This Is One Strange Recession
The U.S. economy added more than half a million jobs in July, obliterating economist expectations.
Here are today’s highlights:
Kyrsten Sinema signs on to the Inflation Reduction Act.
Some companies are hoarding labor.
The rise of “Pink Sauce” shows the power of social media.
These are not easy times for entrepreneurs, especially those who depend on outside funding.
Wunderkeks co-founder Hans Schrei—the newest regular on the 21 Hats Podcast—is looking to get the company’s cookies on retail shelves:
There’s a lot going on right now, but businesses are continuing to hire: “U.S. employers added 528,000 jobs in July, the Labor Department said on Friday, an unexpectedly strong gain that shows the labor market is withstanding the economic impact of higher interest rates, at least so far. The impressive performance — which brings the total employment back to its level of February 2020, just before the pandemic lockdowns — provides new evidence that the United States has not entered a recession. But with the Federal Reserve pursuing an aggressive policy of interest rate increases to bring inflation under control, most forecasters expect the labor market’s momentum to slow markedly later in the year, as companies cut payrolls to match lower demand.”
“‘At this stage, things are OK,” said James Knightley, the chief international economist at the bank ING. ‘Say, December or the early part of next year, that’s where we could see much softer numbers.’”
“The unemployment rate was 3.5 percent, down from 3.6 percent in June, matching its 50-year low on the eve of the pandemic.” READ MORE
Some companies are hoarding labor: “A furniture-manufacturing hub around Elvis Presley’s hometown in Mississippi potentially offers an answer to one of the top questions facing the U.S. economy: Will employers hold on to workers as demand slows, or shed the staff they fought so desperately to hire during the pandemic? If American businesses can resist laying off workers in the face of declining sales at the scale they did in past downturns, the country has a better chance of skirting a deep recession. Furniture manufacturers in the Tupelo area have already been hit hard by a slump, with orders declining by at least 25 percent in a few months, according to local executives.”
“‘We don’t want to reduce our staff, because it’ll be hard to lure them back when things do turn around,’ said Rusty Berryhill, president of Kevin Charles Fine Upholstery, a manufacturer in nearby New Albany. ‘If we laid people off, we’d lose some of our credibility as a company that values its associates.’”
“Power-recliner maker HomeStretch Furniture isn’t planning to dismiss people either. President Skipper Holliman has responded to the sudden drop in orders by leaving vacant around 30 positions after workers quit and by scheduling occasional three- and four-day weekends for his crew of 450 people.”
“‘When you lose people, it could be very hard to get them back because of what everybody’s been through the last couple years,’ he said.” READ MORE
Kyrsten Sinema has signed on to the Inflation Reduction Act after getting her tax changes: “Ms. Sinema insisted on the removal of a provision that would have limited the preferential tax treatment of income earned by some wealthy hedge fund managers and private equity executives. Democrats instead added a new 1 percent excise tax that companies would have to pay on the amount of stock that they repurchase, said one Democratic official, who disclosed details of the plan on the condition of anonymity. That provision, the official said, would ensure that the package still reduces the federal deficit by as much as $300 billion, the same amount Democrats aimed for with the original deal and a key priority for Mr. Manchin.”
“Democrats also agreed to a request by Ms. Sinema to include billions of dollars to combat droughts, according to officials briefed on the emerging plan, something that is crucial to Arizona as it suffers from a devastating megadrought.”
“They were expected to restructure the 15 percent minimum tax on corporations to make it less burdensome on manufacturers. Earlier this week, business leaders in Arizona appealed directly to Ms. Sinema to simplify that proposal, which was included in part because she had resisted increasing tax rates as part of the plan.”
“‘Manufacturers remain concerned that this bill will stifle new cures and therapies,’ Jay Timmons, the president and chief executive of the National Association of Manufacturers, said on Twitter, even while praising the removal of certain tax provisions. He added, ‘We remain skeptical and will be reviewing the revised legislation carefully.’” READ MORE
The rise of Pink Sauce demonstrated the power of social media, but there was a problem: “In the past few week, a condiment dominated TikTok. It was simply called Pink Sauce, and created by a mixologist and private chef with the username Chef Pii. After teasing that she couldn’t quite describe what the sauce tasted like, the product went live on July 1, and individuals could buy a bottle online for $20. The website revealed the ingredients: Water, sunflower seed oil, raw honey, distilled vinegar, garlic, pitaya (dragon fruit), pink Himalayan sea salt, dried spices, lemon juice, milk, and citric acid.”
“The problems started when orders arrived. The color was off; sauces were lighter or darker than advertised on Pii’s website.”
“When the bottles were opened, some exploded and some had putrid odors. The nutrition labels misspelled ingredient names and claimed that one bottle included 444 1-tablespoon servings.”
“Concerned chefs jumped into the TikTok discourse, pointing out the expanding bottles indicated potential botulism.” READ MORE
This is a tough time for entrepreneurs who depend on venture funding: “The emotional burden entrepreneurs take on is well-known across startup land. Ben Horowitz, a successful founder and legendary investor at Andreessen Horowitz, famously wrote in his book: ‘If you don't like choosing between horrible and cataclysmic, don't become CEO.’ But being a founder in a bear market is a more challenging game. The economic fear and uncertainty of the past six months has piled stress on founders who are already trying to do the impossible: build iconic tech companies. Founders are trying to save face for employees and investors while knotted up with the anxiety of a tech crash that has sapped funding for startups. Startups like Fast and Airlift have folded in the bust.”
“Layoffs are rampant. And in an otherwise turbulent year, founders are also reeling from a global war, mass shootings, and a lingering pandemic.”
“‘Most people are not OK. Founders are especially not OK,’ said Katelin Holloway, a former human-resources leader and now an investor and partner at the venture firm Seven Seven Six. ‘Founders who are in the middle of a fundraise or an extension raise are extremely not OK.’” READ MORE
THE 21 HATS PODCAST
This week, Jay Goltz tells Shawn Busse and Karen Clark Cole about a dream he had recently. It was a dream, of all things, about this very podcast, and on it, someone—it was a guy—was talking about how his business was faring: “I think I’m screwed,” he says in Jay’s dream. But who was it? And why was he screwed? Jay woke up before those answers were revealed. So we did some interpreting on this week’s real podcast. Spoiler alert: It wasn’t that hard to interpret! Plus: Shawn explains why he thinks his website is no longer performing. Karen explains why she thinks it’s actually easier to onboard an employee who will work remotely. And Jay and Karen discuss whether it’s time to give up on things going back to the way they were.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
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