A blog about business and economics.

Aug. 1 2014 9:33 AM

The Job Market Just Did Something It Hasn’t Done Since 1997

On first glance, today's jobs report looks like a little bit of a letdown. The Bureau of Labor Statistics reports that the U.S. added 209,000 jobs in July, compared with 298,000 in June. The unemployment rate ticked higher, just barely. Not seemingly a ton to write home about.

But, as the Washington Post's Zachary Goldfard notes, we've now managed to add at least 200,000 jobs for six months straight—the first time that's happened since 1997. The feat was more impressive back then, since the economy and the job market were smaller. But the employment recovery has trucked along at a fairly respectable pace through a winter during which the economy shrank, and a spring in which it grew at a surprisingly quick 4 percent rate. Here's the three-month rolling average for job creation, for perspective


The market isn't improving as fast as we would like or need it to, but at least it's dependable. 

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July 31 2014 6:04 PM

Middle-Class Death Watch: The Median Household Is Now Poorer Than in 1984

You're probably aware that a great chunk of America is poorer today than before the housing crash. But recently, the Russel Sage Foundation delivered a reminder that middle-class wealth is in fact still lower than it was a generation ago. As shown on the graph below, the median household in 2013 was worth about 20 percent less than in 1984. 

As Allison Schrager writes over at Bloomberg Businessweek, middle-class families are poorer today than in the Reagan days for two main reasons. For starters, housing collapsed—and for most Americans, their home is their biggest source of savings by far. Second, household debt has risen significantly over time. Because wealth is just the value of what we own minus what we owe, the typical family is now worth less than 30 years ago.


Or is it closer to 45 years ago? In case the chart didn't make you depressed enough, consider this: New York University professor Edward Wolff has calculated that, by 2010, median net worth in the U.S. had plummeted to its lowest level since at least 1969. Now, Wolff's research and the Russell Sage report were based on different data sets. But the newer numbers still suggest that middle-class wealth has declined a bit in the past four years. So when it comes to their financial health, many American households might well be stuck back in the Age of Aquarius.

July 31 2014 5:10 PM

Nordstrom Buys a Site for Men Who Hate to Shop

The basic principle of Trunk Club is simple: Men hate to shop. So what if they didn't need to? What if, for a reasonable fee, a stylist evaluated a man's clothing preferences and then shipped him an assortment of items to try? Maybe enough men would prefer a service like that to the slog of shopping to make a profitable business.

Nearly five years down the line, Trunk Club is doing well enough that big-name retailers are taking note. On Thursday, Nordstrom announced that it was buying Trunk Club for an undisclosed sum to help tap the growing market for men's fashion and to better integrate its physical and online operations. "This acquisition is reflective of how we want to move quickly to evolve with customers by finding more ways to deliver a great shopping experience," Erik Nordstrom, president of Nordstrom's e-commerce team, said in a release.


Brian Spaly, Trunk Club's chief executive, told the New York Times that the company is profitable and on pace to double its revenue to just over $100 million in 2014. Under the deal, Trunk Club will continue to operate independently but stands to gain from sharing services and resources with Nordstrom. Trunk Club, for example, will likely join Nordstrom's UPS contract and take advantage of its supply chains.

Nordstrom's acquisition of Trunk Club is the latest indication that shopping for people who hate to shop—or simply don't have the time—is big business. In June, Stitch Fix, a similar personalized shopping service for women, announced a $30 million funding round that gave it a pre-money valuation of $300 million. In other words, it's not just men that will skip the hassle of shopping for a fee. Women are on board with the idea, too.

July 31 2014 4:55 PM

The Incredible Shrunken U.S. Corporate Tax

As I argue in my column today, one of the basic problems with the corporate income tax is that it was conceived in a pre-globalization world, a time before tax havens and before U.S. companies started making a sizable chunk of their profits overseas. So I thought it would be useful to break out this graph, from the Tax Policy Center, showing how the corporate income tax’s role in the U.S. tax base has changed over time. Back in 1950, the corporate income tax was able to provide more than a quarter of federal revenue. Today, it’s down closer to 10 percent. Payroll taxes have essentially taken its place.

Globalization is far from the only story here. One reason corporate profits shrank as a piece of America’s tax base in the middle 20th century, for instance, is that they shrank as a piece of the economy, as shown in the graph below. But now, company profits are growing fast compared to our GDP while corporate tax receipts are relatively stagnant. (To be fair, they did pop up a bit during 2006 and 2007, before the recession.)


