Friday, June 30, 2017

Black Business and Economics Stories for Month of June, 2017

There are few Black Business stories in the main steam media this month

The chaos causing Trump presidency has sucked all the news-oxygen out of the room.  He makes the lazy news media's job very easy. An very profitable. And he makes the deep, complicated real-life media's jobs irrelevant. The media and Trump are making us dumber all the time. But which came first the dinosaur or the egg?

Me, Me, Me

So (me) how (me) does (it's all about me) this (me) affect me ? Basically there is no Black Business news coverage any more. It's like unions, education, pensions, and the homeless. If we don't cover it, maybe the problem will go away.

Some of this is our own fault.  We need to do more original material rather than stealing the work of others. We need to do more long form stories and detailed research projects. So, to fund this new, expanded coverage, we are actively pooling our resources and investing in: Lottery Tickets.

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Anyway, here are some of the top Black Business and Economics stories for the month

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Johnson Publishing Company, which publishes Ebony and Jet, is closing shop in Chicago. It was sold to an investment company in Texas. JPC recently relocated its staff to Los Angeles.

Crain's Chicago has the story

Desiree Rodgers bailed out in May

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CNN covers the Black vs. White wealth gap. Same story; new day. (note: Watch out the CNN website is a gigantic ad-pump with very little in depth content.)

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MarketWatch looks at Mellennials. Why black and Latino millennials are struggling more than their white peers.

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Chicago Defender has an update on the Black Bank surge at Citizens Trust Bank in Atlanta

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The Root does an interesting analysis of police killings and payouts.  It's called "How much is a Black life worth? We calculate it."

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We have started watching "Cleveland Hustles" with Bonin Bough on CNBC
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The national urban league released the State of Black America 2017 report on May 2017. The report shows a slight overall improvement in many of the indexes. Thanks Obama.

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The Federal Reserve Bank of Atlanta named Raphael Bostic as a regional governor. Apologies if this was posted before even though it is a big deal


Tuesday, June 27, 2017

Unemployment stable in May 2017. More than 600,000 people left labor force.


The labor economy in the US is unchanged in May 2017. It has been stable within a narrow band for the past two years. The national unemployment rate dropped to 4.3%. Wages grew by only 4 cents. The number of unemployed was 6.9 millon down 200k from last month and the number of long-term unemployed was recorded at 1.6 million (up 37K from last month). 

However, the unemployment rate dropped for a bad reason: A record 608,000 people left the labor force. Different racial groups left the labor market at different rates: 534,000 Whites left the labor force while only 67,000 Blacks and 82,000 Hispanic/Latinos left.  And 21,000 Asians joined. Of the 608K that left 367,000 were men and 241,000 were women. 




There were gains in healthcare, business services and food services. Employment revisions were down -66K for the prior two months. Hours worked were the same.


  
Since May 2015, the national unemployment rate has dropped about one percentage point (from 5.5% to 4.3%).  Blacks have made the largest gain during the period as the Black unemployment fell from 10.2% in May 2015 to 7.5% in May 2017.

The Big Story(s)

The big story is the smooth running of the economy. Thanks to Obama,Yellen and a host of others, plus the natural gas boom, the economy is in great shape. Unemployment is low. Wage inflation is low. We are are in a long-term growth pattern with a rate of about 2% growth for the next 2-3 years.

The second big story is the lack of wage pressure in the economy. Lack of wage growth fuels inequality in our society.  We see no sign of "full employment."

Missing wage inflation is linked to two trends: hidden unemployment and decreased worker bargaining power. Lack of power has led to workers expectations being "whipped" by corporations. Labor has stopped asking for higher wages and feels lucky to have a job (healthcare is a bonus). Employers think the same way and do not feel an pressure to compete for workers based on wages.
The recession of 2007 finalized a huge, on-going reset in employer and employee relations.  We are seeing the end result. 

The third big story is how well the country runs with little guidance. Its true; we have many large, long-term problems that are being ignored. Since the economy running great, we can afford to do so. Large problems such as poverty, jobs, wages, inequality, a shrinking middle class, entitlement costs and healthcare costs can be pushed further down the road.

