Author: scott.hodges

Economic Optimism: News and Views

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What are people’s thoughts on the current status of the US economy?  Is there more of a leaning toward optimism or pessimism? Here we take a brief look.

According to a June study from the NFIB (National Federation of Independent Business), people are pretty optimistic about the economy. The finding was that:

 “While optimism remains at historically high levels, the June figure reverses the gain posted in May, with six components falling, three improving, and one unchanged. The Uncertainty Index rose substantially, increasing seven points to the highest level since March 2017. Last month, small business owners curbed spending, sales expectations and profits both fell, and the outlook for expansion dampened. When you add difficulty finding qualified workers and harmful state-level laws and regulations, you’re left with a volatile mix where uncertainty has increased to levels not seen in more than two years.”

Vis-à-vis employment in Mid-America, according to Ernie Goss, PhD, director of Creighton University’s Economic Forecasting Group and the Jack A. MacAllister Chair in Regional Economics in the Heider College of Business, Omaha, Nebraska:

“Since December of 2018, the national employment growth rate has been approximately three times that of the region. Not surprisingly, approximately 40 percent of supply managers reported the shortage of qualified workers was the greatest economic challenge for their company for the next 12 months,” Goss said. “Due to shortages of workers in the region, U.S. Labor Statistics data show that the average regional hourly wage rate rose by 4.8 percent over the past 12 months, well above the national gain of 3.1 percent over the same period of time.”

Educating Women: Family Finances

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Why are women in America so uneducated on their personal household finances?  Why are statistics showing – even today – that when it comes to divorce or widowhood, women are not educated as to what their personal finances are?  With so many women in top executive positions in various industries (even economic ones), the gap on education in this area is still broad.

Michelle Smith divorce expert is CEO and founder of NYC’s Source Financial Advisors, an RIA (Registered Investment Advisor) and a CDFA (Certified Divorce Financial Analyst).  She has been working in the field, advising women on this issue for the last 15 years.  Source Financial Advisors currently manages $420 million in assets and works with divorcing couples, 85% who are women.

Over the years Smith has found that many women who file for divorce or who are suddenly widowed have had no control over the money in the marriage and assets the couple own are completely foreign to them.  In recent years there has been a substantial increase in the amount of what has been coined the “gray divorce” (people over 50 filing for divorce) that is adding to the financial burden and stress, again primarily of women.  Smith echoed this when she reported that she had been “seeing more and more older people divorcing [given the increase in life expectancy, these people are] unwilling to stay unhappy” for longer.

The financial side for women who survive their husbands or are divorcing is terrible – no matter what age or stage.  There is so much to do (irrespective of the emotional side) with finances when one gets divorced.  Smith has found that the transitional process requires the suddenly-single woman to “become a CFO.”  As such she formulated a process for these individuals.  “Wife2CFO” is a system she developed to aide women in the divorce process.  “About two years ago, I literally woke up in the middle of the night and I saw the letter ‘F’ connecting the word ‘wife’ to CFO and so I immediately trademarked it,” she said.

Ultimately given that the rate of divorce after age 50 has doubled in the U.S. since 1990, and one out of two couples will end up divorced (which doesn’t even take into account the amount left widowed), it is time for women to get a full education on where they stand.

America’s Economy: Amazing Growth

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Just last month 224,000 new jobs were created in America; that figure is more than twice than was needed to maintain workforce progression.  Growth of GDP per person has increased by 1.5 percent per year and over the last decade has increased by a 3.3 percent average annually.

At the end of this month it will have been 121 months that the US economy has been in a state of consecutive growth.  According to the National Bureau of Economic Research (NBER), this is the longest stretch of time since 1854 that the economy has encountered such growth.

Given that the US economy is responsible for 25 percent of global output, if it keeps growing like this, it could be “time to rewrite the rules for how all rich economies behave.”  America is certainly not an island (economically) so if the countries it trades with encounter a recession it will impact the US as well.

Growth of US Economy

Posted on by scott.hodges

There are so many conflicting reports about the growth – or lack thereof – of the US economy.  Here we take a look at some of those and try to present them in a way that the reader can come up with their own conclusion.

In Q1 2019, there was a growth of 3.1 percent in the economy. While there has been a slight deceleration in job hiring, jobs have still been added for more than 100 consecutive months. Plus this month we are seeing more expansion than even that of the 1990s boom, making it the longest stretch of time of continuous growth.

According to economist Todd G Buchholz:

“There is a dirty little secret in economics today. The United States has benefited – and continues to benefit – from the global slump.”

Even though there is currently a Brexit-fed-UK crisis; a French yellow-vest-unrest and a Chinese fear of foreign market bombardment, this global turbulence is not impacting America in the way one would imagine.

Indeed, in 2018 when the US economy grew by 2.9 percent it was unrivalled by its European counterpart that pulled in a mere 1.8 percent in economic growth.  Buckholz puts some of this down to the “sluggish GDP outside of America…low interest rates and weak inflation…puny looking yields on bank certificates of deposits (CDs).”

Bolstering Entrepreneurs

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New business individuals and those wanting to become successful entrepreneurs often need a bit of a boost as they begin to navigate their way in their industry. It’s not easy breaking into it.  Here, we look at some of the recent endeavors that have been engineered by politicians and those who have been through the same thing of getting started and maintaining a new business

Presidential candidate Elizabeth Warren recent proposed legislation to allocate $7 billion in federal grants to aid entrepreneurs in minority groups looking to start their businesses.  Her idea is to administer the program by a newly created department – of Economic Development – which would replace the current Commerce Department. If created this agency would take on the work of both the Patent and Trademark Office and the Small Business Administration.  And it would develop into a Small Business Equity Fund which would be in charge of enforcing conflict of interest rules, assembling information on outcomes, etc.

