Real Estate, The Economy, and News: Average Income

Showing posts with label Average Income. Show all posts

Friday, May 27, 2016

"365 by Whole Foods" Market Boasts Lower Prices and Higher Efficiency

This week, Whole Foods opened their "365 by Whole Foods Market" in Silver Lake, the first of a set of 13 such stores to be built around the country this year. The supermarket chain's new style of smaller store has already interested many customers in its first couple of days, and the company expects the fad to grow rapidly. In her L.A. Times article, Samantha Masunaga describes the new type of store and some of the ways it differs from the classical Whole Foods supermarket.

365 is Whole Foods' first smaller format store. However, it features many high-tech options and better deals than their regular stores, making it a highly sought-after alternative. People, especially Millennials, go to Whole Foods because they are looking for healthier, organic food options. However, eating healthier is often costly, and most people have pretty inflexible budgets when it comes to groceries. Therefore, when shoppers found out that 365's products were the same, but at a cheaper price, they flocked to the new store.

On Wednesday morning, when the store opened its doors for the first time, the parking lot was full and then some. Interested shoppers circled the lot, having trouble finding a spot to park their cars, but when they finally got into the store, they were amazed by what they found. While the 365 has a smaller selection than a normal Whole Foods, its prices are significantly cheaper, which, too many Millennials with little disposable income, is a worthwhile trade-off. Additionally, the displays of produce feature electronic readers that measure the weight of fruits or vegetables and print stickers based on the measurement. In that way, the check-out process is quick and easy, saving time for both customers and employees.

Besides the reduced variety, the new 365 will also be missing Whole Foods' signature deli counter. However, it still has a large salad bar and a variety of pre-cooked hot food items. Analysts believe that 365 is likely Whole Foods' response to losing their share on the health food market. Other stores like Ralphs and Target have begun to provide organic options for their customers, which means Whole Foods is facing much greater competition in a once-blue ocean. Over the past three quarters, Whole Foods has shown declining sales, but the management hopes that the smaller, less cost-intensive 365 stores will help to turn that around over the coming year.

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Friday, May 13, 2016

Strategies to Saving for a College Education

For most parents, a big priority is trying to make sure that their children succeed in life. Parents want their kids to lead an easier life than they had, and most of them see education, especially a college degree, as the main path to that goal. Unfortunately, families have all kinds of financial demands that often take precedence over college, which can be years down the line. Chris Hiestand, in his L.A. Times article, discusses a few potential strategies to help struggling parents maintain their financial stability while still putting money away for future college costs.

A 529 savings plan is one such method to contribute to future expenses. Most savings plans, including the 529, involve the contribution of after-tax dollars to an account, where the money grows in interest and can be withdrawn, tax-free, to pay for educational expenses. Additionally, $14,000 per year can be given between parties as a tax-free gift. Anything above $14,000 is subject to gift taxes. The best thing about tax-free gifts is that they can be front-loaded up to five years in advance. In other words, a parent can put $70,000 into a 529 account one year, but then won't be able to contribute to the account for the next five years. This can often be better than contributing once per year because it gives the money more time to accrue interest, and since you use after-tax dollars, the contributions can be withdrawn tax-free.

Another option is using a Roth IRA to save for college and retirement at the same time. Once again, Roth IRA contributions are made with after-tax dollars, which means the contributions can be withdrawn without additional taxes or penalties. The Roth IRA is often better than a 529 plan for several reasons. Firstly, the 529 is based on a specific interest rate, while the Roth IRA gives you more flexibility to choose investments and decide how much money is being invested. Additionally, if your child doesn't end up going to college, the money in the Roth IRA fund can still be put toward retirement. Finally, perhaps the greatest advantage, is that the money in a Roth IRA does not count against financial aid while a 529 held by a parent will.

Often, there is no way to pay for college without taking out loans. However, there are smarter ways to get the best bang for your buck in loans. Over 70% of bachelor's degree recipients graduate with debt, and although getting a degree is an investment in the future, the returns on investment can be slow. Some loans allow students and their parents to push off interest and payments until 6 months after graduation, but when the interest finally begins to accrue, it can be at rates of 9% or higher. Many parents decide that it makes more sense refinance their mortgage and use the saved money each month to contribute to schooling. Others tap into their home's equity to pay tuition and fees.

In all, getting a college education is possible. Through a combination of saving, financial aid, and smart loans, a college degree can be affordable to some extent. Smart financial planning can be hard, but in general, getting a college degree is a good investment in yourself or your children, and should pay off in the long run. Financial stress today could be worth it if it means business success in the future.

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Friday, April 15, 2016

Millennials Better at Saving Than Previously Assumed

Millennials are often stereotyped as being bad with money. Many people view those 20-something-year-olds as frivolous spenders, more concerned with the here and now than with the future. However, according to recent research, Millennials don't actually deserve this classification. According to Jonnelle Marte's L.A. Times article, they are saving much more aggressively than in past years, and in some cases are saving more than their middle-aged counterparts.

In the study, "Millennials" were defined as consumers between the ages of 18 and 29, and the results blew away many assumptions previously made about their age group. About 62% of Millennials are saving more than 5% of their income for retirement, emergencies, or other future financial goals. This is a significant improvement from last year when only about 42% of Millennials put the same portion of their pay toward savings. Comparatively, it was found that about 50% of consumers between the ages of 30 and 49 were putting as much into savings.

