Gallup has released the new polling data today that shows nearly a third of all Americans are worried about losing their jobs. Americans were this worried about job stability two years ago, but concern dropped 5 points last year, according to Gallup. Even more Americans are concerned that they will lose benefits and/or pay:
More from the report:
With the U.S. unemployment rate running 50% higher than it was in 2008 (approximately 9% today vs. 6% then), American workers are again expressing record- or near-record-high levels of concern about the stability of their jobs and income. This reverses the slight improvement seen a year ago, when U.S. workers' concerns about losing a job, pay, or benefits had abated slightly. The rates of concern are even higher among workers who are the most vulnerable to financial setback -- those with low to moderate incomes.Together, the findings document the ongoing psychological impact of the country's economic problems on many working Americans and how fragile the economic recovery is in their eyes. When workers are worried about their jobs and their income more broadly, this is likely to affect broader economic confidence, the housing market, and consumer spending.
Read the full report here.
Tyler Cowen's Marginal Revolution has become a must-read econoblog. So his latest book is one of this summer's must-reads as well. The book's full title is The Great Stagnation: How America Ate All the Low-Hanging Fruit of Modern History, Got Sick, and Will(Eventually) Feel Better. So how about that last part of the title? How will it get better?
Cowen spoke about the book, and put forward a couple of interesting prescriptions for the American economy when he had Tea with The Economist:
With the rise of social media and the increasing use of Facebook as a primary gathering spot online, many small companies are considering shifting to Facebook as their primary virtual storefront. Eric Packer, entrepreneur and founder of Small Business Search, says that may work out as the best bang for the buck for small businesses, as long as you think strategically. At Small Business CEO, Packer shares four tips for those business owners and marketing managers looking to focus on Facebook. The first tip: "Don't Be Boring!":
With a standard website, it is okay to post relatively dry, informative content. If people come across this site, it’s likely because they were already searching for something that you were selling. However, people don’t go on Facebook when they want to purchase things. They go on Facebook when they want to be entertained by links and posts from their friends. In order to use your Facebook site effectively, you need to update it at least several times a week with entertaining content.What is entertaining content? Being told what to do in the form of a blatant advertisement is not entertaining. An informative article about things that your product does might entertain. A comedy video based on your product is definitely entertainment. Behind-the-scenes footage of popular events might be intriguing. Weird, unexpected happenings are fun to share. Automated posts are not entertaining. Completely random posts might entertain a few people. A variety of unique posts and content types centered on a similar theme, style or brand of writing and content sharing is definitely entertaining.On your small business Facebook site, people see your content next to their friends’ content. You have to be at least as worthy of attention as interpersonal relationships if you want to be successful.
Read Packer's other tips here.
While those of us on the East Coast were watching the weather this weekend, top economists from around the globe were still at the Jackson Hole Economic Policy Symposium, listening to the new head of the IMF, Christine Lagarde give what Felix Salmon called "the most important speech of the meeting, by far." Lagarde gave her vision for what European and American leaders need to do to stave off a most damaging double-dip recession. From the speech:
Two years ago, it became clear that resolving the crisis would require two key rebalancing acts—a domestic demand switch from the public to the private sector, and a global demand switch from external deficit to external surplus counties. On the first, the idea was that strengthened private sector finances would allow the engine of growth to switch back from the public to the private sector. On the second, the idea was that higher demand in surplus countries would make up for a lower spending path in deficit countries. But the actual progress on rebalancing has been timid at best, while the downside risks to the global economy are increasing.
Those risks have been aggravated further by a deterioration in confidence and a growing sense that policymakers do not have the conviction, or simply are not willing, to take the decisions that are needed.
Developments this summer have indicated that we are in a dangerous new phase. The stakes are clear: we risk seeing the fragile recovery derailed. So we must act now. It is a matter of vision, courage and timing. Decisive action will bolster the confidence that is required to restore and rebalance global growth.
We are not without options. We know what needs to be done to support growth, reduce debt, and prevent further financial crises. But we need a new approach—based on bold political action, with a comprehensive plan across all policy levers, implemented in a coordinated global way.
Read the speech here.
