Category Archives: Business and Economy

Trying to make the American “feeling economy” measurable and efficient

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Sociologist Allison Pugh suggests we are heading toward a “feeling economy” with measurement:

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Erin is one of millions, from teachers to therapists to managers to hairdressers, whose work relies on relationship. By some accounts, the U.S. is moving from a “thinking economy” to a “feeling economy,” as many deploy their emotional antennae to bear witness and reflect back what they understand so that clients, patients, and students feel seen. I’ve come to call this work “connective labor,” and the connections it forges matter. It can be profoundly meaningful for the people involved, and it has demonstrable effects: We know that doctor–patient relationships, for instance, are more effective than a daily aspirin to ward off heart attacks.

But this work is increasingly being subjected to new systems that try to render it more efficient, measurable, and reproducible. At best, firms implement these systems assuming that such interventions will not get in the way of workers and clients connecting. At worst, they ignore or dismiss those connections altogether. Even these complex interpersonal jobs are facing efforts to gather information and assessment data and to introduce technology. Moneyball has come for connective labor…

Connective labor is increasingly being subjected to new systems that try to make it more predictable, measurable, efficient—and reproducible. If we continue to prioritize efficiency over relationship, we degrade jobs that have the potential to forge profound meaning between people and, along the way, make them more susceptible to automation and A.I., creating a new kind of haves and have-nots: those divided by access to other people’s attention.

To quantify relationships could be difficult in itself. It requires attaching measurements to human connections. Some of these features are easier to capture than others. In today’s world, if a conversation or interaction or relationship happens without “proof,” is it real? This proof could come in many forms. A social media post. A digital picture taken. Activity recorded by a smart watch. An activity log written by hand or captured by a computer.

Then to scale relationships is another matter. A one to one connection multiplied dozens of time throughout a day or hundreds or thousands of times across a longer span presents other difficulties. How many relationships can one have? How much time should each interaction take? Are there regular metrics to meet? What if the relationship or interaction goes a less predictable direction, particularly when it might require more time and care?

Given what we can measure and track now and the scale of society today, the urge to measure relationships will likely continue. Whether people and employees push back more strongly against the quest to quantify and be efficient remains to be seen.

The International Car Wash Association, the American Beefalo Association, and the purpose of business associations

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I recently drove by the headquarters of the International Car Wash Association. I did not know this group existed and I wanted to learn more. According to their website, here is what this group does:

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International Carwash Association (ICA) is the nonprofit organization representing the car wash industry in the United States, and uniting it around the world. Its members own, operate or support nearly every car wash business in dozens of countries. ICA offers the world’s largest car wash events and exhibitions, the leading online manager training program (LEAD™), news and inspiration through CAR WASH Magazine™ and a variety of industry research products (Pulse™).

Why did this catch my eye? In graduate school, I made a very small contribution to a research project by sociologist Lyn Spillman that involved me going through a multi-volume set of American business associations and coding basic information from the entries. I read a lot of entries about organizations that I never knew existed. Only the name of one group stuck with me from that work: the American Beefalo Association. From their website, here is more information about beefalo and the group:

Beefalo was developed in the early 1970’s by a Californian producer who successfully interbreed American Bison with domesticated cattle. After nearly 150 years of selective breeding, the perfect balance was found in 3/8th’s Bison and 5/8th’s domestic cattle. This new cross had high fertility success and a superior balance of traits for modern-day uses and needs. With this cross, the hardiness of the bison was retained but was melded the easy temperament, superior carcass structure and meat quality of domesticated cattle. In 1975 the American Beefalo Association was formed as the breeds popularity sky-rocketed. By 1985, USDA meat testing had concluded substantial differences in Beefalo’s nutrition profile when compared with traditional beef warranting beefalo it’s own meat label and regulations. Today beefalo is experiencing a resurgence in the health food market as consumers are actively becoming more conscious about where their foods come from, invested in animal welfare and engaged in sustainability efforts.

Spillman went on to write a book – Solidarity in Strategy: Making Business Meaningful in American Trade Associations – explaining how these organizations bring meaning to business activity. Spillman writes, “Associations often dwell on shared identity, admire technical excellence, highlight contributions to the group, and express occupational camaraderie, with little attention to strategic economic purposes.” (13) In other words, the International Car Wash Association and the American Beefalo Association might be assumed to be about generating revenues but they may be more about bringing people across an industry together and creating solidarity.

Naperville as “the second largest economic engine (in Illinois)”

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The last paragraph of a story about NCTV in Naperville hints at the economic activity in the suburb:

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Spencer said she views additional city funding for NCTV17 as an investment into what the station does for the community.