Part of the issue is likely that U.S. companies are earning more profits abroad and keeping them there to avoid taxes they would pay when they send the money back home. The presence of tax havens helps greatly in that regard. Tax credits and loopholes also play a role. But however you think we should fix the tax code, the one we have now doesn't seem to be built for the times.  

July 31 2014 1:32 PM

The McDonald’s-NLRB Kerfuffle Suggests That Our Labor Laws Are Woefully Out of Date

On Tuesday afternoon, the general counsel of the National Labor Relations Board said something that could radically change the worker-employer relationship for major restaurant companies. McDonald’s, the board’s general counsel determined, could be held as a “joint employer” in certain complaints over workers’ rights at its franchises.

In the past, McDonald’s has escaped liability for management practices at its franchises by saying that the franchisee, and not its corporation, determines wages and working conditions in those restaurants. In the U.S., roughly 90 percent of McDonald’s 14,000-some restaurants are franchise operations. (Globally, just over 80 percent of McDonald’s stores are run as franchises, and in 2013 they yielded about $9.2 billion in revenue.) Heather Smedstad, senior vice president of human resources for McDonald’s USA, told the Associated Press that calling McDonald’s a joint employer with franchisees was a “radical departure” and “should be a concern to businessmen and -women across the country.”


Fast-food giants such as Burger King and Yum! Brands (the owner of Taco Bell, Pizza Hut, and KFC) have used similar lines of reasoning in rejecting the joint-employer label. The idea is that business practices and labor practices are apples and oranges: Just because McDonald’s is concerned with its overall brand and bottom line doesn’t mean it should be responsible for the management standards—from hiring practices to scheduled break times—of individual franchisees across the country. “McDonald’s, like any company, has the right to establish its standards,” says Lawrence Lorber, senior council at Seyfarth Shaw and former deputy assistant secretary of labor. The NLRB decision, Lorber says, “seems to be a fairly significant stretch, because what it’s saying is that business standards make someone a joint employer when there’s no other employer relationship.”

Labor organizers argue that because McDonald’s exerts so much control over the specifics of how its franchised restaurants are run—menu, uniforms, décor, and so on—it should be held accountable for workers’ rights as well. The argument, essentially, is that McDonald’s is currently getting the best of both worlds: It has ample power to control the parts of the business it cares about at franchises, while offloading liability for labor and wage violations onto its franchisees.

“If you think about how carefully McDonald’s monitors every detail of how the franchises function in order to maintain their brand consistency, it would be disingenuous to say they have no influence over workplace conditions,” says Rick Hurd, professor of industrial and labor relations at the Cornell University ILR School.

If upheld, the NLRB determination would apply only within the U.S. The rights of workers at franchises in other countries are governed according to rules and regulations there. “Generally, I think you could say that U.S. labor law protections are some of the weakest in the world,” says Wilma Liebman, who served as chairman of the NLRB from 2009 to 2011.

Since November 2012, 181 cases involving McDonald’s have been filed with the NLRB. Of those, the general counsel found 43 to have merit, while 64 are still pending investigation, the agency said in a statement.

While the NLRB has often investigated cases involving questions of joint employers, Hurd said it has danced around the issue of how this status might apply to franchises. “When the National Labor Relations Act was passed in 1935, the standard employer was large manufacturers with lots of employees,” he explains. “We didn’t have these kind of widespread franchise operations back in 1935. The law doesn’t explicitly deal with them, and it’s something that the NLRB has shied away from.”

Liebman echoes this point. “The law is in some ways anachronistic for the way business is done today,” she says, inadvertently giving companies cover to “insulate themselves from labor obligations.”

In the short term, little will come of the general counsel’s statement, which simply allows complaints alleging that McDonald’s is a joint employer with franchisees to proceed. “I know there’s been some talk about suddenly having hundreds of thousands of fast-food workers join unions, but that’s not going to happen, at least not overnight,” Hurd says. But the determination will no doubt add fuel to workers'-rights campaigns like those against McDonald’s and Wendy's. And it means that more companies are vulnerable to those same kinds of campaigns—whether it's Dunkin' Donuts, Buffalo Wild Wings, Domino’s, or so many other heavily franchised restaurants across the country.

July 31 2014 1:12 PM

Service Workers Deserve Higher Pay. They Also Desperately Need Some Vacation.

In Europe, vacation time is treated as a human right. In the United States, we see it as a perk—employers aren’t legally required to give their workers paid time off for rest, even on national holidays. So just as we get income inequality, we get leisure inequality, which is illustrated nicely in a new Bureau of Labor Statistics report on which jobs come with vacation benefits. As Wonkblog’s Christopher Ingraham pointed out yesterday, “Managers are nearly twice as likely as service workers to get paid time off.”


