There’s Still Time to Hit Your Numbers

Yes, it’s August, but in our latest Dashboard episode, Tracy Bech says it’s not too late to take action. Start by reviewing your projections for the rest of the year.

Good Morning!

Here are today’s highlights:            

• New York City is cracking down on street vendors.

• Michael Girdley says running a small business is harder than running a big business.

• There are a lot of explanations for why we are experiencing a boom in jobs.

• Mexico has passed China as our top trading partner.

THE 21 HATS PODCAST: DASHBOARD

There’s Still Time: Yes, it’s August, but Tracy Bech — co-author of “60 Minute CFO” — says it’s not too late to assess where your business stands and take steps to hit your numbers. Tracy also talks about what prompted her to take her own financials seriously, what owners can do if their revenue isn’t meeting expectations, and why she kind of likes recessions but isn’t disappointed we haven’t had one.

• You can subscribe to the 21 Hats Podcast wherever you get podcasts.

REGULATION

Could a bill passed last year take San Francisco from doom to boom? “AB 2011 is a legislative tool that allows for multifamily residential development in areas where it was not previously permitted. It streamlines the approval process for affordable housing on commercially zoned land and allows such approvals for mixed-income housing along commercial corridors, as long as projects meet specified affordability, labor and environmental conditions. It’s undeniable that the pandemic has altered San Francisco in unprecedented ways. Downtown remains hollowed out, and our recovery has been much slower than that of urban cores in other American cities. Although the pandemic certainly accelerated consumer shifts, like ecommerce, many of the continuing retail vacancies were already on course for collapse even before Covid upended everything.”

• “The United States has one of the highest square footages of retail space per capita worldwide. A 2019 analysis by PwC showed that in countries like France, Germany, the United Kingdom, and Japan, the average retail space was less than five square feet per person.”

• “In the U.S., it’s more than 23. In such a highly saturated retail market, poorly conceived shopping centers or those leased in a way that turned out to be a weak investment have crumbled — we should consider it a good thing.” READ MORE

New York City is cracking down on street vendors: “Until last week, Corona Plaza in Queens was bustling: taqueros flipping fresh tortillas and vendors hawking Central American crafts over a soundtrack of cumbia and train traffic. There were produce stands, live bands, and surging crowds, all in a public square that was named one of the 100 best places to eat in the city. But last Thursday and Friday, sanitation workers swept through the plaza, removing several stalls and threatening to penalize vendors who did not have a city permit to operate — nearly all of the more than 80 who regularly work there. In the days since, the grilled-meat stands and jugs of agua fresca have been replaced with protest signs.”

• “It was the latest escalation in the city’s tense relationship with the plaza merchants — most of them immigrant women, many of them undocumented — who have helped revive one of the New York neighborhoods hit hardest by the coronavirus pandemic.”

• “A spokesman for the Sanitation Department said removing the unpermitted vendors was necessary because the plaza had become so crowded that it was impassable, ‘with dirty conditions, with semi-permanent structures bolted into the ground, illegal vending right in front of storefronts.’”

• “‘Corona Plaza symbolizes something that is very core to the American ideal,’ said Jaeki Cho, the host of Righteous Eats, a popular food channel on social media that has featured the plaza: ‘These are real people, making real products that are going to be challenging for you to find elsewhere in New York.’” READ MORE

MANAGEMENT

Michael Girdley says few things are more challenging than running a small business: 

READ THE THREAD

THE ECONOMY

Here’s one reason for the surprising boom in jobs: “Early in the pandemic, immigration plummeted. Borders closed, and the Trump administration used the public health emergency as an excuse to make unusually draconian changes to legal immigration that Team MAGA had long been yearning for. Even well into the Biden era, persistent immigration agency dysfunction made it hard for legal immigrants already here to work. But a lot of those administrative hurdles have since been removed. Today, trends in legal immigration have largely normalized, and the numbers of immigrant workers in the United States have more than recovered.”

• “You can see this in the labor market data: Employment levels for native-born Americans are just a touch higher than in February 2020, when the pandemic recession began (up on net by 0.3 percent); among foreign-born workers, employment has shot up by 9.3 percent.”

• “To be clear, immigrants remain a small share of the labor market. They account for less than one-fifth of employment overall. But they are more than punching above their weight in this recovery, particularly as (disproportionately older) native-born Americans retire.” READ MORE

Or maybe it’s the women: “Women are driving this labor force boom. With rising pay and more flexibility to work from home or adjust their hours, they are surging into the workforce. Labor force participation for women ages 25 to 54 hit an all-time high this summer, far surpassing pre-pandemic levels. There are especially strong gains for mothers of young children. The sectors on hiring sprees lately — health care, social assistance and government — are also ones where women have historically found the most opportunities. The result is women now make up half of all U.S. employees. That milestone was reached only twice before in modern U.S. history: just before the pandemic, and in 2009 after the Great Recession destroyed so many ‘muscle jobs.’”

• “It’s clear that Americans still want to work, contrary to narratives that took root in recent years. There’s also an important message here for employers: Workers are a lot more eager to join companies that pay more and provide some flexibility.”

• “Data released this week showed a sizable jump in output per hour during the second quarter. There has been a mass migration away from low-skilled, low-paying jobs into higher-skilled, higher-paying jobs. Workers also say they are the happiest they have been in decades as they are in jobs that better suit their interests and lifestyles.” READ MORE

Or maybe it’s the pandemic-driven rise in new businesses: “During the pandemic, Americans’ bank accounts got plumped up with stimulus payments and money saved from not going out to dinner or on vacation. Blend in a hefty dose of social media-driven agitprop on the ease of launching a company, leaven it with binge-watching of shows such as Shark Tank, fold in a measure of Musk- and Bezos-inspired dreams of becoming the next centi-billionaire, and the result is a boom in small-business formation. In 2021 the U.S. saw a record 5.4 million registrations of startups, census data show.”