“We think we’re more important and more relevant than ever to Naperville as the fourth largest city and the second largest economic engine (in Illinois),” she said. “We think we provide a really big service. … With a little support from our friends at the city, (we think) we can weather this storm and arrive at port bigger and better than ever.”

What features of Naperville would mark it as such a large economic engine? Its population puts it in the top four communities in Illinois, following Chicago, Aurora, and Joliet. But population alone does not tell the full story. Some more features of Naperville

–Lots of human capital and economic resources among residents: “The region has a civilian labor force of 79,726 with a participation rate of 69.2%. Of individuals 25 to 64 in the Naperville city, IL, 74.0% have a bachelor’s degree or higher which compares with 34.3% in the nation. The median household income in the Naperville city, IL is $127,648 and the median house value is $424,800.”

–Nearly 80,000 jobs in the suburb.

–Certain job sectors well represented: “The largest sector in the Naperville city, IL is Health Care and Social Assistance, employing 12,989 workers. The next largest sectors in the region are Professional, Scientific, and Technical Services (12,897 workers) and Retail Trade (8,375). High location quotients (LQs) indicate sectors in which a region has high concentrations of employment compared to the national average. The sectors with the largest LQs in the region are Professional, Scientific, and Technical Services (LQ = 2.22), Utilities (2.08), and Management of Companies and Enterprises (2.05).”

–Lots of office space available: “The office market in Naperville, IL incorporates 10,451,396 square feet of office space across 56 buildings that are at least 25,000 square feet in size.”

-A vibrant downtown.

–Lots of awards from different outlets.

–Billions of dollars each year in retail sales.

-Multiple corporate headquarters in the city.

-Part of the I-88 corporate corridor, access to multiple major highways, and close to two major airports and Chicago.

As I put together this list, Naperville indeed sounds like an edge city.

In a state dominated by Chicago, it is noteworthy to be second in line as an economic engine. I wonder what other Illinois communities are trumpeting their economic prowess and how many of them are suburbs.

The symbiotic relationship between online shopping and brick and mortar stores

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Can online shopping and brick and mortar stores benefit each other?

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“There was a narrative that as online grew, stores would become less relevant. But it hasn’t worked out that way,” said Neil Saunders, managing director at GlobalData. “In many ways, the store is still the heart or hub of retail.”

It is another example of how online-only retail has its limits, and why physical stores are making a comeback. After years of overbuilding that lead to a sharp contraction, retailers are on track to open more stores than they close in 2024 for the third consecutive year, according to advisory and research firm Coresight Research.

Many retailers have found that it is too expensive and difficult to attract and retain customers without physical stores. And using stores as pickup and drop-off points helps lower the labor, packaging and shipping costs involved in online orders…

Kohl’s now fulfills more than a third of its online orders in stores, Walmart more than half, and Target nearly all its sales from its network of roughly 2,000 locations, according to the companies.

Americans like shopping. This story makes me think that shopping can even be more pervasive. You can be shopping online and in person. You can shop from anywhere and everywhere. It can happen in the online and offline worlds. It is a self-reinforcing system.

Oh yeah, there is still that pesky problem of people not feeling financially comfortable. Is the all-encompassing shopping realm able to overcome this? Is it just a matter of finding good deals or working with some credit or debt to make purchases?

And if shopping is everywhere, there will likely be more need for companies to differentiate their products and services. What will make someone click on that email or that Instagram ad? What will drive people to that location as opposed to making the purchase online?

An American right to a good deal?

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Amid inflation and high prices, the Chicago Tribune editorial board ended an editorial on prices at Starbucks this way:

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It’s no sin to offer good value. Americans are practical people. We’re betting most of those who duck into a Starbucks would be pleased to see some special deals on the menu.

What American does not like a good deal? At the same time, Americans tend to say that the market sets prices. So what happens if prices seem unfair or unreasonable?

Two recent phenomena highlight this tension:

  1. Higher levels of inflation coupled with higher set prices. Is this fair? Sure, Americans keep buying during this time but they are spending more money on goods that used to be cheaper.
  2. High housing costs. Americans want to benefit as homeowners from rising property values but do not like paying high housing prices.

At what point do Americans deserve a good deal? Or when should non-market forces jump in to change conditions? This could depend on the particular context, leaders and influential actors, and what the public wants. Regarding the second example above, Americans have worked over decades to back up mortgages so that more people could pursue homeownership while not providing much public housing.

Even as Americans do not have a right to good deals, they tend to have at least some companies willing to offer goods or services at prices lower than others. This does not always occur and there are situations – such as with monopolies – where the government will step in. Without intervention, individual consumers are left trying to find a bargain or going without in a country devoted to consumerism.

Suburbs buying vacant malls to try to simplify redevelopment process

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Two Chicago suburbs are purchasing mostly empty malls with the goal of redeveloping the properties:

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West Dundee and Bloomingdale officials have similar visions for the mall properties in their towns.