Yesterday President Obama named Princeton economist Alan Krueger as the new chair of the Council of Economic Advisers. Krueger is known for his work on unemployment--and he will be expected to lead on the Obama administration's anticipated new jobs plan in his new role. The Wall Street Journal's David Wessel give a good quick briefing on Krueger:
One former CEA chair thinks Krueger is a good hire. Here's Greg Mankiw's take:
At the Economix blog, Laura D’Andrea Tyson says that as some of the world's largest economies try to avoid a double-dip recession, it is important for policy makers to attack the jobs crisis. And the only way to make progress in fighting the crisis, she argues, is to correctly diagnose the cause:
As one small-business owner told The Los Angeles Times, “If you don’t have the demand, you don’t hire the people.” And the majority of economists agree on this diagnosis. They also agree that the recovery from a balance-sheet recession can be agonizingly long, with significantly slower growth and a significantly higher unemployment rate for at least a decade.Recent data indicate that the United States is on such a course, and many economists are now drawing comparisons between it and Japan during the two “lost decades” following Japan’s 1989-90 financial crisis and ensuing balance-sheet recession.A recent study by the economist Robert Gordon confirmed that the shortfall in private-sector demand, especially the demand for consumer services, residential and commercial construction, and consumer durables, is the primary cause of shortfalls in production and jobs.
Read Recovering From a Balance-Sheet Recession here.
Successful companies depend on successful collaboration: employees working together whether they like each other or not. If the collaboration is not working, don't blame the employees. Blame the leader. So says John Abele, cofounder of Boston Scientific. Abele writes about managing successful collaborative efforts in the Harvard Business Review article, Bringing Minds Together. Abele discusses managing collaboration in this HBR IdeaCast interview:
Irene has passed and the cleanup has begun up and down the East Coast. While the storm did not bring the damage many feared it might, it will still cost billions to clean up.
At Real Time Economics, Conor Dougherty points us to a paper by Yale economics professor William Nordhaus, in which Nordhaus examined the economic impact of hurricanes. Nordhaus wrote the paper in 2005, a record year for hurricanes--both in terms of quantity and economic damage. He updated the paper in 2008. The key finding: hurricanes have become more costly, and the costs rise fast with each increase of wind speed above 74 mph. Here is an excerpt:
The economic impacts of hurricanes in a year depend upon several factors: total output, the capital-intensity of output, the location of economic activity, the number of storms, the intensity of storms, and the geographical features of the affected areas.
The analysis here considers three primary factors: the number of storms, maximum wind speed at landfall, and GDP. The impact of the number of storms is obvious, and we take damages to be linear in frequency. For the analysis, we assume that damages per storm over time conditional on wind speed are proportional to nominal GDP. This is an appropriate normalization to correct for economic growth, assuming no adaptation and neutral changes in technology and the location and structure of economic activity. However, several factors might lead the damage function to shift over time. These “drift factors” include coastal migration, rising housing values, sea-level rise, measurement errors, building codes, and adaptation to storms. An assessment suggests that drift factors may have raised the ratio of hurricane damages to GDP in the order of 1.5% per year in the last half-century.7 However, many of these trends are likely to abate, and we project no further drift for the future.
The third factor affecting damage is wind speed. It was conventional in the past to assume that damages are a function of wind speed to either the second or third power. However, as we see below, this presumption is based on an energy–wind speed relationship, which is probably not applicable to the impact of wind and water on designed structures. Hence, we treat this power as an important parameter to be estimated.
We have gathered data on the storm characteristics and economic damages for 233 hurricanes that have made landfall in the United States between 1900 and 2008. These include all storms since 1933 and 30 storms before 1933.9 Figure 2 shows the trend in normalized hurricane damages since 1900. 2005 stands out from the crowd. 2005 was an economic outlier primarily because Katrina was by a wide margin the most costly hurricane in recent history. In turn, Katrina was so costly not because of its intensity but because it hit the most vulnerable high-value spot in the United States...
Here is Figure 2 from the paper:
Read The Economics of Hurricanes and Implications of Global Warming here.
One more Apple/Steve Jobs story to highlight. This one is about Apple's success in mass marketing during the Jobs era. Advertising Age has a collection of the most effective ad campaigns during the era. Like the Mac vs PC series. This example is an online version of the ads that John Hodgman and Justin Long made popular:
Check out The 10 Best Ads to Come out of Steve Jobs' Reign at Apple here.