Residents of Maine are used to small businesses; they are one of the driving forces of the economy.   They all began modestly also; a struggling individual trying to make money from an idea.  But now there is something to really help them.  Startup Maine is an organization and an event (that was held in Portland last week) on teaching would be entrepreneurs how to make themselves attractive to investors; how to begin a crowdfunding campaign; to create a company that makes a profit; to develop a firm that serves a community, etc. Startup Maine tries to network entrepreneurs with business investors and people who have had experience in this area.

In Louisville, a group has gotten together to facilitate women in their work toward becoming business leaders. Cliff Elgin Insurance created Network of Entrepreneurial Women nearly a decade ago. According to one of his clients Lynn Cooper:

“He saw a need for creating a group of women that could work together and help each other and network. [Being a female entrepreneur back then was very hard and] “When I first started going about five or six years ago it was a lot of men in suits and it was very intimidating.”

Today the organization focuses on networking and helping the entrepreneur individually, also trying to help them find a work-home balance. Members meet once a month.

US Entrepreneurial Scene: Ahead of EU

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US-EU

When we look at the US against the backdrop of Europe, historically we see that America way surpasses Europe.  In size, economy, revenue, agriculture, and a whole variety of other industries.  How true is that today?  How far is Europe lagging behind?  In what areas is America making less progress than it should, pro-rata?  Here, we address some of these issues briefly.

A recent survey found that technologically speaking, the US (and China) is still way surpassing with Europe with the latter’s tech firms being valued at $240 billion since 2000 and America’s at $1,370 billion during the same time frame.  That is a gap of 31 percent.

But can we really blame Europe?  The region hardly has even close to the type of hedge funding rounds commonplace to Silicon Valley.  Ultimately no matter how great the startup idea for a company is, money talks.  And if that is significantly lacking then there is only so far a firm can go. Europeans also seem far more skeptical about handing over a check than their US counterparts.  They are more cautious with their money.  The US seemingly has a much easier time when it comes to investing.

It does not have to be like this though. And Europe is responding to change.  One example of this is TransferWise.  The UK-based money transfer service established in 2011 by Kristo Käärmann and Taavet Hinrikus is taking over The Tea Building in Shoreditch and has become extremely successful at fundraising.  Both co-founders are European, hailing from Estonia so one can’t put this fast movement down to US-genes. 

While this is not the only example of successful European technology startups there is reason to believe that they do have to up their game – especially their fundraising techniques if they want to remain on the map within the next few decades.

Small Business Week

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Small Business Week (held from May 5-May 11 this year) is organized by the US Small Business administration.  established in 1983 as a “national recognition event”, from then until now it is a chance for every American to shop local.

But it is so much  more than that.  this year for example, everyone was invited to participate in a free virtual conference over the first two days. in conjunction with SCORE Association, the SBA gave people the opportunity to network with other business owners, connect with industry experts and be involved in a hands on conference without having to actually leave their homes. Other events included: Small Business Week Hackathon; the National Awards Ceremonies and the NSBW Twitter chat.

During this week individuals are also encouraged to give small businesses attention and respect as well as buying their services/products.  America comprises over 30 million small businesses, providing jobs for 59 million Americans.  This is over a third of the entire workforce in the country and accounts for approximately 44 percent of the US GDP.

And Trump is a big supporter also.  He said his administration is: 

“A strong ally and advocate of small businesses and their ability to help America reach its full economic potential.”

Which is supported by the provision of the Tax Cuts and Jobs Act which lets small business owners deduct 20 percent from their taxable business income. Trump also issued Executive Order 13771 (E.O. 13771): “Reducing Regulation and Controlling Regulatory Costs [requiring] For every new regulation issued, at least two prior regulations be identified for elimination. [In addition] The cost of planned regulations [must] be prudently managed and controlled through a budgeting process.” 

A Thriving US Economy

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America’s economy is thriving. Or so the numbers tell us.  Here we take a look at some of the figuresthat help us feel optimistic for the future of the US economy.

  1. In Q1 2019, there was an annual growth of3.2 percent.
  2. At the start of Q2 2019, the unemployment rate fell to 3.6 percent(lowest it has been in the last five decades).  
  3. Real wagesof the average Joe in the street increased by 3.2 percent(first time in over 10 years).
  4. Inflationis lower than the 2 percent target at 1.6 percent.
  5. 5.4m+ new jobshave been added since January 2017.

According toYum Brands CEO Greg Creed:

“Obviously the US economy is in pretty good shape. But I also do think that there is some sort of bifurcation going on in the marketplace. There are certainly people making a lot of money, there are certainly people for whom value will remain incredibly important.” 

Although it should also be noted that prices are rising. In the restaurant industry – often in line with the increase in labor costs due to the law on the escalated minimum wage – the large chains are elevating their prices likewise.

More generally, prices are rising in the restaurant industry as labor costs increase with higher minimum wages and a more competitive labor market. McDonald’s, Starbucks, and Chipotle all mentioned raising prices in the most recent quarter during calls with investors.   At the same time, the middle class is becoming smaller.  The Pew Research Centerfound 50 percent of Americans to be in the middle class; quite a drop from the 61 percent figure of 1971.  

There is still of course the quite dramatic gap between top and bottom earners vis-à-vis income increase.  In 2017 the bottom fifth of the population witnessed a very minor increase (2.7 percent belowpre-recession figures) in their income whereas the top fifth enjoyed a much higher one (8.7 percent higherthan pre-recession figures).