Finally, the other big story, of course, is the ongoing chaos in Washington. The confusion of the past six months has yielded little action.   We are a progressive blog. We think nothing good can come from the Trump administration however we are getting used to him. We are worried they will get their act together and do some real damage to progressive causes. Thank goodness our economy and our system of government are mostly self correcting. 

The Black Unemployment Rate

The Black unemployment rate dropped to 7.5% from 8.6% last month as 46,000 more people reported to work. The unemployment rate for Black men, 20 and order, was 6.5% while Black women in the same age group were unemployed at a rate of 7.0%.  Black men participate in the labor market at a 68% rate while the participation rate for Black women is 63%. Black teenage unemployment was calculated at 27%. 


The chart below shows the Black unemployment rate and the LFP rate but smoothed out by using a 4 month moving average. 



As is our custom, we calculate the real Black unemployment rate. It was determined to be 11.6% in May. Both the Black unemployment rate and the US U-6 rate declined during the period.   U-6 is the broadest measure of unemployment. U-6 is basically anyone who wants to work and has looked for a job in the past 12 months plus part time people who want full time work.



Business Establishment Payroll Changes

Again, Non Farm Payrolls added 138,000 workers in May 2017. Government employment saw a slight reduction.



There usual categories led the job growth: business services, healthcare and hospitality. A lot of important categories were down.  Construction added 11,000 jobs. 



Just a reminder that the United States is a service economy.    Only 19% of new jobs produce goods (15% if you include government as a service).



Hourly wages for all employees increased by by $0.04 cent in May to $26.22.  Hourly wages are up about 2.5% (1.2% when adjusted for inflation) in the past year. Hourly wages for non-supervisory employees rose by 3 Cents.


The average growth in wages has been below 1% after inflation between 2006 to 2016.




March NFP jobs were revised down from 79K to 50K (-29K). April was revised downward from 211,000 to 174,000 (-37,000). 

ADP reported 253,000 non farm payroll jobs were created.  The jobs were split among small businesses (+83K), medium sized businesses (+113K) and large businesses (+57K).  According to ADP goods producing business increased jobs by +48K while services hired 205K workers. Manufacturing lost 8K jobs.

Paychex small business jobs index was flat at 100.34; a completely neutral value. It's down -0.25% for the year.





Monday, June 26, 2017

Seattle Minimum Wage Study shows net loss of income for low wage workers as hours are cut


Researchers at the University of Washington have released a detailed study of the second round of Seattle minimum wage hikes. They determined that the second hike from $11.00 to $13.00 dollars may have led to employers cutting back on employees hours. Washington State is one of four states to collect data on employment hours as well as employment levels.  The detailed data is required for this type of study.  

Overall, the study found a net loss of income for low wage workers. The workers lost earnings because they worked less hours but at higher pay. The first hike is had no effect on employment levels in Seattle.  

Here is the link to the study...

University of Washington Seattle Minimum Wage Study at the National Bureau of Economic Research. If google the title "MINIMUM WAGE INCREASES, WAGES, AND LOW-WAGE EMPLOYMENT: EVIDENCE FROM SEATTLE" you can find a PDF version.

The study found that for Seattle restaurant workers, the recent increase in the local minimum wage from $11.00 to $13.00 reduced hours by 9% and increased wages by 3%. The result was a net loss of $125 dollars per month for low skilled restaurant workers. However, the number of restaurant employees remained stable. 

This was especially interesting because it used state wage hour study appears to be quite good compared to past minimum wage vs. employment studies.  However, overall unemployment was stable.  

However, there are some problems with the study.

1) They used stand alone restaurants only. They excluded multi-location chain restaurants. 
2) About 70 percent of workers in Seattle already make $13.00 and hour or more.  The study shows an employment increase in workers making above $19.00. 
3) The study was limited to Seattle. Seattle is a boom town with few comparable cities. Separating out the "Seattle" effect (great economy, lots of rich people) from the minimum wage effect may be close to impossible. Seattle has a 3.2 % unemployment rate. 

Interestingly, the study may have "accidentally" determined is the equilibrium or trade off point between employment and wages for Seattle for low wage restaurant workers. We have to wait for the results from other jurisdictions that have raised the minimum wage. The results also support minimum wage increases in jurisdictions below the equilibrium. Workers and governments are leaving money on the table. 