Analysts believe that Millennials' interest in saving money for a rainy day may come from personal experience or what they saw family members go through. Many, especially those straight out of college, struggled to get a job during the recession. Others, even if unaffected themselves, watched as family members were hit by layoffs and saw how hard it was for parents or even grandparents to recover. Likely because of this, 40% of Millennials are putting their savings aside for an emergency, rather than for retirement or something else that would matter the most in the distant future. They know how hard it can be to survive if they unexpectedly lose their job, and as such, want to be sufficiently prepared.

How are Millennials able to save more money now than in previous years? Some are cutting their spending, realizing that instant gratification isn't worth potential financial struggles in the future. Others are getting better jobs or being promoted to better-paying positions in the recovering company, and therefore are earning more money and are more able to put some of it toward savings. Some went back to school when they found that they couldn't find work during the recession and are putting their degrees to use in getting jobs now.

Not all Millennials are choosing to put their money aside for emergencies. Many are saving in order to be able to afford big purchases in the near future. About 27% are saving for a future home, 26% are saving for a car, and 36% are saving to go on vacation. No matter what they are saving for, researchers agree that Millennials have come to understand the value of saving, often more than their older counterparts. When asked about their major goals, the majority chose "saving", while smaller, but still significant, portions chose "leading a healthy lifestyle" or "paying down debt." Saving money can have a positive impact on anyone's life, so it's a good thing that more individuals have come to realize the value of saving over spending.

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Friday, January 8, 2016

Apple Stocks Fall, Partly Due to Struggling Chinese Economy

While Apple is a large company with a variety of different products, many investors measure the company's success solely on the sales of a single product: the iPhone. Because of its popularity around the world, analysts tend to use the statistics of iPhone sales to monitor how the company as a whole is doing. Unfortunately, when iPhone sales are down, investors see this as a red flag and look to jump ship, thereby causing Apple stocks as a whole to go down. Paresh Dave and David Pierson write in their article about some of the possible factors contributing to lowered iPhone sales, as well as how this affects the company.

While just over a month ago, Apple stocks closed at $119, the same stocks have recently taken a plunge, going under $100 for the first time since October 2015. That's a decrease of over 15% in a single month, not a good sign for executives and potential investors. The iPhone 6S, this year's iteration of the popular cell phone, hasn't sold as well as predicted, in China as well as throughout the rest of the world. Several rumors have surfaced that assemblers and manufacturers of iPhones have recently been bracing for a slowdown in production, and financial analysts have determined that Apple has reduced supplies to Asian distributors.

While all of this may be coincidental, investors have taken these signs to be harbingers of future turmoil for the company and have decided to pull out for the time being. China's economy, which has doubled in the 7 years since Apple first opened stores and factories in the country, has a large impact on the company's success and failure, whether we like it or not. China's middle class is slowly expanding, opening up the market for iPhones to a much larger group of people, which will be good for sales when the economy gets back on track.

It seems that the first sign of a downturn for iPhone sales appeared in mid-December, when companies like Jabil Circuit and Dialog Semiconductor, which produce casings and internal parts for the iPhone reported lower-than-expected revenue predictions for the coming months. Decreased sales could be due to the fact that the newly released iPhone 6S is not very different from last year's iPhone 6, which would explain reduced demand, or it could be due to more economic factors. Either way, Apple seems confident that sales and stocks will go back up in the near future, especially with the new iPhone 7 in the works. While growth may be slow in 2016, executives believe that revenue will continue to grow at a rate of about 5%.

Where iPhone sales didn't boom as greatly as expected, products like the Apple Watch, iPad Pro, and Apple TV were popular gifts during the holiday season, thus boosting Apple's total revenue over the past couple of months. Apple executives are certain that China will remain a huge market for iPhone sales, but that it will just take a little bit of time for the economy to catch up again. In the long run, China is still one of the biggest markets for Apple products, even with current economic turmoil messing up sales. Eventually, Apple stocks should go back up, but the question is: How soon?

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Friday, December 18, 2015

Federal Reserve Hikes Interest Rates - First Time Since Great Recession Began

For the first time in seven years, since the Great Recession began in 2008, the Federal Reserve has decided to start raising its interest rate. When the recession began, pushing the interest rates as close to zero as possible was necessary to help the nearly crippled economy. The Fed raising their rates could be seen in a positive light, as a sign of confidence that the economy is getting back on track. To others, it could be a preventative measure in preparation for a future economic downturn. Jim Puzzanghera and Don Lee discuss the implications of the rate hike in their recent article in the L.A. Times.

What was seen by some as a vote of confidence in the recovering economy helped investors to feel more confident, which in turn led the Dow Jones average to rally and close up about 224 points, a substantial increase. When the Fed decides that the economy can handle an interest rate increase, this helps the average person to believe that they can more easily trust the economy to keep their money safe. This leads to more investment, which can help the economy even more on its path to recovery. When people believe in the power of the economy, it is more able to grow and meet their expectations.

On the other hand, the increase of the interest rates might be an indication of future trouble for the economy. When the economy is struggling, when the market crashes or a recession hits, the Federal Reserve is able to lower interest rates, which can lessen the impact of the economic downturn. However, if the rates are already near zero and a recession begins anew, lowering the interest rates will have no effect because they are already too low. So, if the Fed raises the interest rates now, the government can start building up revenue so that if and when the economy slows again, they can lower interest rates and pump money back into the economy to give it a jumpstart.

