Category Archives: Business

Charts show signs of peak employment?

I came across this chart the other day.

Wallace April Employment 2013-05-23


It’s showing that the current “recovery” still hasn’t gotten the number of jobs up to where it was before the recession. And that this is historically unusual, at least looking as far back as 1947. It reminds me of the 16 year chart of the S&P index, which appears to show a ceiling at a certain level. It makes me wonder if we’re seeing peaks left and right–oil supply, stock market, employment?

16 year SPY

I shared the top chart with a colleague who wondered aloud about how the employment numbers look when compared to the overall population of working people. General unemployment statistics are hard to interpret since people who don’t find work within 18 months are dropped from being counted as unemployed (clever trick!), which leads me to look at the number of overall jobs as a potentially more meaningful statistic.

I visited FRED, the free online statistics website, and got data to create the following chart:

employment gap


Although FRED currently only has the US population of working age stats out to 2011, it paints an interesting story in terms of the gap between the number of people and the number of jobs.

On the one hand, there will always be a gap because of factors like people who work but aren’t counted as employed, people who are too disabled to work, people who don’t have to work for a living, and so on. But in any case the trend of the gap is valuable to look at.

The US working age population seems to be continuing up on a smooth line, while the number of jobs seems to have plateaued. If that’s the case, then we should expect to see the ride line above, % gap, continue to grow in the coming years.

Beware the coal powered electric car–or worse

electric_power_industry_net_generation_fuel-largeWas taking in an article titled Electric Cars are NOT Coal Powered Cars which features a huge pie chart showing that in 2009, 45% of US electricity was generated from coal. Not an auspicious start to an argument!

But it gets way better. He then goes on to “make a case” for why natural gas and nuclear are such “clean” forms of energy.

I had a chance to watch a documentary called Gasland which shows how people who live in communities being fracked are getting very sick, and the water is being poisoned.

Nuclear is even scarier. When I was in Japan I discovered that agriculture for *all of Northern Honshu* has been trashed, not just the areas that show elevated levels of radiation. Basically the buying public won’t trust the government that it’s safe (wonder why) and so they just won’t buy from that region. The farmers are devastated, leading to farmer suicides. Suddenly coal isn’t sounding so bad, is it?

Reality is that as a country, we’ve backed ourselves into a corner. Can’t imagine living without a car? The car and oil companies are at “mission accomplished” having killed commuter rail lines in the 1940’s (yes they were convicted, no nothing happened as a result) and given rise to suburbs and the need to have a car.

The only way around driving a “dirty fuel” car might be if you live somewhere very sunny, and have a lot of solar panels, then you might be able to come out net even with the grid, so you can feed the grid during the day, and then charge your car during the night. Of course then you have to factor in the power that went into making the solar panels (which is significant) but it’s probably the best thing around, besides not needing to drive.

More and more, I think the smart move is to “live local” where you can do your essential shopping by bike, your friends and entertainment are likewise nearby, and you can use public transit to get to work. Sure the public transit ends up using dirty fuel somewhere down the line, but it’s got to be much less per person than an individual car, be it electric or otherwise.

I’m looking hard at “going local.”

The truck of the future is…the train

Jim Hansen of the Master Resource Report this week included a story about a cement factory in West Virginia that bought 1.25 mile extension–and a 205 foot bridge over a highway–to link the factory with two major train lines.

Now get this–it’ll remove 24,000 trucks from the road. And apparently rail can move 1 ton of freight 469 miles on a gallon of fuel. Granted, that number comes from the Association of American Railroads. But even if they are off 10x, I bet they are still ahead of trucking. Yikes.

I haven’t looked around on the ground, but I’m guessing that if I go to where the freight rail depots are in the San Francisco Bay Area (are there any?) I’ll see lots of weeds and decay. Seems to me that this train-centric spots will go back to being  relevant–and lively–in the forseeable future.

I’ll add as well that if you’re in a business that involves shipping your product long distances, get ahead of the game and consider what changes you’d need to make to do a lot of that shipping by rail. Or even better, start doing some of your shipping now via rail, so that you have the time to ramp-up at your own pace. I believe the ability to leverage rail will be a big competitive price advantage.

American manufacturing is starting to come back

Not to say that it’s “the good old days” again, but there are stories popping up in the press about American companies that are bringing some manufacturing back to the U. S. of A. I guessing it has nothing to do with patriotism, nationalism, or supporting local communities, but rather is just an advantageous financial decision. Nonetheless, for the people within these American companies, it must feel good to have the jobs coming back.

Here is a news story about how Whirlpool brought a manufacturing line back from China. At :50 a manager mentions rising personnel costs in China, along with logistics costs. Yes, logistics costs AKA shipping costs are really starting to bite, and it’s going to create a realignment in where things are made and how much they cost.

I think it’s important to make a couple of more comments here.

1. I don’t begrudge Chinese companies, entrepreneurs, workers for accepting the contracts and busting their behinds to ramp up production lines and make products. I wish that worker safety and environmental controls were better, but then the United States was just as bad for a long time, and sometimes doesn’t seem to be a lot better. At least there’s a somewhat functional legal system here, though.