I think numbers like these really speak to a bigger story about the mistreatment of part-time workers, who are of course concentrated in the service industry. Companies tend to treat their part-timers as cheap, on-call labor, adjusting workers’ schedules on the fly to meet customer demand. So management dislikes the idea of paid time off not only because it would cost money but because it would make it harder to phone up their staff at the last minute and haul them onto cashier duty. In the end, just 35 percent of part-time workers in the private sector get paid vacation, compared with 91 percent of full-timers, which, along with their erratic schedules, makes it even harder to control their time and lives.


The lesson is that if the U.S. does one day join the rest of the developed world and mandate paid vacation days, we ought to make sure part-timers get it too—otherwise we’ll end up making them look even cheaper and easier to abuse in comparison with full-timers.

July 31 2014 9:28 AM

Your Work Is Not Your Life

This story originally appeared in Inc.

Very few things in our lives are absolute. Everything is measured by degree, from our attention to our patience to the range and intensity of our emotions. 


At the same time, some things are absolute: You can't be all things to all people; you can't dance every dance; and, throughout your life, you've got to make hard choices, sacrifices, and compromises, and then you've got to live with them through thick and thin for a very long time.

We become the sum of the choices we make over time; those choices determine the kind of person we end up being—and how the world sees and values us.

What we become isn't a necessary result of fate or destiny. It's certainly not foretold or pre-ordained. Throughout our lives we remain a work in progress. Iteration isn't just a business process; it's also a strategy for a life well-lived. We can bend and shape outcomes to match our desires if we consciously, actively, and continually apply ourselves. But the good things we all hope for don't happen by themselves; you've got to pay attention and make them happen.

Purpose, Perspective, Proportion

One of the most critical choices you'll need to make when you start out in your career is exactly what kind of person you want to be. I think it's somewhat back in fashion these days to be a workaholic. For some of us it never went out of style. Almost everyone today wants to be an entrepreneur, build a business, and be a big honking overnight success. But that's only part of the story. Ultimately it's not about making money, it's about making a difference. It's also about more than making a living: It's about making a life. And the "you" that you become is a big part of the life you build outside the office, as well as within your business.  

In the frenzy of the work and the world it's really important that you don’t lose your sense of purpose, perspective, and proportion--and risk losing yourself in the process. Your business and your work will always be what you do. These things are not who you are. And it's critical right from the start that you not confuse or conflate the two.

This isn't as easy to manage as you may think. Today too many of us worship our work, work at our play (fitness uber alles), and play at what little worship we make a part of our lives. Where are the soul and the value in that? And (assuming that we want to) how exactly do we get ourselves back on top of things before they veer entirely out of control?

To handle the constant barrage of useful information, occasional insights, and useless chatter that increasingly assaults our senses and impedes our ability to get successfully through the day we need a new plan. You can drown in many ways today—in data, in documents, in deliberations, and in endless discussions. We all need to develop new skills for managing both the data and the people in our lives. It's similar to the radical and rapid choices that drive the triage process in an emergency room. But there are many different kinds of choices in the mix.

At work, we tend automatically to focus on the fiercest fires and the highest flames. We let our attention be directed toward the newest crisis rather than remaining in some kind of control and attending to the critical things that really matter. Attention is as slippery as mercury, and as easily redirected. If no one is paying attention to the things that count, people just stop caring. Once you stop paying attention to the people in your business who are important, and they stop caring about you and your business, they'll go someplace else, to someone who does pay attention and who does care. It's just a matter of time.

But that's on the business side of the equation. As the number of physical, mental, and emotional inputs we absorb each day continues to increase it becomes all too easy to apply the same systems, formulae, and checklists we use at work to our friends and families. This is where things can go very wrong very quickly.

That's because some of the people decisions we confront every day aren't mathematical or subject to standard rules and procedures—they're choices about other people, about feelings, and about our relationships. These concerns are fundamentally different, non-mechanical, and far more complex. People aren't products, positions, or policies—they're our co-workers, friends, and family. There's no fixed formula for getting these things right.

So it's equally incumbent upon us to decide what's truly important in these interpersonal situations, both in the moment and in the long run, and to devote to them the same passion and energy we apply to our business problems and concerns. It's a given that there's never enough time in the day (and that's never going to change); there's never enough of any one of us to go around (cloning may help, someday); and it's way too easy to find an excuse rather than finding the time to deal with these issues.

But here's the bottom line: Your family (when you have one) will be a much more important extension of yourself than any work you do. There's always more work, but you only have one family. And, believe me, good friends are also few and far between. Friends are the family that you get to choose--they're hard to find, even harder to leave, and impossible to forget. So, as you make 'em, make a plan to hang on to them. They're as important an investment over time as anything else.

