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BBA Economic Digest: Where We Are


Where We Are

The Dow Jones Industrial Average was catapulted above 30,000 for the first time ever this past week, with an increasing number of investors encouraged by expectations that a vaccine will be rolled out by early next year.

The Dow was up nearly 13 percent for November so far, and if it holds its gains into Monday’s close, it will chalk up its best month since January, 1987. The S&P 500 closed at a record 3,638 and was up 11.3 percent for the month, which was the third best month for the S&P 500 since its origin in 1957.

Consumers Have Adapted

Thanksgiving Day spending rose by nearly 22 percent year over year to $5.1 billion, hitting a new record, according to Adobe Analytics data. Nearly half of the online purchases were made on a smartphone, Adobe found. (I was one.) The strong online shopping data reflects a trend that many retailers and industry watchers expected: More consumers are avoiding malls and buying gifts from their couch during the coronavirus pandemic.

A scene playing out on Black Friday 2020: Hardly any lines, bare parking lots and more employees than customers in some stores.

Those at Risk

Safety nets are likely to be yanked from underneath millions of vulnerable Americans in December, as the coronavirus surges. Those most at risk are depending on one or more relief programs that are set to expire, right as the economic recovery becomes more fragile than it's been in months.

The pace of first-time filings for jobless claims picked up last week, with the jobs market showing increasing vulnerability to the coronavirus spread.

Claims totaled 778,000 for the week ended Nov. 21, ahead of the 733,000 expectation from economists surveyed by Dow Jones and up from 742,000 the previous week, the Labor Department reported Wednesday.

The total receiving benefits rose to 20.45 million for the week ended Nov. 7, up 135,297 from the week before. That compares with just under 1.5 million a year ago, underscoring how much damage remains in the labor market.

A Serious Economic Thinker

President-elect Joe Biden’s choice of Janet Yellen as Treasury Secretary was seen as a win for markets, since the former Federal Reserve chair should focus on fixing the economy rather than the progressive Democratic agenda feared by some investors.

The first woman Fed chief would also be the first woman Treasury Secretary and faces unprecedented challenges of massive unemployment and a record level of debt, as the government spends even more to reverse the impact of the pandemic during the Biden administration.

“To me it shows Biden is taking stuff pretty seriously and definitely not pandering to the left. She’s a very serious economic thinker, and they have some very serious problems to deal with,” said Barry Knapp, director research for Ironsides Macroeconomics.

The Virus

Experts have warned that there could an even bigger surge in virus cases, following the Thanksgiving holiday which could start to show up in the coming week. There have been more than 12.6 million cases in the U.S.

A record number of Americans — 90,000 — are now hospitalized with Covid-19, and new cases had been climbing to nearly 200,00 daily. The U.S. shot past 13 million cases on Friday against the backdrop of national holiday travel that raised the prospect of an even greater rise in infections.

A Huge Talent Play

The digital divide is real, between companies, communities and individuals. And the ramifcations for economic developers everywhere cannot be overstated.

“It’s stunning,” James Manyika, chairman of the McKinsey Global Institute, says of the digital divide between companies within the same industry. “Part of that is access to technology, access to people who can deploy it.” Manyika might as well have been talking about communities, as he notes that the failure of digital capabilities to spread more widely through the economy is fueling inequality. And therein lies the single biggest challenge facing economic developers. When innovation fails to drive opportunity, it generates fear of being left behind. The truth is that a vast number of Americans and entire communities will be left behind for the lack digital upskilling. It's a constant theme of mine these days when I speak to economic development groups. If you don't invest in the human resources of your community, preferably through public/private partnerships, if you don't provide people with the tools to succeed, they will flounder.

Automation hasn't yet transformed the business world, in part because companies don't yet know how to harness these new technologies. For that to happen, they'll need workers who know how to use AI. UiPath, a robotics process automation software company, surveyed hundreds of C-level executives and senior managers about their hiring plans.

If choosing between two similar candidates, 72 percent reported they would chose the employee who had more experience in automation and AI tools, whether the role specifically required those abilities or not. 83 percent reported that automation and AI would be necessary for jobs of the future, with almost the same percentage believing the pandemic and remote work policies had increased the need for these skills. "There's a huge talent play, but if you think about the emphasis that has been put on this in the past, it doesn't map up with the education" that many workers have had, Tom Clancy, UiPath's chief learning officer told Axios.

