Category Archives: Business and Economy

Recovery best in wealthiest zip codes

Posted on by

A new analysis looks at the recovery of the US economy by zip codes and finds that the wealthiest areas have rebounded the most:

The report found that for the bottom fifth of U.S. zip codes—which the researchers term “distressed”—the medium income only reaches 68 percent of the state-wide median and 27 percent of adults live in poverty. These communities saw employment decline by 6.7 percent during the recovery. Not the recession—the recovery. In the nation’s median and prosperous zip codes, the situation is much brighter. Employment in median zip codes rose by 2.3 percent, while in prosperous communities—the top fifth of U.S. zip codes—employment rose by an incredible 17.4 percent.

EIG’s analysis supports the notion that in the U.S. economic gains continue to be captured by those at the top. “The data outlines two different Americas from an economic standpoint,” said Steve Glickman, the co-founder and executive director of EIG. “The communities taking advantage of the knowledge economy are booming, but the areas where the industrial economy has traditionally held firmest have really suffered. These trends predate the Great Recession, but the recovery has continued to accelerate the fortunes of the most-prosperous areas and the downturn of the most distressed.”

Another piece of evidence to add to plenty of existing material: where people live has a large effect on their lives. And if the United States has persistent residential segregation – particularly by race but also by social class – then these differences by geography will continue to be pertinent.

CNBC: owning a home may be “the new luxury item”

Posted on by

CNBC suggests the dream of owning a home is becoming less attainable:

Almost half of those people who don’t own a home said their financial situation is standing in the way, according to a report by Bankrate.com released Tuesday. Additionally, 29 percent said they can’t afford a down payment and 16 percent said their credit isn’t good enough to qualify for a mortgage…

“A lot of people could be feeling traumatized by what happened to the housing market and are counting themselves out,” she said…

These days, first-time homebuyers, who are primarily in their 30s, are spending a bigger chunk of their incomes to buy their first house — coughing up about 2.6 times their annual pay; in the 1970s, first-time homebuyers purchased homes that cost only about 1.7 times their yearly salary, according to Zillow.

Tighter lending standards and hefty down payments have further deterred some buyers.

Economic conditions and reasoning can go a long ways to determining who can access parts of the American Dream and when they may do so in life. This reminds me of other analyses I’ve seen in recent years suggesting the delayed age for marriage as well as a decline in marriage is also tied to economics: people want to be more financially secure before they marry. Similarly, buying a home is now being put off – not because Americans don’t want it but because they just aren’t set and the conditions have imposed particular restrictions.

Using smartphones to collect important economic data

Posted on by

Virginia Postrel describes a new app used in a number of countries to gather economic data on the ground:

Founded in 2012, the San Francisco-based startup Premise began by looking for a way to supplement official price indices with a quick-turnaround measure of inflation and relative currency values. It needed “a scalable, cost-effective way to collect a lot of price data,” chief executive David Soloff said in an interview. The answer was an Android app and more than 30,000 smart-phone-wielding contractors in 32 countries.

The contractors, who are paid by the usable photo and average about $100 a month, take pictures aimed at answering specific economic questions: How do the prices in government-run stores compare to those in private shops? Which brands of cigarette packages in which locations carry the required tax stamp? How many houses are hooked into power lines? What’s happening to food prices? Whatever the question, the data needed to answer it must be something a camera can capture…

The result is a collection of price indices updated much more frequently and with less time lag — although also fewer indicative items — than monthly government statistics. For Bloomberg terminal subscribers, Premise tracks food and beverage prices in the U.S., China, India, Brazil and Argentina, using indices mirroring government statistics. It gets new information daily; Bloomberg publishes new data twice a week. Premise tracks a similar index in Nigeria for Standard Chartered bank, which has made the aggregate data public. (Premise clients can drill down to see differences across products, types of retailers, or regions.) While more volatile than official statistics, the figures generally anticipate them, serving as an early-warning system for economic trends…

Premise has government clients, and it carefully positions its work as a complement to official statistics, as well as to the academic Billion Prices Project, which scrapes massive amounts of price data from online sources but can’t say what cooking oil sells for in a corner shop. Make no mistake, however: Its methods also provide valuable competition to the official data. The point, after all, is to find out what’s actually happening, not what government reports will say in a few weeks.

