Jobs, China and who is Salvador Avila?
528,000… jobs
That’s the number of new jobs added in July alone. Oh, and unemployment is down to 3.5%, the lowest since February 2020 (right before Covid).
That gives you an idea of how well the economy was running before covid when inflation was running 1.8%.
$3.9 trillion and 43 federal agencies later..
As an aside, it is easy to look back and be cynical about the money generated from the government and shoved into the economy. Was it a significant factor in our inflation problem? Of course.
However, the Cleveland Federal Reserve estimates that 76% of US businesses benefitted from some form of covid government relief. From my viewpoint, many of them were restaurants.
Sure, some did not survive, but many, many more would have failed if not for that influx of cash. We just happen to be paying the price for that funding now in the form of increasing costs and higher interest rates.
Back to the good stuff…
Good news: 528,000 people have a new job. Awesome to be them! All signs of a strong economy.
Except for that inflation thing.
Bad news: the federal reserve was hoping (hope is not a plan) that the economy would cool off/slow down so that they wouldn’t have to keep raising interest rates.
Yep, interest rates will keep going up. Back to the drawing board.
Uh-oh. Is there a mortgage crisis looming?
- From the Wall Street Journal: “Several lenders released statements saying they have limited exposure to property projects where construction has been delayed and that their risks from mortgage defaults are small and manageable.” Gee, where have we heard this before?
United States? Yes, but that was so 2007.
- This time, it is China.
- In China, you buy the property and start paying the loan before construction is completed.
- Due to covid, construction projects have been start-and-stop (mostly stop) and borrowers are threatening to stop payments on loans.
o Shares of some large Chinese banks dropped on the news and the accompanying negative activity on social media.
o The value of Real Estate Developer’s shares and bonds also dropped.
Where have I seen this before… I just can’t quite put my finger on it…
- And what do you think the Chinese government did? What they do best – squashed the messengers.
o Online platforms with information about the boycotts were scrubbed.
o Social media posts tracking the issue disappeared.
o Online chats from Weibo and WeChat that tracked the issue were taken down.
Move along, nothing to see here…
- On one hand, the CCP (Chinese Communist Party) put rules in place to limit excessive borrowing from property developers but on the other, they have asked banks to continue to provide credit to eligible developers so that they can complete unfinished projects. I wonder how ‘eligible’ is defined… perhaps whichever developer is a member of the CCP? Oh, there I go, being cynical again…
- In the U.S., when you miss a payment, you get a late notice. I’m guessing in China, when you miss a payment, you are calling your family to tell them you will be late…
In my opinion, China is the wild card in the world economy. Their own economy is really going to be in flux for the next year or two, driven primarily by their singular focus to wipe out covid – out of touch with reality - and control the habits of individuals – tough to do even if you are the CCP. There is a LOT more going on in China, but I’ll cover that in another Report.
Who was Salvador Avila?
He was born in Mexico in 1923 and came to the US as a migrant farm worker in the 1940s following the crop harvests. He did that until the ‘50s, when he brought his wife and five children to Los Angeles.
He worked two 8 hour shifts at two different foundries so he could send his kids to a Catholic school and buy a three bedroom home.
That’s what the Greatest Generation called a good day’s work.
Not quite the same thing as posting a tik-tok, is it?
When his back went out, he and his wife found an opportunity in 1966 to buy a restaurant with five picnic tables.
In the 1980’s they bought a home on Spyglass Hill in Corona Del Mar.
He died last week at the age of 99; here are a few of his sayings:
Keep a clean restaurant
Make sure the food is always delicious
A single straw on a broom will snap, but a bunch of them together are unbreakable
“I’ve been very fortunate, but we’ve also worked very hard.” Avila said in 1990.
Funny how those two things usually go hand-in-hand.
Two generations and 13 restaurants later, you might know his restaurants throughout Orange County as Avila’s El Ranchito.
That’s what you can do in America if you put in the work.
Four more weeks of summer. You can either take it easy or, if you want to be successful…, “You must be willing to do the things today others won't do, in order to have the things tomorrow others won't have.” Les Brown takes the credit for saying that, but Salvador Avila put that into action way before Les said it.