Economic developers should come to realize that corporate decision makers will increasingly choose communities for investment where the digital capabilities/talent are present. It only stands to reason.

Missing the Mark

Much of economic development marketing, probably most of it, entails a strategy that provides little or no meaningful value but says in essence, “Look at us! Think about us!” That misses the mark, especially so during this time of a national pandemic. My advice is that an economic development organization should act like good corporate citizen -- supporting employees, incumbent employers and workers, and using its expertise to help in whatever way they can. If an EDO has something to say about the helpful actions that it is taking to make a difference, by all means tell it. By the same token, if an EDO is not taking meaningful action to help existing businesses and workers, it better damn well start. The reason: You will be remembered for what you did or did not do during this time of struggle. Finally, if I were an outside company looking in, considering a community for investment, I would take note of what measures an EDO does in terms of providing solutions and benefits to local employers and workers. Inquiring minds want to know. Economic developers as problem solvers, focusing on the needs of others. It's a solid strategy for long-term success.

Not Your Typical Project

When we think of announced economic development projects, we typically think of new industrial facilities or the relocation of corporate headquarters. But you can bet that a new medical school in Temple, Texas, will have lasting economic ramifications for that community.

Baylor Scott & White Health, the largest not-for-profit health system in Texas, announced plans to partner with Baylor College of Medicine to open a medical school campus in Temple, beginning in 2023 with an inaugural class of 40 medical students.

No doubt the new source of medical talent be an asset for Temple Economic Development Corporation in its business attraction efforts.

Nationally, medical schools and teaching hospitals supported more than 6.3 million jobs and added more than $562 billion in value to the nation's economy in 2017. Together, the institutions account for 3.3 percent of the U.S. workforce and 3 percent of the gross domestic product.

Unrivaled

Amazon added 427,300 employees between January and October, pushing its work force to more than 1.2 million people globally, up more than 50 percent from a year ago. That number approaches the entire population of Dallas.

The spree has accelerated since the onset of the pandemic, which has only turbocharged Amazon’s business that much further. Starting in July, the company brought on about 350,000 employees, or 2,800 a day. These numbers do not include the temporary 100,000 holiday workers nor the 500,000 contract delivery drivers.

Amazon’s rapid employee growth is unrivaled in the history of corporate America. It far outstrips the 230,000 employees that Walmart, the largest private employer with more than 2.2 million workers, added in a single year two decades ago.

The closest comparisons are the hiring that entire industries carried out in wartime, such as shipbuilding during World War II or home building after soldiers returned, economists and corporate historians said.

What Were They Thinking?

We all make mistakes, and it is a natural part of learning. And I try not to judge but try to help those who have made missteps. After all, been there, done that.

But sometimes it is hard not to judge, or at least wonder, what in the hell were they thinking?

Such was the case last week when I received an invitation from an economic developer from the Midwest who invited me to attend a dinner here in Dallas in early December,

My response: I wouldn't have dinner with the Pope right now. Again, I have to ask myself, what were they thinking? Who told them this was a good idea? Who would even consider attending?

As previously mentioned, the U.S. surpassed 13 million confirmed coronavirus cases Friday, marking the fourth time the country has hit a million milestone this month. Overall the U.S. has recorded more than 3.8 million new cases in November, by far the highest of any month since the pandemic began.

Good and Bad Failure

There are two kinds of failure within organizations -- experimental failure and operational failure.

The first is nothing to be particularly ashamed of. The most successful entreprenuers in business history, such as Steve Jobs, Jeff Bezos, and Bill Gates, have all experienced experimental failure. The key is that they were thinking big. That's good failure.

Then there is operational failure, when you screw up on something that you really should already have known. That's bad failure, because it often denotes a degree of wrecklessness or ignoring reality. Sorry to say that is what this particular economic development organization demonstrated.

Can We Even Grasp This?

We are numb to it all. The U.S. passed 265,000 confirmed deaths from COVID-19 this week, a figure that is perhaps too vast for us to comprehend. To put that in perspective, that is more than ten times the number of American drivers and passengers who are killed in car crashes each year, and more than twice the number of American soldiers who died in World War I.

When we try to grasp mass death, we inevitably come up against cognitive biases that saps us of our empathy for victims and discourages us from making the sacrifices needed to control the pandemic, says Paul Slovic, a psychologist at the University of Oregon.

As the scale of deaths and tragedy grows, our own compassion and concern fail to keep pace. It will take willful effort not to become numb to what's happening. But it is an effort that must be made.

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