Author: scott.hodges

Good News for US Economy

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The US economy is doing well. It’s a fact. If numbers are anything to go by that is. A recent US Census Bureau Report. 2017 witnessed the highest levels on record of middle class income (to $61,372 for median household – an increase of 1.4 percent from 2016) with a simultaneous decline in national poverty rate (a drop of 2.5% from 2014). Millions of US residents have found jobs again as the deep recession has subsided and thus having two people in a family home work again is a huge contributing factor to these figures.

Caution is still needed however. According to a recent article in The Washington Post debating these figures, there are still many problems:

“While the poverty rate is now at the lowest level since 2006, it is still a full percentage point above the rate in 2000, the last time unemployment was this low… The poverty rates for African-Americans and Hispanics also remain substantially higher than for whites and Asians although the unemployment rates for African-Americans and Hispanics have come down swiftly. Twenty-two percent of African-American households and 19.4 percent of Hispanic households live in poverty compared to 11 percent for whites and 10.1 percent for Asian-Americans, the Census Bureau reported.”

Yet at the end of the day the above figures are still worth celebrating. There is a general consensus that the best way of testing the fiscal status of a typical middle class home is via its median household income. And the Census shows that growth.

US Digital Economy: Women all the Way

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It seems like women are leading the way in the US digital revolution.  The yearly 2018 Bank of America Women Business Owner Spotlight showed that there is a lot of optimism among female entrepreneurs with a staggering 49% of them expecting an improvement within their local economies and 48& to expect this from the national economy.

In general the women are confident: about the economy, about their success in the economy and about elevation in future growth within their particular positions.  In addition, 56 percent of women are planning to expand their businesses within the next five years. According to Managing Director and head of Small Business, Bank of America, Sharon Miller:

“When it comes to small business, women entrepreneurs are at the forefront of the digital transformation. It is exciting to see how they are innovating and leveraging mobile tools to help their businesses succeed. Their increased optimism about the future and the potential for hiring and growth is also very encouraging.”

Digitally, half of all SME owners predict a total switch to digital payments within the next five years and the women seem to be in charge of this, with mobile devices processing payments and engaging in transaction management. Indeed only 26 percent of men use mobile devices to process digital fiscal transactions whereas 33 percent of women do.

 

US Economy: Winners and Losers

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In this video, Ali Velshi and Stephanie Ruhle join Heather Long, Economics Correspondent for the Washington Post, to discuss latest tax projections and who they benefit. They review how the tax breaks fit into the overall economy. As things stand now, Congressional Budget Office forecasts an economic slowdown, partly due to President Trump’s Trade War.

Measuring US Economic Success

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The Bureau of Economic Analysis on July 27th released the gross domestic product (GDP) growth rate for the second quarter of 2018: 4.1 percent.  Everyone has been very excited about this.  It is, after all, a greatly impressive figure, indicative of tremendous growth as compared to  the past few years.  However, according to a recent article by Sophie Mitra, not only does it not tell the whole story, the part of the story that it does tell could be problematic for the average family.  We have to first realize that:

“GDP has many limitations. It captures only a very narrow slice of economic activity: goods and services. It pays no attention to what is produced, how it is produced, or how it might improve lives.”

She pointed out that at the end of the day, what the average American is bringing home in their pay packet each month has remained stagnant “for decades,” irrespective of the fluctuation of GDP and/or unemployment.

Many economists actually believe that “economics considers wealth or the production of goods and services as means to improve the human condition,” and rather it is simply the media that is obsessed with GDP figures.

However, President Trump’s top economic advisor, Larry Kullow insists that the GDP noise “is a boom that will be sustainable,” with Trump himself boasting that “his administration has achieved an ‘economic turnaround of historic proportions’.”

Even if we do consider GDP the be-all and end-all measuring stick of economic success and prosperity, was this all Trump’s doing?  According to a Bloomberg article by Sho Chandra, probably not, since:

“The stars were aligned following 2 percent growth in the first quarter: The biggest tax overhaul since the Reagan era delivered another boost to consumer spending and business investment, and the volatile categories of inventories and trade probably juiced the number — helped by a likely temporary jump in soybean exports ahead of retaliatory tariffs.”

At the end of the day the current GDP number is a nice one but as Mitra pointed out it is much more accurate to engage “complementary measures” involving people as well as products, as an analytic tool.