West Dundee sees a mixed-use development with residential, office, retail and entertainment. Bloomingdale’s consultants have drawn up conceptual plans showing residential, commercial and recreational development in place of the mall’s former retail buildings and parking lots.

Typically, villages stay out of the real estate business and leave redevelopment of retail centers to developers. But for West Dundee and Bloomingdale, taking ownership of their malls and clearing some obstacles, such as multiple property owners or restrictive covenants, were deemed essential for future redevelopment.

“Almost uniformly, every developer with whom we spoke stated that the site has too many complications ­— too many owners, too many covenants, too many uncertainties,” Nelson said last year. “The village’s aim is to bring simplicity to the process so reliable developers with established track records will be interested in partnering to reformat the area. Without municipal intervention, that simply won’t happen.”

Two thoughts come to mind:

  1. It is not too surprising that suburban communities want to guide the redevelopment. Suburban residents and suburban community leaders are often picky about what they might want to replace a shopping mall. By purchasing the property, the suburb can choose the developer and the zoning while also setting a vision.
  2. I wonder if this is an instance where a large property owner – the owners of these malls – can afford to sit on these properties for a while to see if there will be a bigger financial return later. I remember reading in the past about parking lots in downtown areas; they are not flashing and they are not the preferred land use but the company who owns that lot can wait until there is significant demand for the property and then make a lot of money on selling the parking lot. Compared to these suburbs, the property owners may be less interested in moving quickly on a redevelopment plan. (This could also apply to recent conversations about suburban office parks and downtown office buildings: even vacant buildings might not need to be sold or redeveloped if an owner can afford to hang on to them.)

US urban office space vacancies related to earlier office building booms

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With the vacancy rate for office space in the major US cities almost at 20%, is now safe to conclude too much space was constructed in the first place?

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America’s offices are emptier than at any point in at least four decades, reflecting years of overbuilding and shifting work habits that were accelerated by the pandemic.

A staggering 19.6% of office space in major U.S. cities wasn’t leased as of the fourth quarter, according to Moody’s Analytics, up from 18.8% a year earlier. That is slightly above the previous records of 19.3% set in 1986 and 1991 and the highest number since at least 1979, which is as far back as Moody’s data go…

That glut weighs on the office market to this day and helps explain why vacancies are far higher in the U.S. than in Europe or Asia. Many office parks built in the 1980s and earlier struggle to find tenants as companies cut back on space or leave for more modern buildings.

“The bulk of the vacant space are buildings that were built in the 1950s, ’60s, ’70s and ’80s,” said Mary Ann Tighe, chief executive of the New York tri-state region at real-estate brokerage CBRE.

And just as in the early ’90s, it is the overbuilt South that is hit hardest. Today, the three major U.S. cities with the country’s highest office-vacancy rates are Houston, Dallas and Austin, Texas, according to Moody’s. In 1991, Palm Beach and Fort Lauderdale in Florida and San Antonio held those positions.

This sounds like a cyclical market: during financial downturns, fewer companies want office space and vacancies rise. During economic success, more companies expand and make use of the space. When more space is built during the good times, that same space is not necessarily needed later.

Does that mean that COVID-19 was only a partial contributor to office vacancies? Was a reckoning going to come for urban office space even without a global pandemic? Or might office space be back in demand again soon as economic conditions change?

I can see why new office space is desirable to fund and build. Whether it should be built, given the cycles discussed above, is another story. And if office space cannot be easily converted to other uses, how much more is really needed in major cities?

Filling suburban Bed Bath & Beyond locations

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When Bed Bath & Beyond closed all of its stores, it left numerous suburban stores vacant. Many of the locations are empty no longer:

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Burlington, Michaels, Barnes & Noble, Ollie’s Bargain Outlet, Macy’s, HomeGoods and other chains have replaced old Bed Bath & Beyond stores. Indoor pickleball courts, trampoline parks and bowling alleys have also filled up the vacancies…

The majority of Bed Bath & Beyond’s stores are in the suburbs of mid-size and large cities, and are under 50,000 square feet. These are appealing qualities for retailers as some companies favor smaller spaces, instead of mega stores, to save on rent and labor and as shoppers buy more online. Macy’s, for example, is opening its smaller “Market by Macy’s” versions at old Bed Bath & Beyond stores…

Bed Bath & Beyond spaces have been grabbed up swiftly at rents of up to 50% what Bed Bath & Beyond was paying, according to commercial real estate investment firm CBRE. Landlords are taking advantage of the vacancies, with some dividing former Bed Bath spaces into smaller sizes, said Brandon Isner, CBRE’s head of retail research for the Americas.