This is an innovative way to get data more quickly. It would be interesting to see how reliable this data is. Now it remains to be seen how markets, governments, and others will use more up-to-date information.

More broadly, smartphones could be used to collect all sorts of data. See previous posts on using the microphone and the use of additional apps such as Twitter and Waze.

More Chicago suburbs hiring staff

Posted on by

Perhaps this is another sign of a more positive economy (and more tax dollars): some suburban governments are hiring again.

According to a Daily Herald analysis of 61 suburbs, 31 of them added the equivalent of 139 full-time jobs during the fiscal year that ended April 30, 2015, for most suburbs and Dec. 31, 2014, for others.

But 16 suburbs eliminated the equivalent of 46 full-time jobs and 14 towns held the line on the head count from the previous year, the analysis of the suburbs’ most recent audits show…

Still, the vast majority of towns are operating with much smaller staffs than just a few years ago. At its peak seven years ago, employment by the 61 towns was nearly 10 percent higher with the equivalent of 13,251 full-time jobs, compared to a low point of 11,977 full-time equivalent positions two years ago, according to the analysis…

According to the analysis of the audits, the 61 towns in suburban Cook, DuPage, Kane, Lake, McHenry and Will counties first saw significant job reductions in 2010, when they reduced their workforces by 3.8 percent.

While this analysis is interesting, more background might be helpful. Suburban governments today have to balance efficiency (meaning keeping tax increases small or cutting the budget) and quality of life (the suburban life that many of the residents who moved to the community want to continue and enhance). This is not easy to do; residents tend to want more for their money and many might be convinced that government can always cut waste (or at least cut the money they don’t personally care about or benefit from). But, at some point, employees are needed.

This article suggests that a number of the new hires in suburban communities are part-time employees to limit the benefits costs. I’d be interested to see data on whether having more part-time employees in local government leads to better service and community outcomes.

What is a “digital sociology firm”?

Posted on by

This news story reports the sale of a “digital sociology firm” named mPathDiscovery:

Richard Neal, CIO of mPathDiscovery, described TBX as a group of investors from different industries that came together in April. The transaction will provide mPathDiscovery with access to TBX’s capital, experience and business connections.

Neal said mPathDiscovery has two employees — himself and President David Goode — and uses an array of contract employees. The company will remain in Kansas City and soon will begin looking for its first office space.

One result of the transaction has been the purchase of the “digitalsociology.com” web domain. Neal said the name had been owned by a cybersquatter who offered to sell it for a profit.

Neal said digital sociology helps companies see who is saying what, when and where about them online. The process can help companies see how marketing messages are being received by the public and analyze attitudes about competitors.

Two things strike me:

  1. So this is beyond web analytics where companies try to figure out who is visiting their site. (That industry is crowded and there are a number of ways to measure engagement with websites.) This goes to the next level and examines how companies/pages are perceived. I imagine there are plenty of people already doing this – I’ve heard plenty of commercials for site that want to protect the reputation of individuals – so what sets this company apart? This leads to the second point…
  2. What exactly makes this “digital sociology”? As a sociologist, I’m not sure what exactly this is getting at. Online society? Studying online interactions with companies? The use of the term sociology is meant to imply a more rigorous kind of analysis? In the end, is the term sociology attractive to companies that want these services?

Recession decimated construction workforce

Posted on by

Here is another sign the construction industry has not fully recovered from the economic crisis: the number of construction workers is still low.

The new-construction housing market is slowly recovering from the turmoil of the recessionary years, but builders haven’t been able to pick up where they left off. More than 2 million skilled labor jobs were lost to the economy, and many of those workers are gone forever…

Nearly 30 percent of the construction workforce disappeared during the Great Recession, reports FMI Corp., a Raleigh, N.C., provider of management consulting, research and investment banking to the construction industry. Among its ranks are plumbers, electricians, roofers, bricklayers and carpenters.

The shortage seems to be worsening. According to FMI’s 2015 “Talent Development in the Construction Industry” survey, 86 percent of respondents reported shortages of skilled labor. That’s up from the 2013 survey, in which 53 percent of respondents reported such shortages.