Take a little time now to decide how you'd like things to turn out when you look back in 50 years at your accomplishments, your family, and what you've built. It's all right there before you. Everything is possible; ultimately, it's all about what you make of it. 

July 30 2014 6:39 PM

Can Whole Foods Escape Its “Whole Paycheck” Image?

It's hard to feel bad for a store whose nickname is "Whole Paycheck," but this has been a particularly rough year for Whole Foods. Once the king of organic, Whole Foods has recently come under attack on all fronts. After the company announced its second-quarter results in May, shares fell nearly 20 percent overnight on fears that the chain was losing its hold on the organic market. Heading into Wednesday's earnings report, Whole Foods' stock was the second-worst performer in the S&P 500 after losing 30-some percent of its value since January.

Now once again, shares of Whole Foods are slipping in after-hours trading on Q3 earnings that failed to reassure Wall Street. Whole Foods missed on same-store sales and lowered its outlook for the fourth consecutive quarter. Profit came in above expectations and revenue in line, but investors are less concerned with those figures than seeing whether Whole Foods can keep customers coming to its stores amid increased competition for healthy and organic shoppers.


Whole Foods' effort to ditch its "Whole Paycheck" image has become increasingly urgent as big-name competitors like Walmart and Kroger Co. have stepped into the organic market. Many niche products that were once tough to track down outside of a Whole Foods or boutique market are now available at mainstream groceries. In an effort to bring traffic back to its stores, the company will be launching its first-ever national marketing and branding campaign this fall to focus on the "real and substantive differences" that Whole Foods offers consumers.

"We're trying to advertise who we are. We're trying to change what we think is a negative narrative about our company. And we're trying to be very clear what makes Whole Foods a unique, special company," co-CEO John Mackey said on the call. "What we are absolutely convinced of is that in the long term this is going to create great value for our investors."

The chain will continue to work on cutting its prices—an effort that hurts in the short term but is likely to bring back some customers. It also plans to make cosmetic touch-ups to some of its older stores. But until it can match the steep 25 percent discounts offered at Walmart and the convenience of getting organic kale from a neighborhood supermarket, Whole Foods might be fighting a losing battle.

July 30 2014 9:54 AM

Great News This Morning: The Economy Grew at a 4 Percent Rate Last Quarter

It looks like the economy got the spring awakening we were all hoping for. After contracting during the winter, U.S. gross domestic product grew at a 4 percent annual pace from April through June, according to the Commerce Department. Overall, it has expanded at about a 1 percent rate during the first six months of the year.*

These are preliminary numbers that will be revised. But they seem to confirm that our first-quarter economic shrinkage was indeed a fluke, in part due to the freakishly bad weather. The Wall Street Journal notes that, with revisions, the economy grew at a 4 percent rate during the back half of 2013, making it “the best six-month stretch in 10 years.” We’re not exactly on a roll yet, but there’s some pretty good reasons to be optimistic.


*Correction, July 31, 2014: This post originally misstated that the economy grew by about 1 percent during the first half of 2014. It grew at a rate of about 1 percent.  

July 29 2014 5:01 PM

McDonald’s Japan Rolls Out Tofu McNuggets

McDonald's Japan unveiled a game-changer on Tuesday: Tofu Shinjo Nuggets. The item is being rushed onto the menu less than a week after McDonald's announced it was stopping all sales of chicken products imported from China because of reports that a supplier might be shipping expired meat. The tofu nuggets will hit Japanese locations on Wednesday and be available until late September.

Tofu Shinjo Nuggets—literal translation: "minced tofu nuggets"—are made primarily from tofu and vegetables such as onions, soybeans, and carrots. They also include minced fish and will be served with a ginger-flavored sauce, a spokeswoman for McDonald's told the Wall Street Journal. "Because it isn't meat, it tastes a bit different. It's a bit softer," she said.


It's possible tofu McNuggets will enjoy just a brief moment in McDonald's Japan while Chinese chicken suppliers clean up their acts. But Tofu Shinjo Nuggets could also be something much better—the cusp of a new vegetarian/pescatarian push that expands beyond a meager number of salads (which are overwhelmingly topped with bacon and chicken). In May 2013, a 9-year-old girl called for McDonald's to introduce healthier options such as kale chips and more veggies. Maybe the chain will finally heed her call.

If the big dreams don't pan out, there should at least be a fun experiment here for anyone who lives in Japan and has also had normal nuggets. Try the tofu variety and tell us: Which tastes less like chicken?