The Shutdown (NOT), Consumer Confidence and the PCE, Fast Food Wages, 2024 and what's old is new again.
Federal Government Shutdown Summary
All you need to know is that the government will keep working (oxymoron?) through November 17; the budget clock has been reset for 45 days.
That’s the week before Thanksgiving. That’ll go over well, but stay tuned for updates.
The Economic News for Last Week
Again, another mixed bag of news with mixed messages.
Two things: Consumer Confidence and the PCE.
Consumer confidence dropped last month. It is based on roughly 3000 surveys received from, you guessed it, consumers.
But it was still positive, although respondents were concerned about job availability, future business conditions, and income.
Generally speaking, it’s positive if it’s over 100; it came in at 103.
This is the Economic Conference Board Survey, not the University of Michigan survey; just wanted to clear that up.
The good Good News was drowned out by the aforementioned government shutdown threat. That is the most recent Personal Consumption Expenditures index.
It’s like the CPI (Consumer Price Index), except the Fed likes this one better.
Month over month, the Core CPE was only 0.1%. That’s the good Good News.
Annually, it was 3.9%, down from last month’s 4.3%.
More good Good News. We’re making progress, folks.
Except California. Gas is over $7/gallon there.
Minimum wage for fast food workers goes up in California: $20/hour in April, 2024.
The Front Story
If you are the owner of a restaurant chain with less than 60 restaurants nationally, your employees may soon be leaving for greener pastures.
As a matter of fact, if you have any employees that are making less than $20/hour and think they can flip a burger or wrap a burrito better than they can mop a floor, you may lose those workers.
So you better plan for that, perhaps not for 2024, but definitely for 2025.
The only reason for the delay is that it does take a while for folks to figure things out.
The Back Story
The California legislature put through a bill this last session that would raise the minimum wage to $20/hour starting April 1, 2024.
If only it was an April Fools prank.
And the Governor signed it.
This was a backroom deal that Sacramento made with the major fast food franchisors (the corporations) so that they would not be responsible for certain actions of the franchisee (store owner) and avoid having the wages jump to $22/hour.
That was something that was established last year by previous legislation that the fast food industry was going to fight with a proposition they were going to put on the ballot next year. Still following? Stay focused…
To avoid having the entire piece of their legislation shot down by the voters next year through the aforementioned proposition, Sacramento negotiated with the fast-food corporations to have them taken off the hook for the actions of the franchisee if, in return, they pulled said proposition from the ballot in November, 2024.
“OK, what’s the catch? ” said the franchisors.
“We want you to go along with raising the minimum wage for restaurant workers to $20/hour” said the politicians.
“OK, but you take us off the hook for franchisee liabilities?”
“Yep”.
“Hmm. That will increase the labor costs a lot for our restaurant owners… no biggie, they can just raise prices. Instead of a 99 cent taco, we’ll just call it the buck 99 taco. Where do we sign?”
And that’s how prices go up and you input your order on a kiosk in the store.
Planning for 2024
It’s that time of year again – the Q4 Rush.
For the sales folks, it’s a rush to close the deal.
If you are a business owner, odds are you are closing deals at year-end and planning for next year.
So let’s talk 2024 and forecasts.
You alone know your revenue capabilities, but just know that overall GDP growth, the economic growth for the country, is going to be a low 1.1% per Kiplinger.
It was 2.1% for Q2, just in case you were wondering.
You can always network with your industry trade group and see what they think.
Core inflation will continue to ease; that’s inflation NOT including food and fuel.
Fuel will be up, including gas and diesel, just under 10%.
Electricity – 3 to 5% increase.
Labor will increase about 3.5% - that should be the average wage increase.
Shipping costs, in spite of the spike in fuel, will likely fall due to overcapacity. Ocean freight costs are forecasted to drop 33%. That should make up for 2021. Air freight will be slightly higher, though.
Insurance: Up. 10% to 15% across the board.
Good news for the accountants: costs for accounting work are forecasted to increase 10%.
Rents: Office up 1%; Retail anywhere from flat to 3% and warehouse up 5 to 10%.
And for California, budget a $16/hour minimum wage for 2024, assuming you have any workers making minimum wage.
While you are at it, make sure you are keeping up with local labor laws and wages.
There is a significant employer in the San Gabriel Valley that is still paying some workers $15.00/hour. I am pretty surprised that when the minimum wage increased back in January of this year, this institution made no adjustments.
What goes around, comes around
For the last two decades, retail-only stores have been trying to figure out how to go online.
Now online-only retailers are trying to figure out how to go retail. Yep.
Warby Parker started selling eyeglasses online in 2010, cutting out the middleman and selling directly to consumers, completely avoiding brick & mortar.
Now, increasing online ad expenses have gotten to the point that to keep growing, they went retail.
They now have over 200 actual, retail, stores.
And guess what I got in the mail on Saturday. Yes, that would be the snail-mail that is delivered by a fellow in a United States Postal Service uniform.
A catalog. From Amazon.
I kid you not.
It is Amazon’s Holiday Dash, a catalog for kids to make their Christmas gift list.
Over 100 pages with 600 items.
All in a paper catalog. Just like Sears Roebuck & Co. so many moons ago.
Go back and see what your company or previous management did 40 years ago to drum up business or differentiate themselves.
The “old thing” may be the “new thing”.
Heck, I think bell bottoms are coming back.
Halloween in 29 days, Thanksgiving in 52 days, 84 days until Christmas and 90 days to wrap up your annual goals.
