob bosses of Silicon Valley, demanding tribute or wreaking vengeance:
THE 21 HATS PODCAST
The Hardest Thing I’ve Done in Business: This week, Jay Goltz, Liz Picarazzi, and William Vanderbloemen talk about sales, specifically the transition most founders have to make from handling sales themselves to building a sales team. Jay, Liz, and William also discuss the value of going to trade shows, the pros and cons of compensating salespeople based on commission, and the differences between inside sales and outside sales.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
If you see a story that business owners should know about, hit reply and send me the link. If you got something out of this email, you can click the heart symbol, you can click the comment icon below, and you can share it with a friend. Thanks for reading, everyone. — Loren