Category: Economics

Weathering Retail Sales

IMG_4712

Here in Denver, we were recently socked in by a winter storm for about 24 hours. It made for messy conditions for the morning and evening commutes. Meanwhile, the Colorado mountain communities were full of glee, reveling in snow powder that attracts ski and snowboard business.

As with ski resorts, it’s no secret among retailers that weather can have a profound effect on sales. Seasonal changes – as well as daily and weekly fluctuations – must be accounted for when making consumer sales projections. These ebbs and flows not only impact the type of items being sold, but also the manner in which consumers shop. For brick and mortar retailers, the good weather generally fuels business, generating an increase in foot traffic which leads to an uptick in sales. But inclement weather? Well, the results can be mixed.

 ‘Tis The Season To Be Jolly (for Retailers)

The first phase of the holiday season is now behind us, and it appears that shoppers were out in big numbers, according to the latest retail data from the National Retail Federation.

But warmer-than-normal weather patterns wreaked havoc for some stores who were hoping to capitalize on this the busiest shopping season of the year. A report from data analytics firm Planalytics shows that U.S. stores lost $185 million in November sales. This slide is largely attributed to an unusually warm weather pattern in the Midwest and along the East Coast. So far, this trend has continued into December, with outerwear sales plummeting over 30% in cities like Boston, Chicago, New York and Philadelphia.

FacebookTwitterGoogle+PinterestRedditShare

Small Business Saturday – Good Intentions, Bad Economics

small-business-saturday-2015First there was Black Friday, then Cyber Monday, and now there is Small Business Saturday, a day intended to promote shopping at small local businesses for the holiday season as a way to support their livelihood, enhance the local community and even help the environment. While certainly well-intentioned, the movement is misguided and can actually end up hurting more than it helps.

Ironically, the term Small Business Saturday was conceived and promoted by the financial services giant American Express, which also holds a trademark on the term. Nevertheless, the idea – to encourage consumers to shop at small local brick-and-mortar retail shops – has been around for awhile.

The claimed benefits are numerous, but they mostly center around the supposed idea of ‘keeping the money in the local community,’ which in turn supports those businesses, creates local jobs and even has a multiplier effect as the money spent locally circulates around the community more than money that is sent off to say, Amazon.com.

Like many economic fallacies, there is always a grain of truth that makes it potent and appealing to the logic of its believers. It is somewhat true that if you buy a television set online, that money is sent to the online retailer, who is probably not based in your local community. Whereas if you buy the same set from Bob’s Great TVs down the street, Bob has the money in hand which he may very well spend at the local car repair shop that you own. A much better situation, right?

11 Economic Insights on Ghana and Gold

IMG_4588

We live in vast world – yet in some ways, it is quite small. I was reminded of this last week when I found myself in a random conversation with a complete stranger who lives in Ghana. Oh, the wonders of Google Hangouts.

Here’s what I initially discovered about Ghana. This small nation in West Africa has a population of 25.9 million and is richly endowed with an abundance of natural resources like diamonds, manganese ore, bauxite and oil. But Ghana is better known for is it’s mother-lode of gold deposits, making it Africa’s 2nd largest gold producer, after South Africa.

Curious about this, I mined for further information about the significance of this precious metal for Ghana’s economic fortunes. Here are 11 nuggets that I was able to unearth:

  1. Ghana has consistently been ranked in the top ten of gold production worldwide.
  2. Ghana’s mining industry accounts for over 5% of the country’s GDP. Gold makes up over 90% of the total mineral exports, and it represents nearly 50% of the country’s revenue.
  3. Because of its heavy dependence on gold exports, Ghana’s economy has been tepid. This is due to the overall price decline of gold from $1,900 per troy ounce in 2011 to below $1,200 in 2015.
  4. Obuasi, a gold mine that has been in operation since 1897 after it was launched by three Ghanaian merchants, has struggled of late amid this fall in gold prices. Today, miners have to dig deeper and manage expenses more closely just to stay afloat.
  5. With gold-mining weighed down by record levels of debt as well as prices that are near a five-year low, a growing number of Ghanaian miners are fearful of having their employer merge with others just in order to survive.
  6. Many parts of Ghana remain unexplored in terms of potential gold production. This particularly holds true for the northern Upper West region of this resource-rich country.
  7. A major policy emphasis on the part of the government is ensuring that modern and environmentally-friendly extraction methods are being used so that the surrounding ecosystem doesn’t become irreparably damaged; this may lead to the closing of some mining operations and an ensuing reduction in exports.
  8. Although known as an epicenter of global gold production, Ghana (like its neighbor Nigeria) has struggled with an energy crisis, meaning that the majority of its citizens have no electricity. This is due to the nation’s lack of infrastructure capital, compounded by broken promises from the government in addressing the issue. Ghanaians affectionately call this DUMSOR (meaning ‘on’ and ‘off’), because of the highly unpredictable energy supply.
  9. In addition to the aforementioned fall in gold prices, other factors that are adversely impacting the Ghanaian economy include a sharp currency depreciation as well as rising inflation and interest rates.
  10. In 2013, Ghana deported thousands of Chinese nationals involved in the illegal mining of gold
  11. Aside from gold, Ghana is the world’s second largest producer of cocoa, behind Ivory Coast. Cocoa is Ghana’s third largest export after oil and gold.

For Peet’s Sake: Who’s Roasting Who?

