‘This Is an Economy on Fire’
The September jobs report comes in way higher than economists projected.
Here are today’s highlights:
Developers are concluding that EV charging stations are no longer a nice-to-have.
The effects of the UAW strike are rippling through the industry’s small suppliers.
The dramatic rise in immigration is easing the labor shortage and reducing the pressure on wages.
You don’t have to be in Texas to make Texas Pete hot sauce.
The race is on for more EV charging stations, which developers are starting to view as necessities: “When city approval of a proposed $350 million skyscraper in downtown Los Angeles was on the line, project manager Hamid Behdad knew he had to give in to the last-minute demand of a planning commissioner to quadruple the number of electric vehicle charging stations in the condominium tower. ‘When you are in the heat of the hearing in the last leg of the proposal, you aren’t going to say no,’ Behdad said, even though he thought the requirement was overkill. Today, with the Perla on Broadway complete and angling for buyers, Behdad said he is ‘extremely glad that commissioner forced us’ to install chargers on 20 percent of the building’s parking stalls. ‘If we didn’t have these 90 chargers, we would be in real trouble selling units,’ he said.”
“Landlords of apartments, hotels, office buildings, and other commercial properties are rushing to avoid similar trouble. And owners of convenience stores, fast food chains, movie theaters and big box retailers are hoping to cash in on EV chargers to lure customers with time to kill as they fill up.”
“Some companies are building charging centers that are a giant step beyond electrified gas stations. Elon Musk’s Tesla, for instance, is building a whimsical drive-in movie and diner complex in Hollywood where Tesla owners can entertain themselves while loading their batteries.”
“Fancy L.A. shopping centers such as the Grove and Westfield Century City have chargers, as do the more workaday Walgreens, Walmarts, Subways, and 7-Elevens.” READ MORE
Hiring surged far beyond expectations in September: “In a sign of continued economic stamina, payrolls grew by 336,000 on a seasonally adjusted basis, the Labor Department said on Friday. The increase, almost double economists’ expectations, serves as a confirmation of the labor market’s vitality and the overall hardiness of an economy facing challenges from a variety of forces. The unemployment rate was 3.8 percent, unchanged from August, as joblessness ticked back near record lows.”
“September was the 33rd consecutive month of job growth. Hiring figures for July and August were revised upward, with employers adding 119,000 more jobs to the labor market than previously recorded. Wages, as measured by average hourly earnings for workers, rose 0.2 percent from the previous month and 4.2 percent from September 2022.”
“The unemployment rate has been below 4 percent since December 2021, a stretch not achieved since the late 1960s. ‘This is an economy on fire,’ said Samuel Rines, an economist and the managing director of Corbu.” READ MORE
Here’s Mark Zandi’s reaction to the September jobs report:
The likelihood of a soft landing is getting a boost from a historic rise in immigration: “The inflow of foreign-born workers, which had slowed to a trickle in the years up to and including the pandemic, is now rising briskly as the U.S. catches up on a backlog of visa applications and the Biden administration accelerates work permits. This week, it said it would offer work permits to 470,000 Venezuelan migrants. The effect of that action won’t be immediate since it is taking an average of 12 months to issue the applicable work permit. Still, it is one of a series of executive actions that has had the effect of boosting the inflow of foreign-born workers. That is helping ease labor shortages and wage and price pressure.”
“Two years ago, Veselka, a Ukrainian diner in Manhattan’s East Village renowned for its pierogi, was so short on cooks and wait staff that owner Jason Birchard was ready to cut the restaurant’s hours and end table service. Then last year, the war in Ukraine broke out. The Biden administration launched a program to sponsor Ukrainian refugees to live and work temporarily in the U.S.”
“Birchard, who is third-generation Ukrainian American, immediately looked into the new program. He said he thought it was the right thing to do to bring Ukrainians to safety, but also hoped he could find some new cooks. Since then, Birchard has sponsored 10 Ukrainians, mostly extended family members of his existing employees, and eight now work at his restaurant.”
“‘One of my biggest challenges post-pandemic was hiring. Not so anymore,’ he said. ‘It’s been a win-win for me.’” READ MORE
The shortage of accountants is going to get worse: “An accounting career, once a launchpad into the upper middle class for hundreds of thousands of Americans, is no longer paying off. Salaries have risen for young people in finance, marketing, logistics, and consulting in recent years. Even young teachers have seen a slight uptick. At the same time, the median, inflation-adjusted pay for young accountants has stagnated, according to a Wall Street Journal analysis of salary data compiled by the Census Bureau. This pay disparity is a major reason why fewer people are choosing accounting careers, threatening to worsen an already dire shortage of accountants.”
“Some of the nation’s largest college accounting programs, such as Florida Atlantic University and the University of Maryland, have seen their enrollment or number of undergraduate majors decline by double-digit percentages in recent years. That has led to even greater workloads for existing accountants, and more than 300,000 have left the profession between 2019 and 2022, according to the Bureau of Labor Statistics.”
“At Florida Atlantic University, the number of undergraduate and master’s enrollees in the accounting program has been almost cut in half from about 1,500 in 2017, according to George Young, who directs the accounting school there. Many students, instead, are going into marketing and management information systems, a tech-focused business major, Young said. ‘It’s the worst crisis in accounting enrollment that I’ve seen in 30 years,’ he said.”
“Ultimately, pay for accountants will have to rise to draw more students to the field, Young said. A recent review of job postings from Revelio Labs, a provider of workplace data, shows entry-level accountant salaries have started to increase.” READ MORE
Are trucking companies blocking women from becoming drivers? “The trucking industry has complained for years that there is a dire shortage of workers willing to drive big rigs. But some women say many trucking companies have made it effectively impossible for them to get those jobs. Trucking companies often refuse to hire women if the businesses do not have women available to train them. And because fewer than 5 percent of truck drivers in the United States are women, there are few female trainers to go around. The same-sex training policies are common across the industry, truckers and legal experts say, even though a federal judge ruled in 2014 that it was unlawful for a trucking company to require that female job candidates be paired only with female trainers.”