This decision by the Fed, although seen as "historic" by economists, will likely have little effect, at least for the time being. The benchmark federal funds rate, which affects consumer and business loans, has only increased by 0.25%, and the Fed has promised that increases in the future will come slowly. Loans on automobiles and the interests rates on credit cards will probably begin to rise slowly in the coming months, and mortgage rates have already risen slightly. Small businesses, which have been more affected by the Great Recession than their larger competitors, have shown support for the raising of the interest rate, seeing it as a step on the way to a more stable economy. After all, at this point, a quarter of a percentage point does very little to harm business growth and could do much for the future of the economy.

The rate hike has been viewed by many as the turning point for the economy. It may signal an end to the worst of the recession and a new beginning for the economy. The rates, which will grow slowly, at first, are expected to reach 1.375% by the end of 2016, which is pretty low in the grand scheme of things. In fact, the interest rate was over 5% before the Fed started lowering it due to the Great Recession. By some measurements, unemployment is down to 5%, which means that the rate hike could be necessary in order to reduce inflation. Out of fear for issues in the global economy, the Fed decided not to raise rates in September, but since then has decided that the rate hike is exactly what the US economy needs right now.

Some economists believe that the increase is a ploy by the Fed to simply fulfill a promise that was made to raise the rates by the end of the year. Whether this was the Fed's intention or not, it doesn't matter because the rates have gone up and will continue to increase. All agree that the interest rates, when increased again, should go up slowly, so as to not stifle any economic growth that they may cause. While some still fear that the rate hike is a way for the Fed to handle "negative shocks" in the economy, the Federal Reserve Chairwoman, Janet Yellen, assures the American people that the economy appears to be stable for now. She believes that the economy will continue its growth in the future and that the American people should see the rate hike in a positive light.

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Friday, October 16, 2015

Young Adults: Halloween's Growing Demographic

While Halloween was once considered to be mainly for children, statistics show that it has become a major consumer holiday, celebrated by plenty of Millenials and young adults. In fact, it is expected that this year, American will spend approximately $6.9 billion on Halloween and everything it entails. James Peltz, in his L.A. Times article, discusses how spending on such festivities has increased drastically over the years.

It is expected that over 157 million Americans will be participating in the festivities this year. Whether that includes purchasing candy to pass out to trick-or-treaters, or carving a pumpkin and wearing a costume, consumers will be spending a lot of money on their night of fun. The average price per consumer will be around $74, dramatically up from the $48 they spent a decade ago.

Spending, while high on Halloween, is still nowhere near the level during holidays like Christmas, Thanksgiving, Mother's Day, etc. However, for some businesses like costume shops and amusement parks, Halloween provides a significant portion of their yearly revenue. Most of the pumpkins grown in California are used for Halloween, thereby providing a reliable source of income for farmers in the San Joaquin Valley.

Some costume stores like Party City and Spirit Halloween open specific stores only for the six weeks preceding the holiday, thereby getting the most bang for their buck. Even though Party City has year-round stores, Halloween is their biggest season, bringing in about 25% of their annual sales. Even "Knott's Scary Farm" and Six Flags' "Fright Fest" have been known to encompass 15% of the total number of visitors to each amusement park in a given year. American consumers spend over $2 billion in candy alone per year. Generally, Halloween has become very profitable for an array of different kinds of businesses.

Even while consumers reuse decorations and costumes purchased in past years, they can't avoid spending on perishable items like food, candy, and fresh pumpkins, Research has even found that as involvement in social media has grown, so too have holiday-related costs. People share costume ideas via Facebook, Pinterest, and Twitter, alerting friends to sales at certain stores. Even more so, young adults, especially Millennials, tend to participate as a group, purchasing matching costumes and attending themed parties, all of which can be shared around the world by social media.

Peltz sees that nationwide spending on the festivities has doubled in the past 10 years. He believes that it is quite likely due to the technological era in which we live. As new devices and new movies/television shows enter our world, we have so much more to use in the celebration. Sure, kids are still participating in the holiday, but Peltz shows that Millennials make up the largest proportion of participants, and he believes that this trend will continue to hold true for many years to come.

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Friday, October 9, 2015

Disney Prices Soar Due to High Demand

Back in 1955, when Disneyland first opened its gates, the one-day admission price for an adult was $3.50. After inflation adjustment, that price would be about $31 today. While that admission price included only 8 ride tickets, extra tickets could be purchased for 35 cents each. To put that in perspective, If a visitor to the park wanted to go on every single one of Disneyland's original 38 rides, it would have cost about $65 in today's money, a stark contrast to the current admission price of $99. In his article, Michael Hiltzik of the L.A. Times investigates some of the reasons why Disney's prices have so greatly outpaced inflation.

Most recently was an increase in the price of Disneyland's unrestricted annual pass, from $779 to $1049. This nearly 35% increase has even the most loyal customers accusing Disney executives of greed, especially since very few new attractions have been added to the park which might help make visitors consider the raised price worthwhile. According to Hiltzik, however, the decision to raise prices is probably not greed-based. Hiltzik believes that Disney's reasons are far more logistic than economical.

Even though Disney's average price of $99 for admission may seem high, especially when measured against the inflation rate, Disneyland still has thousands of visitors per day, from Southern California as well as the rest of the country and the world. Unfortunately, since Disneyland is a park on a limited plot of land, they have a maximum number of guests they can accept at any given time. Sometimes, especially during summer and the holiday season, when people have time off of work and school, Disney has had to close its gates and turn away potential customers simply because it was at maximum capacity.

