Mortgages, Jobs, Rates, Supply Side Boom, Minimum Wage and Veterans Day.
What happened this week
Mortgage rates dropped just a tad. Why? Well, so did the 10-year treasury, and that’s one of the drivers of mortgage rates.
That’s because it looks like the Fed will NOT be raising rates anytime soon.
Why? The jobs data was weaker than expected, and unemployment was up to 3.9%.
That’s two meetings in a row that the Fed has NOT raised rates.
They won’t be dropping rates either, but it was good Bad News all around.
JP Morgan Chase is expanding its retail presence in… Europe.
That’s always been a tough market for American banks.
Knott’s Berry Farm is merging with Six Flags to create Knott’s Six Berry Flag Farms.
Actually, that’s not true. Six Flags is merging with Cedar Fair Entertainment Co. It’s Cedar Fair that owns Knott’s Berry Farm.
Cedar Fair also owns California’s Great America and 15 other entertainment venues around the United States.
And they will also own 51% of the new entity, but each side will have six board members.
And they have a neat stock symbol: FUN
We’ll see how this shakes out.
What is a supply-side boom?
That’s what Jerry Powell called the current downward impact on inflation: a supply-side boom.
Up to this point, inflation has been driven up by strong demand and weaker supply, causing prices to go up.
Folks have a lot of money, courtesy of Uncle Sam pumping in trillions – yes, trillions with a ‘T’ - and so they buy more stuff or do more stuff than they normally would, creating a demand for more stuff. When the demand increases because people have a lot of cash to burn, the prices generally follow.
And suppliers struggle to catch up.
That’s what has been happening for the last two years.
Vacations, shows, TVs, and lots of stuff.
Until now. The supply side is catching up, increasing the availability of stuff which increases competition which can drive prices down.
When prices go down, so does inflation.
And that, dear reader, is a brief summary (that seems redundant) of a Supply-Side Boom. Bring it up at your next mixer, and it will sound like you know what you are talking about.
Then throw in Quantitative Tightening and see where the conversation goes!
The Minimum Wage
What is the hourly minimum wage? In California, it’s $15.50. But what’s the federal minimum wage? $7.25/hour.
The federal minimum wage applies to companies that engage in any sort of interstate commerce.
Fun Fact: if your company makes a product or service that does NOT cross state lines, you do not have to offer the federal minimum wage, But you must offer your state minimum wage.
In California, that would be $15.50. Unless you are a fast food worker; starting April Fool’s Day in 2024, you will earn $20/hour.
And many healthcare workers in California will get $21/hour starting in 2024.
However, there are 20 states that have a $7.25 minimum wage.
But there are some states that do not have a state minimum wage at all. It’s all market-driven.
That said, what percentage of people earn only the federal minimum wage - $7.25/hour – in the US? 1.5%.
I went down this rabbit hole because I was curious as to what wages and rents were for the rest of the country because, in California, most folks just look through one lens.
The bank teller in Very Small Town, Midwest/Southern State is making $11.00/hour but paying $650/month for a recently remodeled 1 bed/1 bath apartment. That’s 32% of income.
No, it’s not a single-wide. It’s a brick building and looks quite nice, thank you.
However, that same teller in Big City, Midwest/Southern State, makes $15/hour.
And rents are higher, with a nice 1 bed/1 bath renting for about $900/month or 34% of income.
In Los Angeles, the average is $18.97/hour, with BofA offering $23/hour, but you’ll be lucky to rent a room in an apartment or home for less than $900, much less your own apartment where that is north of $2000/month - if you can find one.
And that’s why the politicians in California think that the national minimum wage should be $50/hour.
That would be State Representative Barbara Lee, who is running for the California Senate seat vacated by the passing of Diane Feinstein. She really said that.
The smaller towns in about 40 other states would prefer that didn’t happen.
What I learned in researching this topic is that what applies to some coastal states definitely doesn’t work in many other states. While $7.25 won’t work in California, it does work in a lot of other areas.
And in those areas, life is usually a lot simpler.
I’m guessing that keeps the healthcare costs down, too.
Saturday is Veterans Day – November 11
On the 11th hour of the 11th day of the 11th month in 1918, World War I came to an end with the signing of the Armistice. In 1938, November 11 became a national holiday known as Armistice Day. In 1954, Congress formally changed the name to Veterans Day. Click here to access the Wikipedia page for Veteran’s Day. For those of you that have served in the Armed Forces of the United States of America, thank you. As the Department of Veterans Affairs notes, Veterans Day does not have an apostrophe because it is not a day that ‘belongs’ to veterans, it is a day for honoring all veterans. I encourage you to read up about it or watch a documentary on “The War to End All Wars”.
“They Shall Not Grow Old” by Peter Jackson is very well done – 5 Stars from me.
Today, poll your employees and find out which of them are veterans and give them Friday off.
That’s kind of a trick question. You should already know which of your employees are veterans. They are the ones that consistently show up for work.
16 days to Thanksgiving, 49 days until Christmas and 55 days left in the year. Time to close those deals, or start thinking about sandbagging them.
For business owners, that’s called ‘tax planning’.