“Companies that insist on using women to train female applicants generally do so because they want to avoid claims of sexual harassment. Trainers typically spend weeks alone with trainees on the road, where the two often have to sleep in the same cab.”
“Critics of same-sex training acknowledge that sexual harassment is a problem, but they say trucking companies should address it with better vetting and anti-harassment programs. Employers could reduce the risk of harassment by paying for trainees to sleep in a hotel room, which some companies already do.”
“Steve Rush, who recently sold his New Jersey trucking company, stopped using sleeper cabs over a decade ago, sending drivers to hotels. He said fewer of his drivers quit compared with the rest of the industry, as a result. ‘What woman in her right mind wants to go out and learn how to drive a truck and have to jump into the sleeper that some guy’s just crawled out of,’ he said.” READ MORE
The auto strike is ripping through small suppliers: “The spillover effects are hitting automotive suppliers hard, with some firms in Michigan and Ohio resorting to temporary layoffs and warning that bankruptcy looms if the strike carries on much longer. More than 3,000 supplier employees have been affected so far, a Washington Post tally shows, while an industry association says nearly 30 percent of its supplier members have resorted to layoffs. Beyond the auto sector, U.S. Steel blamed the strike and the prospect of weaker orders for its decision to idle a blast furnace in Granite City, Ill., and temporarily lay off 300 workers.”
“An industry group representing auto suppliers, MEMA, is urging the Biden administration to expedite an aid package for the companies — a step that the administration has been preparing to take in recent weeks, The Post has reported.”
“Industry executives and administration officials warn that widespread failure of these smaller supplier firms — which number in the thousands — would make it very difficult for the Detroit automakers to fire back up again once the strike is over. The chip crisis showed that even one missing part can bring entire assembly lines to a halt.”
“Some suppliers lack the deep pockets to sustain a long suspension of their sales. Many are family-owned businesses, while others are owned by private equity investors. The largest suppliers tend to be publicly traded companies with more resources to ride out the uncertainty.” READ MORE
A couple of restaurant newbies raised $180,000 to open a taco shop that hit $1 million in revenue in its first year: “After perfecting a flour tortilla recipe and hosting breakfast taco pop-ups throughout Washington, DC, La Tejana co-founders Ana-Maria Jaramillo and Gus May had enough encouragement from their regular customers — and the financial backing — to open a brick-and-mortar location. In January 2022, they signed a five-year lease with a five-year option to renew on a three-story space in DC's vibrant Mount Pleasant neighborhood. The couple, who started tinkering in their apartment kitchen in 2019 in an effort to recreate the breakfast tacos Jaramillo grew up eating, raised $180,000 from family and friends to bring their restaurant to life. That's a relatively small amount for opening a brand-new restaurant, noted May: ‘We were able to do it on a pretty shoestring budget.’”
“When they raised money, they didn't give up any equity, meaning Jaramillo and May own 100 percent of the company. They essentially took loans from investors and came up with a four-year payback plan starting at the end of 2023, which gave them about 16 months to get up and running before having to make their first payment.”
“A key component of their success is that they've created a unique, high-quality product — homemade flour tortillas are not easy to make and ‘not that many restaurants are willing to make them,’ said May — but it's also how they've chosen to present it.”
“They describe their social media voice as ‘human-first, rather than business-first,’ and choose to take pictures of and showcase their employees and customers. May writes most of the captions, ‘and he really writes from the heart,’ said Jaramillo. ‘People read the captions and they connect with the story and they share it and they post it and they comment.’” READ MORE
A lawsuit that accused a North Carolina saucemaker of misleading consumers with its Texas Pete brand has been dismissed: “The resolution comes more than a year after consumer Phillip White had alleged he was misled in his $3 purchase by thinking the product was made in or had some connection to the Lone Star State. The hot sauce, as well as many of Garner Foods’ other products, is made locally in North Carolina in Winston-Salem. The company’s address is listed on its product labels. White, represented by attorney Ryan Clarkson of Malibu, who has brought similar cases against other consumer-products companies, had alleged 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.”
“Garner Foods CEO Ann Garner Riddle told TBJ Thursday that there was no settlement. ‘We are just delighted with this result,’ she said. ‘Since the lawsuit has been filed, you know we remained absolutely steadfast that our position and our products are labeled correctly, that our labels and trademarks are truthful and not misleading. It was their choice to request the dismissal.’”
“Asked now for any advice she’d offer other businesses facing similar challenges, Riddle offered: ‘I would recommend hiring a very good attorney and never giving up.’” READ MORE
THE 21 HATS PODCAST
It’s Like Planning Your Own Funeral: This week, Jay Goltz tells Shawn Busse about the latest stop on his journey to figuring out whether an employee stock ownership plan is right for his business. Jay’s latest adventure includes waking up at 4:30 in the morning in Minneapolis too anxious to sleep—“Oh my God, what am I getting myself into here?”—and deciding to leave the seminar and drive back to Chicago. But on that six-hour return trip, Jay says his anxiety turned into clarity. In fact, he thinks he’s pretty sure he knows now what he wants to do. Of course, he has said that before. And we continue to learn more about ESOPs, this week hitting upon an interesting issue: ESOP enthusiasts love to tout the benefits of turning employees into owners. But are they really owners? And is that the right message to send them? “If you bought 10 shares of General Motors stock,” Jay asks, “would you tell your neighbors that you're an owner of General Motors?”
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren