Winter is Coming… and the FAST Act
Winter is Coming… and so is Christmas!
Yes, I know it’s only September, but as my son says the day after Christmas: “Only 364 more days until Christmas.” And now we are down to 104 days to Christmas.
So why bring this up?
Retailers have a glut of inventory and that glut may have you shopping for Christmas presents early and benefitting other consumers as well.
From Walmart to Nordstrom, retailers are discounting items to clear out space for stuff they want to sell for the holidays.
And what goes hand in hand when you discount? Profits – they get discounted too. Those same retailers have lowered profit expectations for the year.
So what drove this? A number of things.
Shoppers are buying less electronics and apparel as they pay more for gas and groceries.
Dollar General – yes, the Dollar stores – have seen their customers “trading down” to less expensive versions of everyday items and putting more on their credit card.
Pandemic spending triggered more orders for goods and the supply chain problems delayed those goods coming in. Until now. Just when people are tightening up on their spending.
The beneficiary of this will be the consumer, at least the ones that have spending ability. So be on the lookout for good deals.
The small business moral of the story? Suppliers to small businesses need to discount their inventory to free up much needed cash and invest that cash in other products. It may be worth asking your vendors if they have something they want to get off their shelves that you might be able to use if priced appropriately.
Governor Newsome signed the FAST Recovery Act.
That stands for Fast Food Accountability and Standards. Shouldn’t that be FFAS?
This authorizes the creation of a Fast Food Council (of course) that will be tasked with establishing minimum standards with respect to the minimum wage, maximum hours of work, the standard conditions of labor and other working conditions for fast-food workers throughout California.
Isn’t that the poster on the wall of every breakroom in every company in California already?
And when did working at McDonalds classify as hazardous work? Sorry, I digress. Again.
What problem does this solve?
Adam’s Theorem of Sacramento Politics: If there is no obvious problem being solved, just look for the donors.
Some nuggets:
Applies only to fast food companies with 100 or more locations nationally.
EXCLUDES restaurants that already are unionized and paying at least $20.15/hour.
The Council CANNOT change anything already in place by OSHA – the Occupational Safety and Health Administration.
Well, that takes care of working conditions.
I guess the only thing they are allowed to mandate are… wait for it… wages.
The Council may (or may not) raise the minimum wage for fast food workers but it can be no higher than $22/hour for 2023.
How unusual that they specified a dollar amount and a date. It’s almost as if it’s an objective.
Oddly enough, they really haven’t defined what a “fast food” establishment is. The only definitions they have posted could conceivably include casual dining.
And how would you define “limited” table service? I could argue I get that at half the restaurants I eat at.
My observations: If you are a small restaurant and you are paying $16/hour, how can you compete with $22? Conversely, if you are already employed by McDonalds, that workforce will be trimmed by automation. And if you are a customer, well, so much for the Dollar Menu.
It’ll be the Five Buck Menu.
It’s just a matter of time before your to-go order isn’t even touched by human hands, with the exception of the guy delivering the food to the restaurant.
And Amazon is working on solving that problem – see the next segment.
How does this impact you, the Business Owner? If you are restaurant owner, that’s obvious. If not, are you in an industry that can be impacted by the FFAS Act indirectly or by any other future Act? And start thinking how this impacts your business plan.
Economic Bits and Pieces
Is this a recession? Second quarter GDP – Gross Domestic Product – was adjusted up, from a decrease of 0.9% to a decrease of 0.6% - that’s good. First quarter GDP had a decrease of 1.6%.
So yes, technically it is a recession, but there are other things going on.
Employment remains strong with strong anecdotal evidence that not only are people applying for jobs, they are also showing up for the interview and even the first day of work. There are even reports of employees not jumping ship before 90 days from readers of this Report.
But…
Amazon is second guessing how many warehouses it wants to open, consolidating operations in some markets and pulling back in others.
It seems more family cash flow is going towards gas and groceries and less to on-line ordering.
Prior to the pandemic, Amazon had 165 million square feet of warehouse space. By May of this year, they more than doubled that to 379 million square feet.
Amazon also has a division called Amazon Robotics.
The 30 year mortgage averaged 5.89% this past week.
Not surprisingly, applications for adjustable rate mortgages are increasing.
And home purchases have slowed down. But it’s not crashing, nor do I think it will.
So things are slowing down, but employment is still strong.
Not much of a theme for today, folks, but we have three key reports coming out this week:
The August CPI – Consumer Price Index - report comes out Tuesday.
The Producer Price Index report comes out Wednesday.
On Thursday, Retail Sales will be released.
And the Michigan Consumer Sentiment Index comes out on Friday. Are consumers happy or sad?
To end on a high note, the price per barrel for oil is $83.54, down from a high or $122.11 on June 8. That’s a 31.6% decrease. I’m guessing consumers are going to be happy about that.
We will have a lot to talk about next Monday. Stay dry, everyone.