Hiltzik thinks that this may be why Disney is continuously raising prices to seemingly outrageous levels. Since the $99 cost doesn't seem to be enough to reduce demand, Disney may be raising prices in the hope that people will have to save up money longer and therefore not come to the park as often. While it is not Disney's intention to force customers away, when the park can only house a certain number of people without causing a fire hazard, it needs to find some way to reduce the demand while still maintaining income.

This demand-controlling measure, while upsetting many customers, is not likely to reduce demand as much as some might think, says Hiltzik. While Southern Californians, one of Disneyland's target demographics, may reduce their visits, analysts expect that tourists and other visitors will still bring in enough for Disney to make the same amount of money, if not more, than before while also preventing overcrowding. It's a win-win situation for Disney and for those who can afford the higher prices. As the prices go up, the amusement park will have fewer people, thus enabling visitors to be able to go on more rides and see more attractions without waiting in long lines.

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Tuesday, May 19, 2015

Viewers Dropping Cable for Cheaper Over-the-Air Options

5/10/15 - As many remember quite well, television of the mid-1900s consisted of a few channels for each of the major broadcasting stations: ABC, CBS, and NBC, among some others. Mainly due to the advent of cable and satellite television providers, modern television has hundreds of channels with content ranging from news to information to entertainment. Television has grown exponentially, but the downside of having so many channels is that prices have skyrocketed. Stephen Battaglio, in his L.A. Times article, discusses a recent phenomenon by which many consumers, unable to afford high-priced television packages, have “cut the cord” and gone back to the television choices provided by bunny-ear antennas.

Watchers of recent years have developed their own system by which they are able to watch all of their favorite shows at a fraction of the price for cable. They use “over-the-air” antennas to watch shows on FOX, CBS, ABC, and NBC for free, and use internet streaming programs like HBO Go, Hulu, and Netflix to watch a variety of other content. Since internet is already a necessity in most homes, this method cuts costs significantly.

Already, about 12.3 million homes rely only on over-the-air broadcasting for their television needs. While this is only 11% of total television users, this trend is a warning signal for cable and satellite providers. As television subscriptions go down, internet usage increases dramatically. Battaglio's sources suggest that cable companies recognize this fact and use it to their advantage. Many such companies are beginning to offer broadband internet service to serve as an alternative to customers while more and more households drop television service.

Price seems to be the big issue for most television watchers. Since cable companies are unable or unwilling to offer prices comparable to those of internet providers, the decision is made easy for many consumers. TV-Internet bundles seem to be the way of the future, but this could lead to problems regarding the FCC's ruling about net neutrality. With the new rules, internet providers are forced to give the same internet speeds and connectivity to all users. Unfortunately, this could take away much of the competitiveness between internet providers and reduce their ability to make economically effective partnerships with television providers.

Internet-based television will likely become more common in years to come, as it is the most economically feasible option for most families. What us the point of spending more money to get the same programs? Battaglio predicts that many people will begin to transfer over as they realize that having a cable or satellite connection is not the only way to access their favorite shows.

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Maintenance Issues at California's Refineries Lead to Gasoline Price Increase

5/1/15 - Drivers throughout California have been noticing gas prices climbing swiftly over the past few weeks, and they don't like it. In the last week by itself, prices have gone up by almost 34 cents, 6 cents of which happened over the course of a single day. Is this due to the state of the economy, or to supply-and-demand, or due to something much harder to control? Samantha Masunaga and Andrew Khouri, in their L.A. Times article, conclude that the increasing prices are mainly due to mechanical issues in gasoline refineries around the state.

California's refineries produce most of the gasoline used within the state, since production and delivery of California's “cleaner-burning blend” can be too expensive for out-of-state refineries to consider it economically viable. Furthermore, since the refineries produce as much gasoline as possible, any break in the production chain can cause massive issues throughout the system. Even if one factory would have to close down for repairs, the amount of gasoline in California would fall, making the available gasoline that much more expensive. The system leaves very little room for delays.

Unfortunately, refineries have been forced to stop or lessen production in order to perform maintenance work, whether planned or otherwise. After a February explosion at Exxon Mobil Corp.'s refinery in Torrance as well as some other, minor, issues elsewhere, the supply of gasoline is running low, thus forcing up the prices. Although the oil-refining companies are producing less, they still have contracts that obligate them to provide a certain amount of gasoline to customers, such as gas stations. In order to do this, they are forced to pad their supplies with purchases of gasoline from other refineries.

Many are upset about the price increases mainly due to the shock of it. When the price of a tank of gas increases by $20 to $30 in a month, it is hard to see it coming. To make matters worse, companies that purchase gasoline from other refineries during a time of low production try to keep such transactions secret, so as to not case a “pop” in the market. On the other side of the argument are the average Californians, who use gasoline and want some way to be able to predict when prices will go up. When a company has to purchase gasoline from another refinery, it is pretty obvious that they are having some issue with production.

The average person has had to cut down on certain “unnecessary” expenditures in order to put more money toward filling up the tank. Some have been forced to cut items when grocery shopping, and others have stopped eating out at restaurants. While gasoline prices are still, on average, below what they were this time last year, some areas are feeling far worse effects. A big cause of this, as Khouri and Masunaga point out, is that the market full of secrecy. If people know when companies are planning to purchase large amounts of gasoline from other sources, they will be able to more easily predict fluctuations and therefore plan out their gasoline purchases in a more beneficial manner. Gasoline has almost become like stocks, constantly changing and difficult to predict successfully. That could all change if refineries develop some transparency and give customers a fighting chance.