IMG_4578

I have always been a coffee house aficionado. The cacophony of sounds emanating from caffeine-buzzed coffee drinkers and pulsating espresso machines appeals to my love for vibrant and hip locales.

Starbucks, which is largely credited with bringing specialty coffee to America, was my first orientation to this whole craze. As a young entrepreneur in Chicago back in 1993, I would indulge in an espresso at my favorite Wacker Drive location, amid a sea of boisterous traders from the Chicago Stock Exchange. Few of us at that time pondered the effect this coffee house trend would have on the culture of American society.

Many years later while on a business trip to San Francisco, my client recommended that I break rank with Starbucks and try a place called Peet’s Coffee & Tea. Amusingly, I thought my client was referring to some lowly guy named Pete who perhaps had a ramshackle vending cart on a downtown street corner nearby. Instead, I was excited to discover a Peet’s store which evoked a pleasant atmosphere and a strong coffee aroma (that can cling to your clothing if you hang around in there too long).

Earnings Stagnation: How Will People Cope?

IMG_4579

Since the Great Recession of 2008, the U.S. economy has struggled to regain full momentum. This is most evident when you examine the earnings of most middle-class Americans. And a recent report by the U.S. Department of Labor seems to suggest that this trend shows little sign of abating.

The findings of this employment cost index report suggest that paychecks of U.S. workers grew at a very tepid rate this summer, rising a paltry 0.6% during the July-September period, compared to the April-June period. Overall during the past 12-months, pay and benefits have risen only 2%; well below the 3.5% to 4% that most labor economists feel is indicative of a healthy economy.

What all of this signifies is that there’s still an ample supply of workers for businesses to hire at much lower pay rates; an indication that the job market has yet to return to full health. Over the past year, employers have added 2.2 million new jobs which has resulted in a decline in the unemployment rate from 5.9% to a seven-year low of 5.1%. Nevertheless, wage advancement remains sluggish.

There is also the issue of the 6.5 million (at last count) Americans working part-time who really wish to work full-time. That accounts for about 2 million more workers than prior to the recession. And it is important to keep in mind that the unemployment figures have been skewed even further because millions more Americans have ceased looking for work altogether, even though they would take a job if offered one.

Federal Reserve officials view wages and salaries as the key metric in assessing the economy’s true health, because a sustained uptick in wages would signify a leveling out of the unemployment rate. As unemployment drops, businesses are often forced to increase their pay in order to attract and retain talent.

Unfortunately, according to many economic analysts, there are no signs of this trend occurring in the foreseeable future.

Upping The Minimum Wage: Help or Hindrance?

There has been a ton of media chatter this year about efforts by several states to boost the minimum wage. And for good reason, since wages are a hot issue, particularly among those Americans working in service-related jobs.

Unfortunately, the collateral damage is starting to rear its ugly head in states that have recently boosted the legal minimum wage. Take Seattle for example, which has been a hotbed of talk on this issue. According to the St. Louis Federal Reserve, which has been monitoring this development, the Emerald City began to experience declining numbers of restaurant employees around the first of the year, when the minimum wage increased to $9.47 per hour. This represents the highest minimum wage in the nation. The reported loss of 1,300 jobs between January and June is the largest drop off since the Great Recession of 2008. Moreover, 1,000 restaurant jobs were lost in May, following the minimum wage increase in April, the largest one-month job decline since a 1,300 drop during that recessionary period. This is in contrast to a national increase in restaurant jobs to the tune of 130,700, an overall 1.2% increase in employment in the Seattle area and a 3.2% restaurant employment increase in the State of Washington (excluding Seattle) – all during this recent period.

The bottom line is that small businesses like mom-and-pop restaurants and coffee houses lack the greater profit margins needed to withstand the expenses associated with a minimum wage increase. So they resort to cutting staff and reducing hours, paying fewer workers more money. Even well-funded enterprises like McDonald’s are reportedly pondering labor-saving methods like self-checkout kiosks, robots on the food production line and robots to manage expenses, all of which would lead to an overall reduction in staff numbers.

My Winning Presidential – Double – Ticket (Except They’re Both Dead)

IMG_4556

Like many Americans, I’ve been immersed in the 2016 Presidential debates. Truthfully, I’m not the least bit impressed. They seem like nothing more than a series of clown shows. I’d rather curl up with a cup of fair-trade coffee and read Nietzsche. So last night, I decided to create my own Presidential ticket. I’m calling it Election Fantasy Football.

Back in the eighties when I was attending a Catholic Jesuit high school in my native Columbus, Ohio, one of the requirements for graduation was to recite all of the U.S. Presidents in order with their terms in office. My recall is good, so I jogged my memory in search of the one president most closely aligned with my libertarian bent.  

Drum roll please. My choice……………

Calvin Coolidge, the 30th U.S. President

And for his running mate, I chose Jack Kemp, former New York Congressman and Housing Secretary under George H.W. Bush.

Below, I’ll make the argument as to why Americans should support a Coolidge/Kemp Presidential ticket. But before you read this, I want to remind you not to get too far upstream with your excitement because they’re both dead.

The Case for Coolidge

I know, I know term limits – as well as Coolidge’s death – would prohibit this fantasy from occurring. But work with me here. As the 30th U.S. President, he was a modest and humble man (unlike Trump), and he is arguably the last true laissez-faire, libertarian-oriented political leader to see the Oval Office.