| Fight for $15 vs. Drive to "Completely Obviate" Need for Fast Food Workers Posted: 10 Nov 2015 10:10 PM PST Fight for $15 Protests Sweep USThe fight for a "living wage" of $15 per hour is raging the US. Here are a few recent headlines. Fast Food RobotsThose fighting for a $15 living wage need consider Hamburgers, Coffee, Guitars, and Cars: A Report from Lemnos Labs. Momentum showed off its prototype hamburger-making robot, which is expressly designed to displace two to three full-time kitchen workers, thus saving fast-food companies up to $90,000 per franchise per year, or $9 billion nationwide. In a matter of minutes, the machine can grill a beef patty, layer it with lettuce, tomatoes, pickles, and onions, marry it with a bun, and wrap it up to go. (I saw it with my own eyes.)
In addition to restaurant automation, the Lemnos companies are exploring areas like street-legal electric shuttles for corporate campuses (Local Motion), a new generation of electric guitars that take advantage of the smartphone revolution (Unplugged Instruments), and helping baristas brew the perfect cup of coffee (Blossom Coffee). Along with their peers at other specialized accelerators, such as Rock Health, Greenstart, and Media Camp, these entrepreneurs are trying to prove that a rapid-iteration mindset and a focus on customer needs can help almost any kind of technology startup get off the ground.
"Our device isn't meant to make employees more efficient," said co-founder Alexandros Vardakostas. "It's meant to completely obviate them." Obviate the WorkersBy all means let's pay workers $15 an hour, the ones with a job. But let's also pay 80% of the current set of fast food workers precisely what they are worth: Nothing. That may sound harsh, but it's simple economic reality. Here's the real deal: Once machines cost less than worker salaries and benefits, the replaced human workers are essentially worthless. It's not quite that simple because many people, myself included like human contact. For example, I do not use self-checkout lanes. Yet, I have to wonder: How long will it be before there is an extra charge for having a human checkout clerk? And at a fast food or chain restaurant, I don't care is I have human contact or not. Indeed, I would rather click buttons myself, accepting responsibility for my order. To top off the benefits, there is no need to tip a robot. Counterproductive Push for $15The push for $15 is counterproductive. Not only will higher minimum wages displace workers, if everyone's wage rose, $15 would no longer be a "living wage". And the higher the wages and benefits, the greater the incentive for companies to replace workers with hardware and software robots. Mike "Mish" Shedlock |
| Wholesale Trade Inventories Surge Led By Autos Posted: 10 Nov 2015 09:39 AM PST Autos are the sales Energizer bunny. Nothing seems to slow them down. Wholesale Inventories Surprised to the Upside, led by autos. Wholesale inventories rose 0.5 percent in September following an upward revised 0.3 percent gain in August. The September build appears to be intentional based on a 0.5 percent rise in September sales that keeps the stock-to-sales ratio for wholesalers unchanged at 1.31.
Inventories of autos rose 2.3 percent as wholesalers try to keep up with what is very strong retail demand for autos. Excluding autos, the stock-to-sales wholesale ratio is unchanged at 1.27.
Inventory draws reflecting gains in sales include computer equipment, electrical goods, and apparel. Wholesale inventories of furniture rose on a swing lower for sales.
Inventories in general are heavy and businesses, waiting for a pick up in sales, are being careful to keep them in check. Today's results are in line with Commerce Department assumptions and should have little bearing on third-quarter GDP revisions. Reflections on BatteriesAt some point batteries die. When that happens to auto sales remains to be seen, but what cannot last forever clearly won't. On the personal side, I am headed from Zion to Bryce Canyon National Park for a couple of days. Mike "Mish" Shedlock |
| Economists Blame Mild Weather For Poor Retail Sales Posted: 10 Nov 2015 09:25 AM PST Goldilocks Weather Bad For ShoppingWeather in the past two months has generally been unseasonably pleasant. Economists say this is bad for shopping as Redbook's Same Store Sales Report shows retail sales year-over year are only up 1.1%. Sales in Redbook's same-store sample slowed sharply in the November 7 week, to a year-on-year plus 1.1 percent from an already moderate 1.9 percent in the prior week. Unseasonably warm weather has been hurting sales of seasonal goods, which could be a factor in Friday's retail sales report for October. Turning back to November and this report, readings in the early part of the month will be forgotten as attention turns to the holiday kickoff late in the month.