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California Employment Rates Rising, Mainly Due to Temporary Jobs

4/24/15 - While California's Inland Empire suffered many of the harsh consequences that came with the housing market crash, its economy has been coming back over the past few years. The Inland Empire currently contains one of the fastest-growing job markets in the state, aided mainly by growth in the logistics sector, which involves transportation and storage of goods. While jobs have indeed been added, and unemployment rates thereby lowered, Chris Kirkham's L.A. Times article points out that this growth may not actually be the significant shift it appears to be.

As the ports have gained more use in previous years, Riverside and San Bernardino counties have joined the supply chain of international trade. Strategic locations in these counties have become “inland ports” for goods traveling throughout California and to the rest of the country. The Inland Empire, on the other hand, has plenty of affordable land, which has made it the place for warehouses, in which goods are stored until they get shipped out.

Inventory, transportation, and warehouse jobs accounted for 1 in 5 new positions created in the Inland Empire last year. Job growth is great, but these are not of the ideal type to help the average worker and the economy. Positions in this industry usually pay minimum wage, do not include health benefits, and provide no guarantee as to the number of hours an employee might expect to work in any given week. So, while employees are provided with some source of income, they lack job security and can never be fully prepared to adjust to the ever-changing demand for workers.

Temporary jobs like those in this sector have increased by 35% over the span of 5 years, growing faster than almost any other industry. While such jobs are difficult to keep, Kirkham shows that some who work quickly and efficiently are able to climb the corporate ladder and move from positions of warehouse laborer to inventory manager or sales representative. In the aftermath of the Great Recession, companies care more about precision and speed in order to cut inventory costs. This has caused warehouses to be more like short stops between the factory and the customer, rather than long-term storage spaces for goods.

The logistics industry is a necessary part of international and domestic trade. Goods need to be transported, sorted, and kept track of. The industry needs support, but so do the workers. Kirkham concludes the article with the following claim: the workforce is struggling. What changes might be made to keep the industry thriving while also helping laborers to gain some semblance of structure and continuity, rather than uncertainty and worry?

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Wal-Mart To Increase Minimum Wage to $9 Per Hour

3/13/15 - Statistics show that six out of ten Americans believe that the federal minimum wage should be raised. Many believe the raise is necessary, as a wage of $7.25 per hour is not necessarily enough to live on, especially for individuals trying to support their family. Others believe that if the minimum wage is raised, companies will be forced to lay off some workers, or raise prices on goods, in order to compensate for the extra money being payed to employees. In their L.A. Times articlerticle, Jim Puzzanghera, Shan Li, and Sarah Parvini discuss a recent decision by Wal-Mart to raise their minimum wage and what this decision means for them and their workers in the long run.

After facing intense protests and rallies led by labor groups and increases in state minimum wages throughout the country, Wal-Mart decided to protect its public image and raise its minimum wage to $9 per hour, $1.75 per hour above the federal minimum wage, for around 40% of its employees, starting in April. This will provide about 500,000 Wal-Mart employees a substantial pay increase, and the company plans to raise the minimum wage even more, to $10 per hour, by February 2016.

According to Doug McMillon, a Chief Executive at Wal-Mart, these changes are to help build a stronger business while also providing for the needs of their employees. While the pay raises do place the company in a better light, prevent the federal government from having to propose higher minimum wages, and lower costs incurred by having to continuously train new hires, they will also cost over $1 billion in extra costs during this fiscal year. Shares in Wal-Mart fell 3.2% since the beginning of the fiscal year, but economist Justin Wolfers is confident that the benefits will far outweigh the added costs.

By Wolfers' argument, as an employee's salary increases, so does their productivity. Several companies, including Costco, Trader Joe's, and the Gap, have illustrated this point of view, showing a correlation between happy customers and employee wages well above the federal minimum. Could this just be a matter of correlation versus causation, however?

It makes financial sense for Wal-Mart to increase their wages, and some believe that this may force similar businesses like Target, Safeway, and Kroger to raise wages or risk losing employees. Craig Johnson, president of Consumer Growth Partners, believes that Wal-Mart's changes may convince Target employees to change teams, but he doubts that others will give up good jobs at other stores to join Wal-Mart.

For some, the wage increases are not enough. “Ten dollars is pocket change,” says Sanders Mosley, a current Wal-Mart employee. Many feel that companies can afford to and should pay their employees $15 per hour, rather than the ten to thirteen dollar per hour wages on the high end of the spectrum. Is $10 enough to live on, with the rising cost of living and the improving economy? Maybe, maybe not. Can companies really afford to a minimum of $15 per hour and still keep workers employed and shareholders happy? Probably not. While Wal-Mart and many others are raising their wages, they are careful not to go too far, and thus make sure that happy employees are a benefit, not a net financial loss.

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Plunging Gas Prices May Not Last Long

1/30/15 - Drivers throughout the state and the country have noticed the recent decline in gasoline prices and are hoping that this trend continues for as long as possible. While gasoline was over $3 in most areas a year ago, the cost of gasoline is now at $2 or even less, a nice change for everyone filling up at the pump. Unfortunately, says Don Lee, in his article in the Los Angeles Times, these low prices are unlikely to last long. In fact, he predicts that they will begin to climb within the next few months.