It may take a long time before the housing industry approaches where it was in the early to mid-2000s. In the meantime, those workers have to do something and/or go elsewhere. Even with all the political talk about helping workers, I don’t remember anyone suggesting plans for helping construction workers in the same way that politicians have discussed manufacturing workers.

Additionally, I wonder what it takes to ramp up with a lot of new workers if the housing industry starts booming again. Businesses today tend to shed workers when times are bad, add when the economy picks up, and disregard training and upstart costs. However, it is not always simple to just hire large numbers of laborers.

Calculator suggests developers can profit and build affordable housing

Posted on by

The Inclusionary Calculator suggests developers can typically make 10% profits and build 12-15% affordable housing at the same time:

It can feel like a mantra among private developers: Requirements by municipal governments to include affordable units in market-rate housing developments make those developments unprofitable, even unfeasible. It may be one of the most frequently repeated claims about housing in general. Can it possibly be right?

The Inclusionary Calculator is an effort to settle this question—and to prove that one major assumption about affordable housing is a myth. Developed by the Cornerstone Partnership, the tool allows users to simulate the balance sheets for market-rate developments for any number of scenarios. It accounts for factors such as costs of production, financing, affordability set-asides, and parking requirements…

“In almost every case, we could target a 10 percent profit for the developer and still leave at least 12 to 15 percent of the units to be affordable,” McCarthy says…

So, not only does inclusionary zoning not raise the costs of market-rate construction beyond reason, it also does not raise the price of market-rate units for homeowners. It eats away at developer profits. That makes affordable housing a moral question, not a feasibility issue: Do leaders dare to challenge developers on their profit margins?

The Inclusionary Calculator is available here after watching a training video and registering.

This poses a fascinating question in the housing industry (as well as for other sectors of the American economy): just how much profit is enough? Very few people outside the housing industry would have any idea how much money developers and others make on the construction and sale of housing units. Perhaps the process is deliberately opaque or perhaps it is simply complicated. But, I wonder how the public in many communities would respond if they knew that 10% profits were generally possible while also providing affordable housing.

Of course, this is just one hurdle in the construction of affordable housing. Not allowing developers to claim that they can’t make money would help the process but in many communities, neighbors would still complain. A NIMBY response often takes over; who lives in affordable housing? What does this signal to outsiders? Won’t this lower our property values?

Naperville’s role in the founding of Coors

Posted on by

After seeing numerous Coors Light commercials during football, I was reminded of Naperville’s part in the formation of Coors:

The J&N Stenger Brewery sat in what is now downtown Naperville between the late 1840s and early 1890s, slaking thirsts as far away as Chicago, Elgin and Ottawa. It was founded by Peter Stenger Sr. and was later run by sons John and Nicholas. John took over after Nicholas’ death in 1867.

In 1869, Stenger hired 22-year-old Bavarian-born Adolph Coors–yep, that Coors–as a foreman. He stuck around for about four years before taking off for Golden, Colo., where in 1873 he opened The Golden Brewery, forerunner of Coors. No one is sure exactly why Coors left Naperville, although some reasons have been bandied about.

According to the book “Coors: A Rocky Mountain Legend,” Stenger hoped that Coors would marry into the family.

“Stenger had three daughters,” said Brian Ogg, assistant curator of the Naperville Heritage Society. “And I think he did want to marry the brewmaster to one to his daughters. But it didn’t take, for whatever reason, and Coors left town.”

Both parties – Naperville and Coors – went on to do big things. Coors founded a company that is now part of the Molson Coors Brewing Company and has annual sales of $5 billion. Naperville had a number of industries in and near downtown in its early history including this brewery, Kroehler Furniture, and several quarry operations (including what later became Centennial Beach). Today, Naperville is known less for manufacturing and more for a large and wealthy population alongside high-tech and white-collar jobs in major corporations along I-88.

Yet, it is interesting to think about what might have happened if that relationship had worked out. Could Naperville today be home to a brewing empire? Would the city leaders then have made different choices about annexing land and building subdivisions after World War II? Would having such a business in the city exacerbated the downtown alcohol problems of recent years?