Do women want Harleys? Well, some certainly do. And it seems even a lot of women who don't own a motorcycle really like the brand. We'll leave it up to you to figure out why that is. But we mention Harley-Davidson because it scored very highly among women in a recent survey. Forbes contributor Caleb Melby took a look at the survey results, and he highlights a few of the brands that do well among women: Barbie, CVS, Kotex...and Harley Davidson. Melby writes:
Harley Davidson, the traditionally male-associated brand, scored with women this past year – landing it a spot on the index for the first time at number 194. The iconic motorcycle brand staged a series of initiatives to celebrate the growing number of women enthusiasts, including women-only garage parties, a first-ever female “biker boot camp,” and the launch of “women riders month.” The company also gave women the chance to interact with fellow female riders on a new website, featuring tips and advice on how to turn their riding dream into reality.
Read What Brands Do Women Want? here.
Incidentally, Forbes has a lot of content focused on women in business right now. Click here for Forbes's list of The World's 100 Most Powerful Women.
We went on the hunt for some of Steve Jobs's top public moments, and we have selected two. First, this grainy old video from when he introduced the Macintosh personal computer to the world:
Steve Jobs demos Apple Macintosh, 1984 from Vincent on Vimeo.
And this is Jobs's speech at Stanford University's 2005 commencement. The message here is very personal. Jobs was speaking one year after he was diagnosed with pancreatic cancer. His closing line to the graduates: "stay hungry, stay foolish":
Steve Jobs stepped down as CEO of Apple yesterday. From his resignation letter:
I have always said if there ever came a day when I could no longer meet my duties and expectations as Apple’s CEO, I would be the first to let you know. Unfortunately, that day has come.I hereby resign as CEO of Apple. I would like to serve, if the Board sees fit, as Chairman of the Board, director and Apple employee.
While Jobs had been on medical leave, and it seems clear that his ongoing battle with pancreatic cancer and the effects of that battle (this was Jobs's third medical leave from Apple, according to the New York Times), is not going well. So our first thoughts are focused on the health of one of the most innovative leaders in American business. As for the future of Apple, the company now has a significant challenge: remaining an industry leader without its leading visionary. David Pogue presents three reasons to expect Apple will continue to be Apple:
The good news: First, Mr. Jobs isn’t leaving Apple. He’ll remain as chairman of the Apple board. Tim Cook, who’s been Apple’s director of operations for seven years, will take over as chief executive. (He’s been acting C.E.O. since January.)You can bet that as chairman, Mr. Jobs will still be the godfather. He’ll still be pulling plenty of strings, feeding his vision to his carefully built team, and weighing in on the company’s compass headings.Second, the tech world doesn’t turn on a dime. Apple’s pipeline is already stuffed with at least a couple of years’ worth of Jobs-directed products. In the short term, you won’t see any difference in Apple’s output of cool, popular inventions.Third, even if Mr. Jobs isn’t sitting at every design meeting, ripping apart or heartily embracing each idea presented to him, his tastes, methods and philosophies are deeply entrenched in the company’s blood.
But Pogue says that these reasons may not trump the potential damaging affect of Apple losing Jobs's "personality." Read Steve Jobs Reshaped Industries here.
The Planet Money team has done some excellent work this year in explaining some of the basics of money--especially in their What is Money? special for This American Life. Today David Kestenbaum and Jacob Goldstein take a look at a relatively new currency: Bitcoin. Bitcoin is a sort of online cash. Daniel Lyons gave a brief description in a June article for Newsweek:
What if people could use the Internet to create a new kind of money, one that didn’t involve governments and central banks and could be used anonymously, like cash? That is the idea behind Bitcoin, a virtual currency that has caught the attention of computer geeks, financial speculators, and drug dealers. For the first time, you can buy anything online without giving your credit-card number or bank-account information—leaving no trace at all.Hundreds of merchants accept Bitcoins for things like books, computers, and professional services. The currency trades on a handful of Bitcoin exchanges, where the price of a Bitcoin fluctuates based on demand. Not long ago a single Bitcoin sold for less than a dollar, but in recent months the price climbed to $8, then to $20, then above $30, before falling back to $18, the current level.
So is this a currency with a future? With that question in mind, Planet Money gave Bitcoin a try:
The cover of the legendary Hitchhiker's Guide to the Galaxy had two simple words: Don't Panic. Mike Periu of EcoFin Media urges small business owners to heed that advice. As bad as it may seem, panic is not a productive response. Instead, Perlu writes at American Express's Open Forum, "take a deep breath," and then follow these steps:
First, check your lines of credit
Second, slash your sales forecasts
Third, increase your DSO, A/R, and bad debt assumptions
Fourth, hold an employee meeting
Fifth, stay flexible
Read Should You Be Panicking Right Now? here.