Researchers also found that employers shifted to more experienced workers. Many first time workers may find their first job opportunity will decrease. We will have to wait and see the results of the next increase.

Since, the study is so important, there are lots of articles on the topic. 

Washington Post

538

Here are some over the top headlines

Study: Seattle's minimum wage increase goes horribly wrong

The Center for Wage and Employment Dynamics found no such reduction on jobs in the Seattle restaurant industry. Berkley's Institute for Research on Labor and Employment has a traditional study on the same period using US census data.

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Notes:

The Federal government is cutting the funding for the US Census including expanded data collection on the labor market.

Lastly, We would like to add that the US is the only western democracy where there is a active and vociferous debate about increasing the minimum wage. The UK, France and Germany have all created, where it did not exist, or increased the current minimum wage with much less rancor and debate. In addition, most countries invest in Active Labor Market policies to help the unemployed re-enter the labor market and to help low-wage workers find better paying jobs. 

We are completely confused about the popular demand in the US that people work but our unwillingness to pay them a fair wage.  

Wednesday, June 14, 2017

"Stop sports Arenas Subsidies" bill introduced by Booker (D-NJ) and Langford(R-OK) in Senate


Two Senators have introduced legislation to stop federal government subsidies from support sports arenas. 

Two senators, Corey Booker, D-NJ and Frank Langford, R-OK want to stop sports team giveaways.They have introduced Senate Bill SB. 1342

Wealthy team owners don’t need federal tax breaks to build new stadiums, U.S. Senator Cory Booker said in support of the measure.

ESPN had the original, breaking coverage.

Here is the Brookings Report covering the waste of taxpayer subsidies going to billionaires.  

Another article from Vice Sports has lots of links on the issue.

To show how hard it is to get rid of these subsidies. Check out this story on Sen. Moynihan, who introduced legislation in 1996 to stop similar subsidies. The bill was S.1880.

And NPR in 2011 also had a good summary of the issues.

Saturday, June 10, 2017

Some programs at the University of Phoenix have a 11% job placement rate for $60K tuition


The University of Phoenix looks like a scam

We were recently reviewing entrepreneurship programs at colleges in the US. We came across a program at the University of Phoenix which grants a Bachelor of Science in Business with a concentration in small business and entrepreneurship.  The program costs almost $60,000 and has an 11% job placement rate.

Gainful employment statement.
Another link.


The Gainful Employment Statement is the result rules created by the Obama administration in 2015 because of low performing for-profit schools.


Thursday, June 8, 2017

LeBron-O-nomics


The value of LeBron to the city of Cleveland is making head line news.  The owner of Quicken Arena in downtown Cleveland has asked for a $180 subsidy from the city and county to renovate the area. We want to look more closely at the economic impact Lebron and the Q Arena have on the city of Cleveland.

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Cleveland.Com discusses the value of LeBron's return in 2015.  The estimate was $500 million in the story. However, the article covers reason why that figure might not be reliable. Basically, very little new revenue is generated in northeast Ohio from outside the region, instead the money simply flows from other spending in the region like movies and restaurants. (Hey, I am going to skip Starbucks this week to see LeBron).

An older article from 2010 tracks the details of "How much is LeBron worth to northeast Ohio?" They breakdown LeBron value to the local businesses, City, Region and the Cavaliers.

The authors also call LeBron "priceless" in the story. The statement captures how difficult it is for a city to strike a fair deal with owners regarding arenas and superstars.  There is always an implied threat they will move away. And you can't negotiate with a monopoly.

We do want to note: There is some value in bringing together a diverse set of fans including those from the suburbs to downtown Cleveland. Also, LeBron and the Cavaliers enhance the image of the city of Cleveland nationally and internationally.

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A new paper from American Enterprise Institute economists attempts to quantify the effect.
The paper called "Taking My Talents to South Beach (and Back)" looks at the natural experiment of LeBron James leaving Cleveland in 2010, moving to Miami (winning two championships) and then returning to Cleveland in 2014.

