Podcast Summary
Layoffs in tech and media industries, but overall jobs are still being produced: Unexpected tech and media layoffs, but overall jobs market remains a focus and concern, despite inflation
Despite the headlines of layoffs in various industries, the labor market as a whole is still producing jobs, although the drivers of growth have shifted. The layoffs we're seeing are primarily in tech and media industries, and the workers in these industries are often receiving severance packages, which may not be reflected in initial jobless claims. Additionally, inflation at both the consumer and producer levels is higher than anticipated, but it was expected and is not a new development. Overall, while the economy is experiencing some challenges, the labor market and jobs production are still a focus and a concern.
The last mile of inflation: Services and potential concerns: Economists predict inflation to continue, but its impact on services and consumer behavior could cause significant shifts in the inflation landscape.
While economists anticipate inflation to continue, it's not expected to move in a straight line. The last mile issue is the potential for inflation to impact services and cause concerning inflation pressures. However, there's also a possibility that inflation could drop quickly if certain economic factors fall apart, such as job openings or the labor market. Another crucial factor is consumer behavior. Despite a recent unexpected drop in retail sales, consumers have been strong and resilient, supported by the labor market. Overall, the economy is holding up, but if these key factors were to change, the inflation situation could shift dramatically.
Robust US job growth and real wage increases fuel economic outperformance: The US economy's strong labor market, with robust job growth and real wage increases, is helping it outperform other advanced economies, despite challenges in tech and media sectors and commercial real estate.
The US economy is experiencing robust job growth and real wage increases, leading to overall economic growth that outperforms other advanced economies. This strong labor market is helping to mitigate potential weaknesses in the UK and Japan. However, there are individual pockets of concern, such as tech and media layoffs, and the vacancy of offices leading to challenges for commercial real estate and cities, resulting in tax revenue shortfalls. These interconnected issues highlight the complexities of the economy and the ripple effects of various developments. Despite some challenges, the US economy remains the healthiest among advanced economies, with a strong labor market as a key factor.
Commercial Real Estate's Impact on City Budgets: Boston relies heavily on commercial property taxes, a decline could lead to a significant revenue gap, cities may consider shifting the burden to residential taxes or exploring alternative sources, ESG practices may continue to evolve despite investor withdrawals.
Commercial real estate significantly impacts city budgets, with Boston being particularly reliant on commercial property taxes, accounting for around 40% of its revenue. A decline in commercial property values could lead to a revenue gap of up to 10%. Cities could consider shifting the burden to residential property taxes or explore alternative revenue sources, but these measures may be met with resistance. On a different note, the withdrawal of major investors like JPMorgan, State Street, and BlackRock from the Climate Action 100 Plus coalition advocating for Environmental, Social, and Governance (ESG) initiatives may signal a shift in focus, but it does not necessarily mean the end of ESG practices. Companies will likely continue to address environmental, social, and governance issues, albeit under different labels or with a greater emphasis on one category over another. The political climate, with pressure from both progressives and Republicans, may influence how these practices are perceived and implemented.
ESG Debate and Market Updates: Professor Keddy highlights the significance of public commitments and accountability in ESG efforts, while the stock market faces losses and rate changes.
The debate around Environmental, Social, and Governance (ESG) initiatives and asset managers' fiduciary duties continues to be a contentious issue. While some argue that ESG efforts are a distraction from maximizing returns, others believe that they are essential for accountability and long-term success. Leanne Keddy, an accounting professor at Carleton University, emphasizes the importance of public commitments and accountability, especially during times when it's needed most. Meanwhile, the stock market experienced a downturn, with significant losses for the Dow, Nasdaq, and S&P 500. Roku faced a significant drop in stock price due to a larger-than-expected Q1 loss, while Toast saw a rise in revenue but also announced layoffs. The yield on the 10-year Treasury note increased to 4.28 percent. Public.com offers a high yield cash account with an APY of 5.1 percent, which is currently one of the highest rates available. It's important to remember that the Federal Reserve's federal funds rate is not the only rate that matters in the financial world.
Big banks vs small issuers: Interest rate disparity: Consumers pay $105B in credit card interest annually, with revolvers disproportionately affected by higher rates. Evaluate the whole package before choosing a credit card.
Consumers face significantly higher interest rates and fees when using credit cards from large issuers compared to smaller banks and credit unions. The CFPB report reveals that the median interest rate for a big card company is 28%, while a small card issuer offers a median rate of 18%. This disparity can lead consumers to overlook the long-term costs and stick with familiar brands, despite their potentially higher rates. In 2022, consumers paid a staggering $105 billion in credit card interest alone. With about half of US credit card users revolving their balances, those individuals are disproportionately affected by higher rates. Neal Doss, a marketing professor, suggests evaluating the whole package of a credit card, not just the brand name, before making a decision. Additionally, the self-storage industry has seen remarkable growth, with over 265 million square feet of rentable space added in the past 5 years, indicating a potential trend of accumulating more possessions.
Self-Storage Industry's Growth Factors and Trends: The self-storage industry's growth is driven by the pandemic, population movement, and low-interest rates. High-end facilities with advanced features are in demand, making Extra Space Storage a strong player. Despite oversaturation in some markets, the industry's resilience and reliance on consumption ensure steady demand.
The self-storage industry has seen significant growth in recent years due to various factors such as the pandemic, population movement, and low-interest rates. Extra Space Storage, with its focus on providing high-end facilities with features like climate control, large bay doors, and advanced security, is one player capitalizing on this trend. The industry's resilience during economic downturns also makes it an attractive investment option. However, oversaturation in some markets is causing concerns with rising delinquencies and vacancy rates. Despite these challenges, the American economy's reliance on consumption and the growing trend towards decluttering ensure a steady demand for self-storage solutions.
The Cost of Hanging Onto Excess Belongings: People pay for storage despite questioning its need, with costs like Crawford's $273 a month adding up significantly, while outside focus shifts to improving literacy
People, like longtime Extra Space Storage customer Crawford, often hold onto excess belongings and pay for storage space, despite questioning the need to do so. The cost of storage, which is now $273 a month for Crawford, can be a significant expense. Meanwhile, outside the storage facility in Timonium, Maryland, the price of gas continues to rise, reaching a national average of $3.28 per gallon. Elsewhere, there's a renewed focus on literacy, with schools changing their approaches to teaching reading. This shift is due in part to a podcast, "Sold A Story," which investigates how teaching kids to read went wrong. The podcast has inspired a renewed commitment to improving literacy and is being shared widely.