We are seeing a rapid increase in the number of smartphone owners this year. eMarketer estimates nearly 50% growth of smartphone owners in the US over the course of 2011. Clearly phone makers and wireless carriers are happy about this growth. Marketers that have developed successful strategies for reaching consumers via mobile web apps should also be happy. Those that haven't need to get to work. Here is eMarketer's estimates for mobile internet usage in the US through 2015:
At first glance, this appears to us to be a conservative estimate, given the rapidly rate of smartphone ownership. Read Two in Five Mobile Owners Use Internet on the Go here.
Jobs have been harder to come by since the start of the recession. Well paying jobs have been even harder to come by. Adam Looney, director of the Hamilton Project at the Brookings Institution describes the situation for men in particular has quite bleak. Looney says that for men with jobs, wages have been stagnant, and are not much more than they were in the 1950s, (accounting for inflation). This has made education even more important, as well paying jobs for men with just a high school education are simply very rare in today's environment.
Looney discusses the situation in this @Brookings video:
The oldest members of the baby boomer generation are turning 65 this year--the official retirement age. Not exactly the best time for a lot of new retirees to start selling off equities. In a new Economic Letter, Zheng Liu and Mark Spiegel of the San Francisco Fed's Economic Research Department point out that "U.S. equity values have been closely related to demographic trends in the past half century." And that is cause for a little worry:
Since an individual’s financial needs and attitudes toward risk change over the life cycle, the aging of the baby boomers and the broader shift of age distribution in the population should have implications for capital markets (Abel 2001, 2003; Brooks 2002). Indeed, some studies attribute the sustained asset market booms in the 1980s and 1990s to the fact that baby boomers were entering their middle ages, the prime period for accumulating financial assets (Bakshi and Chen 1994).However, several factors may mitigate the effects of this demographic shift. First, demographic trends are predictable and rational agents should anticipate the impact of these changes on asset demand. Consequently, current asset prices should reflect the anticipated effects of demographic changes. In addition, retired individuals may continue to hold equities to leave to their heirs and as a source of wealth to finance consumption in case they live longer than expected (e.g., Poterba 2001).Foreign demand for U.S. equities might also reduce the downward pressure on asset prices. However, the effect is probably limited for two reasons. First, other developed nations have populations that are aging even more rapidly than the U.S. population (Krueger and Ludwig, 2007). Second, there is substantial evidence of home bias in equity holdings. Individual investors typically hold disproportionate shares of domestic assets in their portfolios. For example, in 2009, the foreign equity holdings of U.S. investors were only 27.2% of the share of foreign equities in global market capitalization. While the low level of international equity diversification is still not well understood (Obstfeld and Rogoff 2001), it suggests that foreign demand for U.S. equities is unlikely to offset price declines resulting from a sell-off by U.S. nationals.
Read Boomer Retirement: Headwinds for U.S. Equity Markets? here.
So the economy is still struggling, and many consumers are reluctant to spend. There is plenty for retailers to be down about. But Marshall Fisher says in some ways this is a great time to be in retail. For one, it is quite easy to figure out how to match supply to demand. Fisher is a professor of management at the Wharton School of Business, and he and Harvard Business School professor Ananth Raman recently made the case for more efficient use of data in The New Science of Retailing: How Analytics Are Transforming the Supply Chain and Improving Performance.
Fisher discussed the book recently in this short interview for Knowledge@Wharton:
There is still considerable uncertainty in Libya, but the BBC is reporting that rebels have taken control of much of central Tripoli. If we see an end to the fighting in Libya, we will soon be able to take a look at the potential economic impact of an end of four decades of Gaddafi's rule. At The Big Picture, David Kotok lays out what he thinks is likely to happen "if and when the Qaddafis lose and leave":
In short order, Libyan oil production will ramp up. As it does, oil prices in world markets will fall and oil futures markets will reflect the expected increase in production of oil from Libya. The key prices to watch are those trading in Europe, like Brent. US oil prices (WTI) are no longer the leading indicator of world prices intersecting with world supply/demand. Excess inventory at Cushing, OK is complicating the pricing structure.We expect oil prices to fall when highly desirable, sweet Libyan crude production is fully resumed and enters the pipeline. Maybe, they are going to fall by a lot. This will come as a much-needed boost to the US economy and to others in the world.Remember: the oil price acts like a sales tax on consumption. To clarify this relationship we convert crude oil prices to gasoline prices and then estimate what a change in gas price will mean for the American consumer. Roughly, a penny drop in the gas price per gallon gives Americans 1.4 billion more dollars a year to spend on other than gasoline. That is a huge stimulant to the economy. The ratio is different in Europe because the gas taxes are so much higher there. Nevertheless, it is still significant.