• “Two years on, the effect continues as inflation spurs many Americans to look for a side hustle and the acceleration of e-commerce and remote work makes it easier than ever to launch one. More than 5 million new business applications were filed in 2022, a 42 percent increase from pre-pandemic levels.”

• “‘People want freedom,’ says Karen Jenkins, an independent management consultant in South Carolina. ‘They want to take ownership of their lives and are willing to take more risks.’”

• “That’s good news for the U.S. economy, because the country’s 30 million-plus small companies were responsible for almost two-thirds of new jobs from 1995 to 2021, according to the U.S. Chamber of Commerce.”

• “Less clear is how many of the newly formed enterprises will survive and thrive. The census data show registrations of businesses that aren’t necessarily up and running. It’s much more difficult to build a company that hires staff, generates revenue, and earns a profit—evidenced by the hundreds of thousands of startups that fail every year or never get off the ground.” READ MORE

MANUFACTURING

The era of ultra-cheap Asian manufacturing may be ending: “The workplace features floor-to-ceiling windows and a cafe serving matcha tea, as well as free yoga and dance classes. Every month, workers gather at team-building sessions to drink beer, drive go-karts, and go bowling. This isn’t Google. It’s a garment factory in Vietnam. Asia, the world’s factory floor and the source of much of the stuff Americans buy, is running into a big problem: Its young people, by and large, don’t want to work in factories. That’s why the garment factory is trying to make its manufacturing floor more enticing, and why alarm bells are ringing at Western companies that rely on the region’s inexpensive labor to churn out affordable consumer goods.”

• “Americans accustomed to bargain-rate fashion and flat-screen TVs might soon be reckoning with higher prices. ‘There’s nowhere left on the planet that’s going to be able to give you what you want,’ said Paul Norriss, the British co-founder of the Vietnam garment factory, UnAvailable, based in Ho Chi Minh City. “People are going to have to change their consumer habits, and so are brands.”

• “The problem is acute in China, where urban youth unemployment hit 21 percent in June even though factories had labor shortages. Multinational companies have been moving production from China to nations including Malaysia, Indonesia, Vietnam, and India. Factory owners there said they, too, are struggling to get young people to sign up.”

• “Factory wages in Vietnam have more than doubled since 2011, to $320 a month—three times the rate of increase in the U.S., according to data from the United Nations International Labor Organization. In China, factory wages rose 122 percent from 2012 to 2021, the latest period for which the U.N. data is available.” READ MORE

Chinese imports have fallen 24 percent since May, and Mexico is now America’s biggest trading partner: “Through the first five months of this year, U.S. imports from China were down 24 percent from the same period one year ago, according to the Census Bureau. Companies such as HP, Stanley Black & Decker and Lego are among those that have been repositioning their supply lines for American consumers, either to avoid the risk of being pinched between rival superpowers or as part of a longer term strategy to produce goods closer to customers.”

• “​​A combination of political and economic forces is driving the supply chain makeover. U.S. tariffs on roughly two-thirds of Chinese goods, imposed during the Trump administration, have cut into new orders. Wages for Chinese factory workers have risen, eroding one of the country’s competitive advantages.”

• “Earlier this year, Mexico became the United States’ top trading partner, as manufacturers increasingly favored regional supply networks rather than global ones. Mexico, Canada and China have taken turns occupying the No. 1 spot since the start of the 2018 trade war.” 

• “Still, China remains the world’s factory, accounting for 31 percent of global manufacturing value added, compared with 17 percent for the second-ranked United States. With modern ports, highways, and high-speed rail, along with factory clusters that can rapidly adjust to changing conditions, China retains advantages that no other country can match.” READ MORE

OBITUARY

Tony Mandola, legendary Houston restaurateur: “A member of the dynastic Mandola family, many members of which are local restaurant operators, Mandola brought an effortless grace, abundant humor, and old-school hospitality to the table as owner of Tony Mandola’s Gulf Coast Kitchen, the Cajun-meets-Italian restaurant he ran with his wife and business partner Phyllis Mandola, the only daughter of the legendary restaurateur ‘Mama’ Ninfa Laurenzo. Together they were Houston restaurant royalty; a powerhouse team that merged two of the city’s legacy bloodlines.”

• “[Tony Mandola’s Gulf Coast Kitchen] would be the last to see Tony Mandola hold forth as he worked the room amid loyal customers; it closed in 2021. By that time, Mandola’s memory was already in decline. He was diagnosed with Alzheimer’s in 2012.”

• “Mandola’s brother Vincent Mandola, who died in July 2020, was known for his collection of restaurants, including Nino’s, Vincent’s, Grappino’s, and Pronto Cucinino; his brother Damian launched Damian’s Cucina Italiana, co-founded the original Carrabba’s, and owned the late Pesce in Upper Kirby; his sister Rose married into the Carrabba family.”

• “‘I’m blessed to have some wonderful uncles, but even as a young kid I wanted to emulate [Tony]  because I idolized him,’ Johnny Carrabba said of his uncle. “He taught me so much about the business. Everyone knows Tony as the gracious host with the great personality. But what people may not recognize is that he was technically brilliant in the restaurant business.” 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.

• You can subscribe to the 21 Hats Podcast wherever you get podcasts.

Thanks for reading, everyone. — Loren