The researchers found that LeBron James increased the number of restaurants and bars by about 13% and employment by 24% in the local area.  The effect is most notable with in a one mile radius of the arena. There is was no effect past seven mile away

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In related but separate news, one of the key papers in the sports subsidy field, "Do Economists Reach a Conclusion on Subsidiesfor Sports Franchises, Stadiums, and Mega-Events?" by Dennis Coates and Brad R. Humphreys, summarizes the opinions of economists related to supports subsidies.

Here is another link.

A majority of economists surveyed at the American Economics Association convention find no benefit to sports subsidies.  There is no market failure requiring a subsidies, instead the subsidies enrich monopoly owners. Basically subsidies are a waste of money and team owners are playing off cities against each other.

Here is a great quote from the paper...

"We have seen that economists in general, as represented by Whaples’s survey (2006), oppose sports subsidies. Economists reach the nearly unanimous conclusion that “tangible” economic benefits generated by professional sports facilities and franchises are very small; clearly far smaller than stadium advocates suggest and smaller than the size of the subsidies. The fact that sports subsidies continue to be granted, despite the overwhelming preponderance of evidence that no tangible economic benefits are generated by these heavily subsidized professional sports facilities, remains a puzzle."

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Brookings Institute has the often quoted article from 1997, Sports, Jobs, & Taxes: Are New Stadiums Worth the Cost? by Noll and Zimbalist which discusses tactics cities can fight back against sports subsidies. Not a lot can be done but have active citizens and politicians can force monopoly sports owners to cut a better deal.

FANG and Google content sites

When we got up this morning, we did the usual.  We handled out business(we made coffee, people!) and used Google search to see what was going on. Google had a small ad at the bottom of the screen promoting an internal web site. Google sites are known to have some great content, so we clicked and got:



The sites are loaded with images and discussions. Lots of details and suggestions for further research. Just great, engaging material.

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Then we thought about it for second.  FANG - Facebook, Amazon, NetFlix and Google - earn most of their profits from the content, creation, and products of others. The create almost zero, original content. Google let's you find other peoples web pages and watch youtube videos. Netflix lets you watch movies created by others. Amazon sell other peoples stuff. And Facebook, the worst of all, is 100% user created. FB has nothing original.  

To be fair, Amazon has opened distribution centers and Netflix has created some original content. 

What these companies have in common is that they are "natural" monopolies created by the internet.  They distribute the hard work of others for a fee, while making enormous profits.

Some of our richest and most successful companies, effectively "steal" content from people and then charge for accessing that content.  This hustle sends society the wrong message about how to be successful. People are no longer interested in putting in the hard work.  Instead, they are looking for a "get-rich quick" scheme like Facebook where they can skim off a little from the top.  That's the message these big companies are sending. 

We seem to be rewarding the wrong people in this process. We have created a business culture where there is little long-term innovation, rather everyone is looking for a quick payday. 

We have to find a way to reward our real innovators and our artists rather than IT people who move electrons around. 

Friday, June 2, 2017

Interesting Stories for June 2nd, 2017- What we are reading

This site has a list of eleven Black Business Directories and apps. Eleven Buy Black Mobile Apps are featured here. From the Black Economic Development web-site.

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CityLab from the Atlantic Magazine discusses "The 100 year old penalty for being Black". The article looks at a paper describing "What would the US look like, if Black economic progress since 1880 occurred level as Whites." The paper also supports Black repartions in a wide set of areas.

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Vox has a story of uninsured minorities being over charged at the hospital emergency room.

Emergency rooms over charge the poor.

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Bloomberg has a great story on the US being unable to execute infrastructure projects. "The US has forgotten how to do Infrastructure,"  The story looks at over-priced infrastructure projects and how they undermine public support.  It's all about productivity.

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Japan housing construction workers are more productive than US workers: FT Alphaville.  The blog says we don't need more workers just higher productivity.

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A piece in VOX by Brian Resnick discusses research showing that people who are "science curious" are more willing to listen to opposing points of view.

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Women are still lagging in pay for some STEM jobs according to Bloomberg

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Quartz has a story about white collar unemployment.  The trend may be due to corporations no longer providing employee training. The Quartz story on white collar unemployment is here.




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