Read Qaddafi, Bernanke & Stock Markets here.
Whether on Facebook, Google+, or the original social media: word of mouth, odds are pretty good a friend told you about Warren Buffett's Stop Coddling the Super-Rich column in the New York Times this week. That is if you didn't read it in the Times first yourself. It remains one of the NYT website's most emailed articles. Maybe you think Mr. Buffet has gone mad. Maybe you think he said what needed to be said, and was just the right person to say it. Maybe you take issues with his logic. Whatever the case, it is worth following up the piece by watching Buffet explain himself, on Charlie Rose:
This chart from Marketing Sherpa reveals how marketers from nearly one thousand companies allocate their B2B marketing budgets:
Note that this does not necessarily mean that marketers place double the emphasis on Web design as they do with social media. Marketing Sherpa's Jen Doyle points out that the first two items on the list--Website design and tradeshows--require "significant expenses" to do right.
Read Doyle's analysis of the B2B marketing budget survey here.
As Andrew Ross Sorkin reminds us, Google has been denying suggestions that it wants to get into the mobile phone business for years now. So we might want to be a bit skeptical when Google tells us that its $12.5 billion deal to buy Motorola Mobility is all about acquiring patents. On his DealBook column for the New York Times, Sorkin writes
...it is undeniable that Google’s new chief executive, Larry Page, has long had a hankering for the mobile phone business, and this acquisition may be the culmination of his ambitions. Mr. Page, after all, was the executive who personally pursued the acquisition of Android and has been its biggest proponent. And he pressed Google to compete in federal auctions for wireless spectrum in recent years at a time when others were more hesitant — and in some cases was willing to overpay for spectrum.“He was the guy behind Android,” Mr. Levy said in an interview. “Larry is a big ambitious guy; he will roll big dice.”If there’s any question about Google’s motivation to own a handset maker rather than just a portfolio of patents, consider this: InterDigital, a licensing company that owns some 8,000 wireless patents and has another 10,000 patent applications being processed, has been up for auction. Many industry insiders were sure that if Google were serious about acquiring a portfolio of patents, InterDigital would be its target. The company’s market value is only about $3 billion and it doesn’t come with all the baggage of Motorola’s handset business.
Read Is Google Turning Into a Mobile Phone Company? No, It Says here.
Some business cultures are relationship based. Others are transaction based. When you are leading a multinational company, you can't assume that one way of business will work everywhere you have an office. So says Fred Hassan, who was Chairman and CEO of Schering-Plough and serves on the board of major multinational corporations. In this short interview, Hassan outlines some key strategies in cross cultural management:
At News N Economics, Rebecca Wilder shares this chart to show that any global economic recovery that was underway earlier this year has slowed down:
The chart illustrates the growth of import demand for manufactured goods from the US (12.8% of world import demand in 2011) and China (9.7% of world import demand in 2011) on a 3-month over 3-month annualized and seasonally adjusted basis. Spanning April through June 2011 compared to January through March 2011, US imports for manufactured goods slowed to a 4.9% annualized clip, while Chinese manufacturing imports contracted at a 22.9% annualized pace. US import demand growth peaked at 36.9% in March 2011 (again, on the same 3M/3M SAAR basis), while Chinese import demand growth peaked a bit earlier at 108.2% in January 2011.
So could this be the result of the Japanese earthquake and tsunami? Wilder does not think so. Read Global slowdown underway - it's more than the Japanese supply chain disruptions here.
The good news for those looking at residential construction as a key economic indicator: home builders are a shade more confident in the market for new homes than they were last month. The bad news: builders were pretty pessimistic last month. The overall rating on the National Association of Home Builders confidence index remains at 15--what the NAHB calls a "low level." From the release:
Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as "good," "fair" or "poor." The survey also asks builders to rate traffic of prospective buyers as "high to very high," "average" or "low to very low." Scores from each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.Two out of three of the HMI's component indexes posted marginal gains in August. The component gauging current sales conditions gained one point to 16 – its highest level since March of this year – and the component gauging traffic of prospect buyers rose one point to 13 following two consecutive months at 12. However, the component gauging sales expectations for the next six months declined two points to 19, partially offsetting a six-point gain from the last month's revised number.
Read the full press release here.