Texas Takes All

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When it comes to being on top in business, Texas takes it all!  According to a CNBC report last week, Texas was ranked America’s 2018 Number 1 state for business!   At Enchanted Rock, a live CNBC broadcast featuring Governor Greg Abbott announced Texas’ rating following a comprehensive study of all 50 states.  64 metrics in 10 categories were used to make the determination.  Abbott’s response to the news was:

“Texas offers a blueprint for business success.  The Texas economy is the fastest growing in the nation, and more Texans are working than ever before. This is not an accident – reforming taxes, removing regulatory barriers, encouraging participation in the sharing economy, investing in our education system, and securing Texans’ freedom to aspire is our formula for success. As Governor, I will work to continue to keep Texas the best state to build a business big or small, and implement a blueprint for a new era of economic expansion.”

Post US Tax Cuts Repercussions

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How does the US economy look half a year after the implementation of the 2017 Tax Cuts and Jobs Act? Mattie Duppler recently took a look at where we are today with this in a review in The Hill.

She commented that:

“Gone is the outdated system that took too much of our money, sent our jobs overseas, and stagnated our economy. Individuals are now seeing thousands of dollars in tax relief and bigger paychecks. Families are benefitting from a doubling of the standard deduction and child tax credit. Lower taxes on businesses of all sizes are stimulating our economy. Americans are feeling the effects of a reinvigorated economy.”

She added support to this with the following numbers:

“More than four million people are receiving bonuses, benefit increases, and higher wages from hundreds of companies, totaling some $4 billion back into the pockets of the working class. Companies like Apple, Comcast, Boeing, and Bank of America have given workers across the country bonuses, in addition to pledging new investments into our national economy. Many more small businesses have done the same in their communities by growing their operations and hiring more people.”

According to an analysis by Willliam Gale, Hilary Gelfond, Aaron Krupkin, Mark J. Mazur and Eric Toder published last month, while the law “reduce[s] federal revenues by significant amounts, even after allowing for the impact on economic growth. It will make the distribution of after-tax income more unequal. If it is not financed with concurrent spending cuts or other tax increases, TCJA will raise federal debt and impose burdens on future generations. If it is financed with spending cuts or other tax increases, TCJA will, under the most plausible scenarios, end up making most households worse off than if it had not been enacted.”

LG Makes First International Robotic Investment in Bossa Nova

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LG Electronics has made its first major international investment in US-based Bossa Nova Robotics. The Korean company invested $3 million in the robot developer as part of their efforts to expand in robotics.

LG has stated its intentions to become more competitive in the robotics industry across the globe, and has made several large investments in South Korean robotics already, in companies including SG Robotics, Robotis, Acryl and Robostar. It’s investment in Bossa Nova Robotics was its first big step into the overseas market. The American company has an impressive track record, with over 50 Walmart supermarket chains relying on their supply.

The Korean tech leader has also showcased several robots, including a sophisticated guide navigation technology at Incheon International Aiport. The company now plans to focus on AI and self-driving technologies.

Small Business See Major Growth in 2018

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American small businesses are thriving, and investors prefer them over larger companies this year. The Russel 2000 index, which includes largely the shares of smaller businesses, is up 7% this year and trading at an almost all-time high. Other indexes, including the Dow and S&P 500, which include major stocks such as Apple, Coca Cola and Boeing, have only increased by 1% or 2%, each approximately 5% below record highs.

The shift is a result of several factors, including some changes within the US economy itself. First, smaller businesses like those in the Russel 2000 are growing profits at a much faster rate than larger corporations, with projections of another 40% increase this year and an additional 23% in 2019. According to Nationwide chief of investment research Mark Hackett, “President Donald Trump’s tax cut and deregulation policies favor smaller companies over large, multinational blue chips.”

Indeed, the companies in the Russell 2000 are supported primarily by the American economy, while global corporations like Coke generate revenue from all over the world.

Small businesses have also paid higher taxes in the past, so recent corporate tax cuts have had a greater impact on them than on their larger counterparts.

Small businesses can also be considered lower risk, as they are influenced less by international market fluxes. US-China trade talks and global growth have little to do with local American businesses.

“A lot of large caps stumbled earlier this year and there has been volatility. People are looking to small caps. There are just more opportunities,” said Dave Harden, president and CIO at Summit Global Investments.

Analysts believe smaller businesses will continue to grow in the U.S. in the coming years, carving a new, permanent space in the stock market.