Definition
Redbook is a weekly measure of comparable store sales at chain stores, discounters, and department stores. Figures for the first week of the month are compared with the average for the entire previous month. When two weeks are available, then these are compared with the average for the previous month, and so on through the month. It might be more useful to compare year-over-year figures since these are indeed compared to the comparable week a year ago. This index is correlated with the general merchandise portion of retail sales covering about 10 percent of total retail sales. Weather CommentsApparently, weather needs to be just right, not for comfort levels, but to induce shoppers to buy. Supposedly, it's important that weather not be too good. Colder weather would be good now, but colder weather in January won't be. I propose comparing weekly retail sales to the same week as last year or to the monthly average a year ago is essentially meaningless, if not outright ridiculous. Mike "Mish" Shedlock |
| US Import/Export Prices Show Cross Border Deflationary Pressures Posted: 10 Nov 2015 08:36 AM PST There's a slew of US economic reports out today. Let's take a look starting with a look at Import and Export Prices as described by Econoday. Cross border price pressures continue to move lower. Import prices fell 0.5 percent in October including a steep 5 tenths downward revision to September to minus 0.6 percent. And it's not just gasoline! Nonpetroleum import prices fell 0.4 percent for the 10th decline in a row. Year-on-year, total import prices are down 10.5 percent, which is right in line with trend, with nonpetroleum down 3.4 percent for the largest drop since October 2009.
The story on the export side is the much same with export prices down 0.2 percent for a year-on-year decline of minus 6.7 percent. Excluding agricultural products, export prices fell 0.3 for a year-on-year decline of minus 6.1 percent.
Prices have been falling steadily for about a year in this report with declines also appearing for finished goods in what is a very important deflationary trend. Import prices for capital goods are down 2.3 percent year-on-year with vehicles down 1.6 percent and consumer goods down 0.6 percent. The export side is similar including a 2.4 percent year-on-year decline for consumer goods.
By country, contraction is steepest with Canada where import prices fell 1.0 percent in the month for a 20.5 percent year-on-year decline. Latin America is next, also down 1.0 percent in the month for a year-on-year decline of 14.7 percent. Import prices fell 0.1 percent with China where the year-on-year rate is minus 1.4 percent while prices with Europe actually rose 1 tenth in the month for a year-on-year minus 2.9 percent.
Contraction in import prices not only reflects low commodity prices but also the strength of the dollar which has been giving U.S. buyers more for their dollars, while contraction in export prices reflects generally deflationary global trends. Fed policy makers may be worried that slack has been absorbed in the labor market but they are also concerned about the continued lack of price pressure, the latter speaking against the urgency for a rate hike. Import/Export Prices vs. Consensus Economists were pretty close to the mark on export prices, but missed the boat totally on imports. The consensus import price change was -0.1% with the actual result of -0.5%, outside the range of any economist's estimate. Falling prices are a good thing actually, but the Fed sure does not see it that way. As noted just a bit ago ...
Mike "Mish" Shedlock |
| China Posts Lowest Business Sentiment on Record as Deflationary Pressures Rise Posted: 10 Nov 2015 08:11 AM PST Markit reports China Posts Lowest Business Sentiment On Record. Data only dates to November of 2009, so that makes sentiment worst since the recovery. However, sentiment is so low, I it's possible sentiment is worse that any time in the past 20 or even 30 years, had it only been measured. Let's take a look at the report. The latest Markit Business Outlook Survey signalled the weakest level of optimism amongst Chinese companies since data collection began late-2009. This was highlighted by a net balance of just +17% of firms expecting business activity to rise over the next year, down from a previous low of +23% in June.
Average input prices faced by Chinese businesses are expected to rise only slightly over the coming year. A net balance of just +3% of firms forecast higher input costs in October, down from +9% in June, to signal the weakest inflation expectations in the series history.
At the sector level, manufacturers anticipate a fall in cost burdens (net balance of -6%). This is the first time deflation has been forecast in the sector since mid-2012. In contrast, service sector companies expect input costs to increase over the next year, though October's net balance of +14% is the lowest for a year. China Business Expectations Deflationary Pressures RiseSentiment largely reflects continuing deflationary cost pressures on manufacturers. For details, please see China's PPI Drops 44th Month, Chinese Trade Slumps on Waning Demand, Deflationary Pressures. Mike "Mish" Shedlock |
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