2. It’s so critical that manufacturing knowledge, and all of the support pieces that go with it, not fade away in this country. Think about it–it’s not sustainable in the long run for all of us to become marketers, financial consultants, and personal trainers. There has to be a tangible aspect to the economy, and for a while we’ve been outsourcing a lot of it. It’s time for the tangible to come back, and for the skills that go with it–such as machining–to be refreshed. These skills will make our society much better off in the long run.

Want to support local businesses? Pay cash.

I have to admit that I’ve gotten very comfortable using my credit card. Too comfortable. Yes I pay it off every month so I’m not using it for “credit” per se–just for convenience. It’s nice to see a summary of my expenses, for understanding where my money goes. That convenience doesn’t cost me anything directly, but in thinking about it I’ve come to realize that it costs the retailers a lot.

Now if we’re talking a huge, publicly held company, then I look at it as a cost of them doing business with me. But when it’s the small business entrepreneur restaurant owner down the straight who makes the amazing Taiwanese double sauce noodles for me week in and week out, then it doesn’t quite feel right.

I got curious about how much it might actually cost them, and found a website, which shows you the cost for a variety of cards, if you let them know which one you have. So looks like for a restaurant, factoring in the per transaction cost fee, and then the percentage fee, it’s about a 5% fee to the merchant to pay for my noodles on the credit card.

Having just spent about half a year working closely with a variety of small businesses, I know how much of a difference 5% can make–for a restaurant that’s taking in $400K a year, that’d be a $20K difference, which can mean a lot to a hard working local entrepreneur.

For me it’s become an easy choice: do I want that 5% going in the pocket of the owner, or the pockets of the huge bank’s executives and shareholders? When buying local pay cash! It’s fun, it’s easy, it makes a difference.

The store may be local, but is the service any good?

I recently wrote about my experience of discovering that there is a salon one block away from my house. I’m so used to driving everywhere that I didn’t even know it was there. So it’s great that I can walk to this business, but then of course I wonder if it’s any good. If nothing else, greater competition means that providers need to try harder, be better, to be successful. I wonder how the move to local business will impact service quality?

I grew up in Canada, and one of my fond memories is of family excursions across the border from Vancouver to Bellingham to go shopping in the United States. I remember how there was better selection, better pricing, and much friendlier service. It just seemed as if there was a lot more competition in the United States, and that the retailers tried harder. As customers we were in heaven, and it called to question why retail service back home in Vancouver was so lacking.

These questions about competition and service have been thoroughly studied. When I was at MIT studying for my MBA, I had the good fortune to take a class with Professor Duncan Simester, a very sensible professor of marketing at MIT who studies market competition. One of my takeaways from his class was the importance of location for many kinds of businesses, especially retail businesses. That given the choice between going to business A or business B, all other things being equal, you’ll go to the one that is closer to you. And along those lines, if A is closer they can probably charge a bit more, and still win your business because they are closer.

You may be thinking “I don’t mind driving 10 minutes if it’s going to save me some money.” And here’s the twist: when gas and cars are very cheap, then zipping around from here to there to save a dollar or two isn’t a big deal. But when gas gets closer to it’s fully loaded cost (which has been estimated at $12/gallon in addition to what you pay at the pump), then you’ll very likely think twice about driving to get that “deal.”

The end result will be that local businesses will regain a lot of power that’s been lost during the car age, and prices will go up. It may also mean that the large box stores lose power to small, more conveniently located, locally run businesses. I can only hope that levels of service will not suffer too greatly, and that the strategy of business success through good service will carry on. But the effective range of where we can shop is going to shrink, and this may not be a good thing for customers.

The return of the local business

Back in the old days, I imagine that everyone knew the businesses right around them. If you didn’t have a car, I’m guessing your options were foot, bike, and bus, with the latter not happening all of the time. For my grandparents who grew up in central Alberta, even going to a restaurant was a big deal, at least when they were young. So this notion of hopping in the car and driving 5 miles for…anything is relatively new.

After years of getting pounded on by the Internet and by chain stores, I anticipate the return of the small, local business. As gas gets more expensive, and as people to appreciate the value of “local” once again, we’ll start to seek out, discover, and support local businesses more.

I was recently looking for a hair salon for a friend, and so I did my usual thing: hopping onto Yelp to find out which businesses are around, which are affordable, which are good. And so I came up with a list of salons to call–all within about 5 miles of here, when I stumbled on something very unexpected:

There’s a salon across the street.

I’ve lived here over three years and I didn’t know that there was a salon one block away, on the other side of the street. Wow. I must have passed the storefront, because I patronize a dry cleaner that is very close by. But I just wasn’t paying attention–it didn’t register.

I’m glad I had this experience because it brings into my awareness how much I depend on the car for day to day living, and how I’d lost track of that. Why drive 5 miles when I can walk across the street? Going I will pay more attention to what businesses are nearby. I hope they have good service.