Records for Inflation and Unemployment Claims

So many things going on… 

• Something you haven’t seen in 50+ years: unemployment claims of 184,000 for the week ended December 4. It was over 800,000 per week in a six week stretch at the beginning of the year; that is a drop!

  • One, that tells me it’s a tight labor market (thank you, Captain Obvious); you are willing to keep anyone as long as they are breathing, so you are not firing anyone.

  • Two, this does take into account seasonal issues, like construction and agriculture that typically let workers go when winter sets in. Otherwise, the raw number is 281,000 – still pretty darn good.

• Something you haven’t seen in 39 years: inflation is at 6.8%

  • While initially increased car prices were the driver (and they still are), other items are catching up and making a bigger part of the inflation number.

  • Click here for a detailed breakdown of this weeks inflation numbers. You can see that the tallest bar that stands out is “Energy”. It shows a 30%+ increase in costs. Pictures certainly tell more than words. The bars in order are: All Items 6.8% increase; Food 6.1% increase; Energy 33.3% increase, and All Items Less Food and Energy 4.9% increase. Used Cars and Truck are included in that last column and are up 31% year over year.

More PPP Information

• For both 2020 and 2021, there were 11,456,315 loans made.

• 8,977,224 have applied for forgiveness for both 2020 and 2021

• 94% of 2020 loans have applied for forgiveness. Those 6% are way past due for forgiveness and I promise you they have received a payment notice.

• 66% of 2021 loans have applied for forgiveness. 

Hiring and Retention

• Can we stop talking about finding and keeping workers? No, not really.

• Nationally, the unemployment rate is at 4.2%, so how is California at 7.3%?

  • Are they holding out for a management position, like Cousin Eddie? Some really are; consumer bankruptcies are at a pre-pandemic low, so the folks have money.

  • Hospitality is a big part; the international tourists have not come back yet.

• All that said, this is a workers market. They hold the cards, and for the most part, they know it. So how do you differentiate?

• Options are:

  • Raise wages and pass on the costs to your customers. If you are going to raise prices, do it when everyone is expecting it. It is likely your competition is also raising prices.

  • Offer perks. Pay for subscriptions to streaming services like Netflix or HBO Max; if they are on a tight budget, employees don’t subscribe to things like that.

  • Provide a child care allowance or a $50 gas card every month. And some of these things are not subject to employment taxes.

  • With inflation going up, your employees will be on a tight budget. 

How about housing?

• Back in November, the Inland Empire made the front page of the Wall Street Journal with the headline “Californians Flee the Coast to ‘Inland Empire’ Cities”. Interestingly enough, directly below that article was “Market Expands for Factory-Built Homes”, but I digress.

• The IE tied the Phoenix region in 2020 for the biggest gain in households from migration nationwide according to postal service change-of-address records.

  • Reasons cited are familiar with anyone that has ever heard John Husing talk: less expensive housing and in a new twist, better schools.

  • As is often the case, the WSJ followed a family in their move from Norwalk to Eastvale (has Eastvale ever even been mentioned in the Wall Street Journal?) where they purchased a 3,700 sf house for $670,000 with a jacuzzi and a yard big enough to grow strawberries, Bok choy and kale. Yep, they are millennials.

    • Impromptu Poll: Would you rather have your neighbor grow cannabis or kale for personal consumption?

    • 30,000 moved just from L.A. to the IE, never mind other areas of the state.

    • I wonder if anyone moved from the IE to L.A.? I will have to look into that.

 Anecdotes

• Some of my insights are based on anecdotal information. Three examples. We went to the Corner Butcher Shop for a Christmas Roast Beast. When we asked the price of the 10 lb. Tenderloin Roast, we were told $500. We thought they were joking, but no, it’s on the price sheet. We called Hottinger’s in Ontario and were told it would be about $120 for the same 10 lb. roast. Guess where we went?

• I needed a chair cluster spring welded and found a guy that would do it for $20. While I was waiting for him, I met a fellow with a 5 bedroom house in Rancho Cucamonga that was renting out 4 of those rooms to other folks for anywhere from $800 to $1000 for each room.

• In the Sunday paper, there was a double-wide manufactured home in Yucaipa listed at $279,000. To be fair, there were aluminum awnings on both sides of the home providing covered parking.

• Lessons learned:

  • Unless money is no object, shop around. And that goes for anything. When things get tight, it’s not about the nickels and dimes, it’s about the pennies.

  • You know that single family residence down the street with 6 cars? It’s really multi-family. Who needs an ADU when you have a spare bedroom?

  • I’m guessing you are no longer laughing at Cousin Eddie living in a manufactured home, any more, are you?

 11 more shopping days ‘till Christmas.