Lee first addresses the main question: why did the oil prices fall in the first place? One of the main answers involves development and usage of new technologies. A somewhat new process called hydraulic fracturing, also known as “fracking,” has become increasingly prevalent in the industry for use in forcing extra oil out of otherwise dry wells. Furthermore, the development of shale oil techniques, which allow for the conversion of organic matter within rocks into synthetic fuels, helps to increase supply.

Following the laws of supply and demand, the increased supply will likely lead to increased demand. This increased demand can give producers of gasoline a reason to increase their prices, which is why Lee expects the price of crude oil to be back on the rise before the year is half-over. Lee does admit, however, that it is possible for prices to stay low, if oil production continues to increase. Otherwise, waning supplies would force prices higher, just as they have done in previous years.

Reduced gasoline prices could have dramatic effects on economies around the world. Countries that produce and export oil, like Iran, Russia, Venezuela, and Nigeria, are likely to suffer because reduced prices mean less income. On the other hand, countries that don't rely on the export of crude oil, like the United States, Japan, South Korea, and China, are predicted to benefit because they pay less for the crude oil they import. Also, their citizens will pay less for gasoline, and will have more money to contribute to the economy in other ways.

Some states in the U.S. Will benefit more than others. Similarly to the situation in the global setting, oil-producing states like North Dakota and Texas will be harmed by low prices, while other states, and the companies within those states, will be unhurt. In fact, the low prices could even lead to an boost in job growth. Even with increases in employment, lowered gas prices could be disastrous in the long run. A lowered price of gas could lower prices for all commodities, which could force the Federal Reserve to increase interest rates. Inflation is a huge risk when dealing with drastic price decreases.

Lee concludes that the huge quantities of oil being produced in Saudi Arabia, which is another factor in the price decrease, may be an attempt by the Organization of Petroleum Exporting Countries (OPEC) to force the United States out of the picture. If Saudi oil prices stay low enough for long enough, it could become economically illogical for the United States to continue producing via shale and fracking. Whatever the true reason for the decline in prices, people are enjoying it for however long it may last.

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Holiday Shioppers Spending Confidently

1/2/15 - According to a retail analytics firm called ShopperTrak, the biggest shopping day of the year is the Saturday before Christmas. But, what is the second-biggest shopping day? Statistics show, at least for 2014, that the second-biggest shopping day of the year is not Black Friday, as some might expect, but rather the Friday following Christmas. As stated in an article by Tiffany Hsu, Andrew Khouri, and Ronald D. White, of the Los Angeles Times, a combination of post-Christmas sales, optimism regarding the slowly-recovering economy, and even the calendar's placement of Christmas on a Thursday, come together to make the day after Christmas the perfect time to shop.

Christmas falling on a Thursday can have quite an impact on retail sales. For many, this turns into a four-day weekend, which could give consumers a full three days to shop. Such a “blockbuster” weekend could end the year with a bang, ensuring the National Retail Federation's prediction that this season's revenue would pull in approximately $616.9 billion.

Even more effective than the holiday's placement on the calendar, though, is the slowly-returning faith of the general population in our local and national economies. With a lowering of gas prices and a slow increase in employment, people find that they have more money to spend on those items they want, not just what they need. Consumers are beginning to have more faith in the continuity of their employment; they feel a good degree of job security. With that sense of job security comes increased spending, as consumers are more willing to make purchases when they feel sure of a steady income.

Retail stores have done well in predicting the amount of inventory they need this year. Instead of purchasing too little inventory and running out, or purchasing too much and having to cut into their bottom lines, it appears that the retailers have done well with their inventory, thus maximizing revenue. Online retailers have improved their on-time deliveries, compared with previous years, thus giving consumers more confidence in ordering gifts through the internet.

The days following Christmas are great for gift card redemption. Knowing this, retailers provide extra discounts, hoping that such gift cards will be used to purchase excess inventory. Store prices are down after Christmas, and wallets tend to be fatter, both of which prod consumers to spend. People seem to be happier with the current direction of the economy, and that is helping the economy even more.

While current discounts will certainly bleed over to the next year, retailers are accepting it as a positive trade-off. The first quarter of the coming year may not bring in as much money as retailers would like, but sources show that the second and third quarters are quite likely to bring great improvement for the economy in the coming year.

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Labor Force Participation Rates Declining

12/19/14 - To the average observer, it would appear that California’s economy is steadily recovering. Unemployment rates are down, and new jobs are being introduced at a constant pace. Yet, in Tiffany Hsu’s L.A. Times article, it is revealed that the labor force is much smaller than it may seem.

Unemployment rates are measured based on the number of people receiving unemployment benefits from the government, not necessarily based on the number of people actually without work. Once someone has given up and stopped looking for work altogether, they are no longer considered “unemployed,” since they no longer qualify for unemployment benefits. So, “unemployment rates” tend to be quite misleading.

According to Hsu’s sources, the more accurate measurement of the labor force’s stability is the “labor force participation rate” – the number of people working or actively looking for work in proportion to the number of working-age individuals in the population. This, compared to the “unemployment rate” is more accurate in that it takes into account individuals who have given up on finding employment. The currently falling labor force participation rate has dramatic implications on the state of the economy.