“There is little to no concern that any of the spaces will go vacant for long,” he said…

It is interesting to hear that some suburban retail real estate is in demand. This would contrast with the negative news about shopping malls or about some big box and strip mall properties. Perhaps it is the particular size of these stores – a medium size that could appeal to a lot of other retailers – or perhaps it is the low price – which cuts the cost of doing business.

I hope there are some large-scale studies going on regarding the transformation of retail spaces in the suburbs. Imagine taking pictures at 5 year intervals in major shopping districts or along major roadways. At the least, it could detail the changes in buildings and what retailers are present. But, it could also catalogue major changes to structures, what kinds of retailers are present, and how popular these sites are. Just as the shopping mall defined life for suburban teenagers for at least a decade, the major shopping centers and strip malls in suburbs defined life for millions over multiple decades. Plenty of people visited Bed Bath & Beyond and many more could visit these structures – with whatever is in them- for years to come.

“Stuck between the hot housing market and the hot job market”

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Housing values are up and there are jobs to be had – but many of the jobs to work are in places where housing is expensive. What gives?

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All over the country, employers like McDonnell are finding themselves stuck between the hot housing market and the hot job market. In Oregon, rural school districts have puzzled over how to provide enough housing for teachers. In rural Arizona, hospitals are renting out rooms to staff members. In Massachusetts, the state has helped support temporary housing for summer workers on Cape Cod.

The result is a kind of tug-of-war between two of the economy’s main pillars. On a small scale, these transactions are just business owners and employees working things out in one-to-one agreements. But the underlying tension caused by the housing market could permanently shape how people decide where to live, what jobs to take — and whether the economy is working for them.

No one thinks a lack of housing is enough to spoil momentum in the labor market. Employers have added workers for 34 consecutive months, after all, and the job market is still churning. But some economists still worry about the knock-on effects of the country’s housing challenges. Until enough homes get built in the places that need it most, more companies will have to get creative — through higher pay, remote work options or other perks — to ensure their workers can find a place to live…

Martin estimates that offers don’t work out more than half the time, largely because of housing issues. And even when they do, Martin said, she’s never seen so many professionals in mid-level management roles, earning $60,000 or $75,000 per year, who still need roommates to make it work.

I remember a presidential candidate suggesting people should be able to live near where they work…

The most interesting part of the article above is that it sounds like at least a few employers are getting creative in providing housing so they can have workers and stable employees. If the market or government cannot provide housing, employers and organizations can help.

This is a long-term issue in the United States that sometimes goes by the name of “spatial mismatch.” This refers to the situations where the jobs available do not line up with where people live. Particularly with jobs scattered throughout metropolitan regions, workers have difficulty finding housing near work opportunities and/or need to commute long distances.

Since job growth has continued for a while now, does this mean only certain workers have been able to take advantage of certain jobs? For example, those with more resources or housing equity in their current location or an ability to commute long distances could have an advantage for jobs. At some point, will there not be enough workers to fill some of these spots?

Trying to diversify a city economy through sports

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Las Vegas has gambling and all that goes with it, including significant recent investments in sports:

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In under a decade’s time, the desert city long known for its casinos, food and live entertainment has become the home to four major league sports teams (the latest being MLB’s Athletics), six minor league teams, a major sports organization in the Ultimate Fighting Champion, and four large sports venues playing host to events such as NCAA tournament games, NFL Pro Bowls, and, coming this February, Super Bowl LVIII.

At least a half-dozen more venues are in the planning stages, and the city appears poised to be one of the top picks for an NBA expansion team and an MLS team, as well…

The initial economic impact estimates for Sunday’s Formula 1 Las Vegas Grand Prix and the February 2024 Super Bowl were $1.3 billion, and $500 million, respectively. (But this was before ticket prices slid for F1 when the championship was won earlier in the season).

That total would match the estimated $1.8 billion contributed to the metro area by all sporting events from July 2021 to June 2022, according to an economic impact study released this summer by the Center for Business and Economic Research at UNLV’s Lee Business School.

Earlier research on public money used for new stadiums suggested teams benefit the most from that spending. Will the money spent here on facilities increase the size of the economy, generate additional new jobs, and other benefits or does it simply shift money around? Will residents and businesses move to Las Vegas just because of sports?

Perhaps the pitch with Las Vegas is that it has the added bonus of lots of tourists. If some of them can be enticed to sporting events and other local attractions, this is extra money. This might work for major events, but I would guess it is harder for a regular season MLB game.

Here is just one guess of how this all might look in 10-15 years: local officials will say that sports helped enhance the city’s status, the team owners will be happy with their facilities and revenues, and the local economy will not be enhanced much just because of sports (when accounting for the debt and costs associated with sports).