Inflation (again), Consumer Confidence, Personal Income, BKs and Debt, the Hottest Job Market, and Who was Bernard Marcus?
23 Days Before Christmas, and all through the land…
Not yet, folks, I’ll get that prose out soon enough. But what is going on economically that you can also use at your friendly holiday mixer?
Inflation: It seems a little stuck and not descending like the Fed would prefer.
PCE – the personal consumption expenditures index went up from 2.1% to 2.3% year over year. That would seem bad, which it is, but it was expected to.
Somehow, when it is expected, it doesn’t seem to be as bad. It’s like setting a low bar and celebrating when you make it.
Regardless, inflation is getting a hair further from the 2% target the Fed seeks.
To add insult to injury, the core PCE also went up slightly from 2.7% to 2.8% on an annual basis, but monthly, it was up 0.3%.
Multiply that by 12, and you have the beginning of an unattractive run rate.
OK, I’ll save you the trouble: 3.6%. And that’s excluding gas and food.
Most economists still think the Fed will drop rates another notch in December; mark your calendar for the 18th, and we’ll see.
The Conference Board issued its latest consumer confidence report for November.
It rose to 111.7, the highest point in the last 16 months. Pre-pandemic, it was at 128.
It is impressive what a growing 401k will do to your confidence.
And then there is the expectations index; it’s what folks expect to happen in the next six months. That index is at 92.3, the highest in almost 3 years. Optimism is good.
A few more things:
Personal income was up 0.6% for October, twice the rate of inflation. That’s a good thing because it means that folks will feel better about Christmas shopping.
While durable goods orders were up 0.2%, it was less than the 0.5% expected. Higher is good, less than expected, meh.
New unemployment claims continue to stay low at 213,000, relatively speaking. That’s a 7-month low, and that’s a good thing.
There are 1,910,000 people without jobs, and that number increased by 9,000 last week. Excluding the pandemic, it’s the highest level since 2018. Hmmm.
What is Franchise Group?
Just another company filing for bankruptcy. Why?
High debt levels is one reason.
By the way, it wasn’t bank debt; it’s private debt.
Oh, and the CEO is under investigation for a securities fraud case tied to the collapse of a hedge fund.
Franchise Group were the owners, at one time or another, of Sylvan Learning Center, Buddy’s Home Furnishings, Pet Supplies Plus, American Freight, and Vitamin Shoppe.
They sold Sylvan and are liquidating American Freight.
So, when you wonder why banks seem to perform a colonoscopy on every business and business owner they lend to, the precedent was set hundreds of years ago, not just by companies like Franchise Group. Financial fraud just isn’t a good look.
In Related BK news…
Spirit Airlines filed bankruptcy because of… wait for it… high debt levels. $3,600,000,000 high.
Big shocker. NOTE: They will continue to fly during the holidays, so keep your spirits up.
Advance Auto Parts is closing more than 700 stores, including all stores in California.
While industry growth has averaged 4.5%, online sales have grown 9%.
That’ll take a bite out of same-store sales.
The hottest job market in the United States belongs to…
Stockton. Yes, Stockton, California. As measured in percentages.
Well, when you set a low bar…
Stockton's job growth was 4.3% for the 12 months ending September. The area added 11,800 positions, bringing its total to 289,000, ranking it 95th of 100 metro areas.
For sheer numbers added, that belongs to New York City.
149,600 jobs were added in the last 12 months, but only a 1.5% gain.
The city has 10.2 million workers.
Just a little trivia to get you through awkward conversations at the holiday mixer.
Who was Bernard Marcus?
His name should be as common as Jack Welch, but it’s not.
Of course, not many folks know who Jack Welch is anymore. Oh, well.
He was born in 1929 to Russian immigrant parents in Newark, New Jersey; his father was a cabinet maker.
He was the youngest of four children and grew up in a tenement. He secured his pharmacy degree at Rutgers.
On the family apartment, Mr. Marcus said, “…it was so bad they tore it down to build a slum.”
He initially worked as a pharmacist but left for the retail side of the business and ended up managing discount stores.
He joined Daylin, which owned the Handy Dan chain of hardware stores in Los Angeles, in 1970. Mr. Marcus was the CEO of that division.
Daylin got into financial trouble as interest rates increased in the mid-1970s; Sanford Sigaloff was brought in to fix it, and Marcus was fired by Sigaloff in 1978.
This was the change that started an empire.
Fired with Marcus was Arthur Blank, whose family pharmacy had been acquired by Daylin years before.
It was Marcus and Mr. Blank who founded a hardware store in 1978 in Atlanta, opening the first two stores in June 1979.
They gave all their employees orange aprons.
Cash was so tight that empty boxes were used to make the shelves look full.
Within 10 years, they had 100 stores. After 20 years, they had 900 stores.
The name of that store? The Home Depot.
He was CEO until 1997 and chairman until 2002. A billionaire, he gave generously to charity, pledging to give away 90% of his wealth. He supported the Georgia Aquarium, multiple healthcare facilities in Georgia and Florida, and the Israel Democracy Institute.
Bernard Marcus passed away at 95 last month, leaving a legacy of a ‘can-do’ attitude and trying new things, even if they failed.
There are some items to note in this issue.
While price increases have decreased, they are still there, so check with your industry group to see their expectations of price increases for 2025 and plan accordingly.
Manage your debt: don’t bite off more than you can chew. It doesn’t take much of a hit to earnings for your debt payment to overcome you.
Finally, as one door closes, another opens, as evidenced by Bernard Marcus. And don’t forget to support the folks that might need it.
Counting down to year end…