A drop in the participation rate could mean that the jobs available are not the jobs people need. For many with college degrees and experience in well-paying fields, a plethora of jobs in the fast food industry means very little. Even for those who are willing to “lower their standards” and accept jobs for which they are “overqualified,” like a barista or salesperson, such positions have so much competition that the odds of gaining employment are slight. In the end, many individuals simply prefer to stay unemployed rather than risk losing such government benefits as Supplemental Security Income or Social Security Disability Insurance.

No matter what the reason, a decrease in the participation rate can’t be a good thing. With more seniors continuing to work well into their sixties and seventies, and new graduates looking for work straight out of school, only so many positions are available to recently laid-off workers. If higher-paying positions are unavailable in California, job-seekers will look elsewhere for employment, and that can have consequences.

While a decline in unemployment rates may seem like a positive sign, Hsu shows why this positive impact is limited. Statistics are misleading, but the bottom line is this: we need to get people back into the labor force. The state has been creating new jobs, but mainly in lower-paying fields. Workers, especially those with college degrees, want to work in jobs “worthy” of their skills. Thus, to bring the workers back in, the creation of better jobs must be a priority.

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Low-Paying Jobs Filling the Southland

12/5/14 - According to recent data, job creation in the Southland has steadily been making its way back to higher levels. However, this data can be misleading. While new jobs are being created, thus allowing more unemployed workers back into the labor force, most of these jobs are in food service and retail sales. Such low-paying jobs, while better than nothing, don't provide the kind of increased domestic productivity that our economy so desperately needs. In his L.A. Times article, Chris Kirkham looks into the effects that this trend may have on the ongoing economic recovery.

Kirkham's sources point to two possibilities for this trend: 1) a decrease in the availability of jobs in higher-paying industries; or the more likely option 2) a lack of individuals with advanced education forces such industries to look elsewhere for employees. As Kirkham points out, many of the industries that once provided the opportunity to advance, manufacturing and construction in particular, have gone through changes that allow for a decrease in the amount of necessary employees. New technology, while helpful to society as a whole, removes the necessity of several positions in the industries, thus lessening the availability of such industrial jobs.

More than just the influx of new technology, though, is the fact that most higher-paying jobs require that those holding the jobs have some form of higher education. The bare minimum for these positions is usually a bachelor's degree, but some require further knowledge as gained in graduate school or beyond. The main problem, it seems, is that only 30% of workers in the Southland, compared to over 40% in the Bay Area, have a bachelor's degree, and that just isn't enough to fill the growing need for skilled employees. Without workers to fill these positions, many companies are forced to move elsewhere to find employees.

With a trend toward lower-paying jobs comes a marked decrease in median household income. Just as the Southland has more individuals lacking college degrees, nearly 18% of families in Southern California fall below the poverty line, a dramatic difference from the Bay Area's 11%. According to experts, the way to boost income levels in the Southland is to get more of the population into post-secondary schooling options.

A variety of high-paying jobs are indeed available in Southern California. From healthcare to construction, and everything in between, there are plenty of job opportunities for those with the necessary skills. All we need now is for people to gain those skills.

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FHA Set To Re-institute Quick-Flip Restrictions

11/14/14 - The Federal Housing Administration, a federal agency involved in providing mortgage loans to real estate investors, is set to reinforce restrictions that were lowered in 2010 in an effort to help the weak housing market. These restrictions set a minimum of 90 days for investors who wish to buy a home and “flip” it, by fixing it up and reselling it. The 90 day period between buying and selling is meant to prevent the selling of poorly-fixed houses for “hyper-inflated” prices. On the other hand, forcing flippers to hold onto a house for 90 days raises their costs, which they then have to incorporate into their selling price. An article by Kenneth Harney of the L.A. Times investigates the positive and negative aspects of the FHA's restrictive 90-day flipping period.

By waiving the 90-day flip period in 2010, the FHA enabled investors to buy, fix, and sell houses quickly and at lower cost, thus allowing first-time home-buyers to more easily find homes in a lower price range. These quick-flips benefited both investors and buyers, lowering prices across the board. Because of the decreased restriction, over 100,000 homes were revitalized and sold, thus improving the housing market.

This improvement is the reason for the FHA's reinstitution of the 90-day flip period. The waiver program has done what it was meant to do: it stimulated home sales, thus stabilizing the market and allowing newcomers the chance to become home-owners. The program has worked relatively well so far, but such a program always has its possible dangers.

In the past, before the 90-day period existed, investors would commonly resell seemingly well-maintained houses, which were nothing more than run-down homes with a fresh coat of paint. This would lead to buyers defaulting on their mortgages, and the FHA would be forced to cover the losses. By forcing investors to take at least 90 days in fixing the houses for resale, the sellers are encouraged to actually do a decent job on the construction.

Whether the restrictive 90-day period is a good or bad thing is a matter of opinion. Yes, forcing flippers to hold onto a property for longer than they need to would raise sale prices, but allowing quick-flippers to sell dilapidated properties at synthetically-high price would also hurt the housing market. The main point addressed in Harney's article is this: whether you like it or not, the FHA has made its decision. The waiver program will stop at the end of December, and the 90-day resale period will come back into practice at the beginning of 2015.

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Low Supply + High Demand = Price Increase

10/31/14 - Southern California rental costs are on the rise, and there's nothing we can do about it. According to a recent study cited in Tim Logan's L.A. Times article, rent prices throughout the Southland are poised to rise over 8% in the next two years. This is due partially to a surge in job growth as well as a shift from home ownership to rental.

