Unemployment, new jobs, and wage increases; business backup plans, Olympians, and who was Don Horton?
Economic Talking Points This Week
Unemployment creeps up to 4.1%. It was 4%.
From a historical perspective, this is still pretty low, but considering our low was 3.4% in January 2023, some folks will ring alarm bells by yelling that unemployment has increased by 17%!
Covid aside, the last time unemployment was 4.1% was in 2017.
Including covid, we went from 14.8% in April 2020 down to 4.1% in November 2021.
The good news from this is that the increased rates from the Fed seem to be doing what the Fed expects: impact jobs, which impacts spending, which impacts prices, which is how inflation is measured.
And the result should be lower inflation.
206,000 new jobs were created, with 82,000 in education and health and 70,000 in government.
That makes private sector hiring soft, reinforcing the Fed’s actions.
In a related subject, initial unemployment claims keep edging up. They were 238,000, up from 234,000 the week before.
Average annual wage increases dropped from 4.1% to 3.9%, also reinforcing the Fed’s actions.
If wages don’t go up as much, there are fewer dollars to spend on stuff, so the prices of that stuff don’t increase as much.
The next Fed meeting is July 30-31. Probably not lowering rates then, but it will mark the one-year anniversary of the last rate hike.
Some folks think they might drop rates in September or November. If you are a borrower, you are looking forward to that.
Backup Plans
Some of you may recall that I am part of a team that bought a bank in January. As you might expect, it is a very structured and regulated industry.
One of the many items on the “must have” checklist is a backup plan for various scenarios. The scenario with the most impact is the branch having to evacuate for whatever reason. As you can imagine, that makes it very difficult for customers to transact business. Because of that, we have a plan.
Do you?
Regardless of the size of your business, what happens if the power goes out or if a delivery truck turns over on the street, spilling some sort of hazardous material? Do you have a plan?
Most businesses don’t, so you’re not alone.
Part of the problem is that as a business owner, there’s never enough time to come up with something like this because you are busy generating revenue. Well, you can solve that problem in a couple of ways.
Ask one of your employees to carve out an hour and create a disaster plan.
Or you can query ChatGPT: “Write a plan for a business to follow if it has to evacuate its location.”
In less than 30 seconds, you get a comprehensive outline of what you should do before, during, and after your evacuation. And it even throws in a business continuity plan outline in case you can’t return to your place of business.
Impressive.
And then you can hand it to the aforementioned employee and see if they can fill in the details.
Another helpful tip from your Uncle Adam.
The Paris Olympics – July 26 to August 11
Judo: Japan and France are the key players in this sport – who knew? The venue is in the shadow of the Eiffel Tower. A person who practices Judo is known as a Judoka. Four Americans are competing: Maria Laborde, Angelica Delgado, Jack Yonezuka, and John Jayne.
The hometown favorite is Teddy Riner, 35 years old and an 11-time world champion. He is a heavyweight, meaning he weighs more than 100 kilograms. That’s 220 pounds for us folks in America.
The heaviest women’s category is 78 kg. Or 171 lbs. The current world champ is Akira Sone of Japan. She is 5’4” and started Judo because her three older brothers practice judo.
Handball: a combination of soccer (you throw the ball into a goal) and basketball (you can dribble and pass it); I’m still confused every time I watch it. Yep, no Americans in this event.
Egypt and France are the teams to watch for. The exciting bit will be to see if France’s men's and women's teams, who both won in Tokyo (the last Olympics, in case you weren’t paying attention), can take the gold in Paris and do two golds in two Olympics.
Note: Egypt can be the spoiler on the men’s side.
Modern Pentathlon: Just a bit unusual. Each competitor must swim 200 meters, fence fellow competitors, ride a horse in a show-jumping course, and run and shoot a laser pistol. Seriously, I did not add that last part, but the British do really well at this event. It must be the horse part.
There is one American at this event – Jess Davis from Connecticut.
After the Paris Olympics, the horse event will be replaced, and a new event/trick/skill will be added for the Los Angeles Olympics in 2028.
Yes, the Olympics are coming to Los Angeles in 2028 – get that on your calendar to ensure you are not in L.A. during the summer of 2028.
The replacement event will be some sort of American Ninja Warrior-style obstacle course. Again, I did not make that up.
That’s perfect for L.A. Pedestrians already know how to duck, dodge, and dive around the tents and the syringes on the city sidewalks.
Only folks in California will get that.
The British are not amused.
Who was Donald Ray Horton?
He was the third of five children, born in a rural area of Arkansas in 1950. His dad raised cattle, and they lived in a house without indoor plumbing.
With seven family members, you always wanted to be the first one in the washtub.
When his father was elected County Sheriff, they lived under the jail, with the five kids in one room and the parents in a hide-a-couch in the other room.
As a boy, he earned money by shining shoes and doing odd jobs. He went to college and transferred to the University of Oklahoma to study pharmacy. On his first day of class, he saw this girl walk into the classroom, got up, sat down by her and four months later they were married.
He left OK and started work in a real estate sales business his father had started. He then worked for another entrepreneur and concluded he would be better off building homes than selling them.
So he did.
For the first three years, he didn’t take a day off. In his words, he was accounts payable, construction, and the company's salesperson. Even after being firmly established, the company was known for strict cost controls, including senior executives sharing rooms in budget motels.
If you haven’t guessed already, the company that Mr. Horton started was D.R. Horton.
My favorite part of the story, as related in the Wall Street Journal, is as follows:
One afternoon in late 1978, he arrived at a bank in Fort Worth, Texas, an hour early for his appointment with a loan officer, just to show how eager he was. He ended up waiting two hours to see the banker.
Pretty snobby group, those bankers.
He needed $30,000 to build his first house. He finally got a chance to make his pitch around closing time. After over an hour of dickering, the weary banker took off his glasses and dropped them on the table.
“I’m going to loan you the money” to build the home, the banker said. “Not that I think you know what you’re doing, but I think you will sell it.”
The banker “was right on both counts,” Horton said later.
Over one million homes later – with indoor plumbing - Don Horton passed away in May at the age of 74.
Some Hortonisms:
In the real estate business, it’s easy to make money but harder to keep it.
It’s a quick trip from the penthouse to the outhouse.
Walk through the builder graveyard, and all the tombstones read ‘long and wrong on land.’
In 39 years of business, I have found that most businesses and business owners are straightforward and do the right thing for the company, employees, and customers. Don Horton established the Horton Summer Camp for employees’ children and the D.R. Horton Foundation to provide financial assistance to employees impacted by natural disasters. And all this is in place because Mr. Horton started his business by working every single day for three years.
The successful business owner is like an Olympian. They are willing to do the things today that others are not willing to do, like putting in the time so they can succeed. Once a business owner is successful, many tend to share that success by establishing foundations, summer camps, and other non-profits that benefit the community. Or, if nothing else, they sponsor the local little league or softball team.