“What if the greatest threat to capitalism…is simply lack of enthusiasm and activity?”

Posted on by

In a long excerpt from The Happiness Industry, William Davies explores a real threat to capitalism: a lack of happiness.

What if the greatest threat to capitalism, at least in the liberal West, is simply lack of enthusiasm and activity? What if, rather than inciting violence or explicit refusal, contemporary capitalism is just met with a yawn? From a political point of view, this would be somewhat disappointing. Yet it is no less of an obstacle for the longer-term viability of capitalism. Without a certain level of commitment on the part of employees, businesses run into some very tangible problems, which soon show up in their profits.

This fear has gripped the imaginations of managers and policymakers in recent years, and not without reason. Various studies of employee engagement have highlighted the economic costs of allowing workers to become mentally withdrawn from their jobs. Gallup conducts frequent and wide-ranging studies in this area and has found that only 13 per cent of the global workforce is properly “engaged,” while around 20 percent of employees in North America and Europe are “actively disengaged.” They estimate that active disengagement costs the U.S. economy as much as $550 billion a year. Disengagement is believed to manifest itself in absenteeism, sickness and—sometimes more problematic—presenteeism, in which employees come into the office purely to be physically present. A Canadian study suggests over a quarter of workplace absence is due to general burnout, rather than sickness.

Perhaps people should turn their attention away from the NSA and toward their employers:

Rather than the rise of alternative corporate forms, we are now witnessing the discreet return of the scientific management style, only now with even greater scientific scrutiny of bodies, movement, and performance. The front line in worker performance evaluation has shifted into bodily-monitoring devices, heart-rate monitoring, and sharing of real-time health data, for analysis of stress risks. Strange to say, the notion of what represents a good worker has gone full circle since the 1870s, from the origins of ergonomic fatigue studies, through psychology, psychosomatic medicine and back to the body once more. Perhaps the managerial cult of optimization just needs something tangible to cling onto.

Studying happiness (and related concepts like life satisfaction and well-being) is its own academic subfield – see earlier posts here and here. And governments are very interested in well-being as well with measures like Gross National Happiness from Bhutan and regular reports about the happiest countries on earth.

All of this reminds me of sociologist Arlie Hochschild’s research on “emotion work” in relationships to keep them going and “emotion labor” in jobs that require a consistent cheerfulness or happiness as part of the routine. This would include a lot of service and retail jobs where employees regularly interact with customers and need to present an upbeat image. This is not easy to do and can be quite draining.

And what might Marx say about this – capitalism goes out not with a revolution but rather with indifference and apathy?

Illinois tax breaks often fail to add jobs or keep companies

Posted on by

The Chicago Tribune finds that tax breaks from the state of Illinois often do not work as intended:

In the first comprehensive analysis of 783 EDGE agreements, the Chicago Tribune found that two of every three businesses that completed the incentive program failed to maintain the number of employees they agreed to retain or hire.

State officials can’t say how many jobs have been created through the job program; nor can they say how many jobs EDGE companies have eliminated. The Tribune, however, found that 79 current or former EDGE recipients have reported eliminating 23,369 jobs through layoffs and closures since entering the program.

Officials have long pitched tax breaks as a competitive tool that bolsters the state’s fragile economy, and the program has seen explosive growth as Illinois battles with other states to attract and retain businesses. Leaders of the EDGE program say it has been a lifeline for dozens of companies, helping to create new jobs and improve workplaces.

But the Tribune’s analysis suggests that tax credits often do little to help companies expand or create sustainable jobs. A pattern of deals emerges in which businesses lobbied for maximum rewards and minimum requirements — and the state said yes.

Tax breaks may help politicians claim they are bringing in new jobs and money but they don’t often benefit taxpayers as much as the political and business leaders suggest. See earlier posts here and here. And perhaps the biggest issue is that once come communities or state start offering tax breaks, everyone feels like they have to play the game as well just to get a hearing from major corporations. It can then become a race to the bottom: as governments offer more and more breaks, companies benefit more and more yet the local area gets less and less.

If the Tribune‘s analysis is correct, perhaps a better route for the state would be to improve business conditions overall rather than resorting to tax breaks to simply survive.