Inflation, Apple concentrations, overtime and salaried workers, the 'magic' of Sacramento, and business optimism.
Inflation
The big news this week was inflation; it stopped dropping.
There are a number of ways to measure inflation with various indices.
The main one is the Consumer Price Index, but there are two parts of it.
The whole thing, which tracks prices of all products and services.
And Core, which takes out the two most volatile parts of what people spend money on: food and fuel.
This kind of evens things out and makes the CPI less volatile.
That said, the CPI went up from an annual, year-over-year rate of 3.2% to 3.7%.
The Core CPI – no food, no fuel – went down from 4.7% to 4.3%, BUT it was up month over month.
Overall, that’s good Good News. Not great, but good.
The lousy part is that the increase was almost all fuel, not a big shocker there.
In California, we have over $6/gallon.
Summary? The Fed won’t raise rates on this news, but they are not going to drop them either. Yet.
Let’s talk concentrations…
How’s China working out for Apple?
Short term, not so well.
Long term, it’s a wait-and-see.
Why do I bring this up? Two weeks ago, China ordered officials at Chinese central government agencies not to use Apple iPhones and other foreign-branded devices for work or to allow them to be brought into their offices.
Apple has two concentrations in China:
Sales, with 19% of revenue generated in China
Manufacturing, with upwards of 95% of iPhones, iPads, Macs, and Air Pods made in China, according to Forbes.
It all works out well until it doesn’t.
Are you mindful of the concentrations in your business?
Make sure you know where your concentrations for revenue and expenses are and then plan accordingly.
Overtime and Salaried Workers
When is a salaried worker not paid overtime?
When they are “in a bone fide executive, administrative or professional capacity as those terms are defined by the Labor Department.”
And they make more than $35,568/year.
Until now – maybe.
The Department of Labor is proposing that overtime (working more than 40 hours/week or 8 hours/day in California) be paid to anyone making less than $55,068/year. Except…
The motion picture industry will have to pay overtime to anyone making less than $84,091/year and working more than 40 hours each week, or 8 hours/day in California.
And this affects you how?
Well, if you have any salaried workers that make more than $35,568/year but less than $55,068/year, you will have to pay them overtime wages if the Labor Department gets its way.
Last time this was tried, a federal judge ruled that the Labor Department exceeded its authority.
You might want to think about this in your planning for 2024 just in case it takes effect.
You can’t make this stuff up…
Last week marked the end of the legislative session in Sacramento, so there was a huge push to get bills passed and ready for the governor’s signature. Nothing new; that happens every session.
Now for the definition of irony…
Assembly Bill 418 outlaws four chemical additives from food products, including red dye #3, on the grounds that some studies have linked them to increased risks of cancer, as well as reproductive and immune system issues. Fair enough.
Senate Bill 58 allows possession of psilocybin “magic” mushrooms and other psychedelic substances for personal use just as long as you don’t have them at schools or give them to people under age 21.
So, Sacramento outlaws red dye #3 but legalizes psychedelic drugs.
I guess there is no proof that psychedelic drugs cause cancer or have reproductive and immune issues.
So, what does this have to do with business? Well, the same folks who are passing these bills are the same ones who are drafting legislation that will affect your business.
Think about that the next time you vote.
I had the privilege of moderating a panel of four business executives this past week: One owner and 3 professional managers. The three managers were two CFOs and a CEO. All four had a common challenge for both 2023 and 2024: Labor.
The owner relayed a story about hiring 30 workers for his furniture manufacturing/assembly operation. In 30 days, only 6 were left.
It’s not because he’s mean; on the contrary. They left because the workers found another opportunity that paid better or easier work.
The other commonality was the 2024 forecast. Growth; anywhere from 15% to 30% growth. One company was just catching its breath after 3 years of double-digit growth.
If only they could find the labor and get it to stick around.
Believe me, the companies offer a lot of worker perks.
All in all, they were optimistic and preparing for growth for 2024.
That’s why I like talking to business owners. They are naturally optimistic.