While Southern California has long had issues in providing enough rental housing, the recent rise in demand is far surpassing the rate of new construction. The study shows that vacancies remain roughly the same, since the higher rent prices, combined with roughly unchanged income, make for a situation in which renters can't afford the cost of renting.

This trend, predicts the study, will lead to the mass exit of industrial jobs from Southern California. Without affordable housing, businesses can't afford to remain open or open new factories in the Southland. Logan's source even compares California's current stance to that of Detroit in its heyday: a strong housing market, which could fail as soon as industrial jobs move elsewhere.

As Logan discusses in the article, this future failure could be prevented with the right policy initiatives. From lowering restrictive and costly requirements on new construction to speeding up the approval of building permits, Logan presents evidence that shows how policy-makers could make housing more affordable and, at the same time, keep jobs close at hand.

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Los Angeles: A Leader in Technology

10/8/14 - When many people think about the relationship between California and technology, Silicon Valley tends to be the first connection to jump into their minds. Santa Clara County, home to Silicon Valley, does indeed have plenty of technology-based jobs, but is it really Number One? According to Tim Logan's article in the L.A. Times, the real leader, at least in sheer numbers, is Los Angeles County.

A study performed by Los Angeles County Economic Development Corporation produced results showing that L.A. has over 368,000 jobs in the technology sector, more than both Santa Clara's 313,000 and Boston's 361,000. While Los Angeles was once a powerhouse for careers in entertainment, jobs involving technology, including aerospace, architecture, engineering, and software design, have become much more common in the Los Angeles of today.

Not only is the number of jobs in technology growing; the pay rate for these careers is on the rise as well. Jobs in the high tech industry can pay approximately $87,000 per year, a difference of over $30,000 compared to the lower-paying jobs in non-technological industries. As Logan's article states, while 9% of the country's jobs are in high-tech industries, 17% of all wages in the country go to those employees in such industries.

In summation, Los Angeles is in the midst of a technological boom. With the push for faster production, in a world of instant gratification, technology is the way of the future. As people need the creation of newer innovations, high-tech industries will continue to grow. With the evolution of newer technologies and better jobs, this trend may, in the long run, have a dramatic effect on the economy as a whole, not just for those individuals in the high-tech industries.

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Lowering Interest Rates: A Continuing Trend?

7/14/14 - Interest rates are a large part of measuring an economy's strength, stability, and ability to recover. For the average American, there is no ideal interest rate; it all depends on one's status. For older Americans, relying on the interest accrued from a pension fund or savings account, low interest rates can be devastating, helping very little to increase their principal investment. On the other hand, low interest rates can mean lower mortgage rates, more affordable loans, and improvement of the stock market. In his article, Tom Petruno of the Los Angeles Times investigates interest rates, their effect on the economy, and predictions of future changes.

In most countries, the interest rates are controlled by a main federal banking organization: the Federal Reserve, the European Central Bank, or the Bank of Japan, to name just a few. These organizations command changes in the short-term interest rate, and as of recently, have been holding them as low as possible, in an attempt to stimulate economic growth in the form of real estate, corporate loans, and stock market investment.

Although the Federal Reserve publicly predicts interest rates to be up to 2.5% by 2016, several members of the policy committee remain skeptical as to the magnitude of this rate increase. While they disagree as to the amount, they seem to concur as to one main idea: America of the post-Great Recession era will take quite a while to regain its previous economic stature. Of the many sources Petruno cites in this article, one message stands out: don't rely on a return to “normal” interest rates, for the economy still has a ways to go.

While central banks control short-term interest rates, such long-term rates as on bonds are affected more by the principle of supply and demand. As demand for bonds decreases, the banks offer higher interest rates as an incentive to increase demand, and as demand increases, banks have more leeway to lower interest rates without affecting sales too drastically. Thus, the interest rates on bonds have been falling lower and lower due to increased consumer demand for such “safer” investments.

According to Petruno, even though interest rates have been at all-time lows, inflation could reverse this trend. As prices and wages increase, long-term interest rates could be driven up markedly by bond investors. According to the Federal Reserve, the current national inflation rate is at target levels, around 2%. While some analysts believe that the inflation rate will continue to increase, in the long run, it appears to remain steady, especially given that wages aren't increasing along with the costs of goods and services. Due to high unemployment, and a dramatic shift to more part-time work, the current rise in prices is predicted to decrease, given that lower wages can't fuel a sustained increase in costs.

In concluding the article, Petruno brings up the following point: while the funneling of money into central banks has not, as of yet, triggered a dramatic improvement in the national economy, such an improvement due to this money could have negative consequences, namely high inflation. It seems like the solution to fixing the American economy relies mainly on time and patience. Interest rates are slowly climbing, and the economy appears to be healing, albeit slowly. Thus, all we can really do is watch and wait.

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The Economy: Looking Up?

7/7/14 - Looking around, seeing homes facing foreclosure, businesses having to shut their doors, and unemployment rates through the roof, one might think that the American economy is struggling as much as ever. However, according to a recent article by Don Lee of the Los Angeles Times, things may not be quite as bad as they seem.

Sure, America may have a 6% average unemployment rate and recent college graduates may have trouble finding work, but, compared to most other countries, we seem to be doing well. The average income of an American citizen far exceeds that of a Chinese citizen, and even with the recession taking its tolls, the United States leads the world in labor force growth. More and more individuals enter the workforce every day, and with them comes the promise of increased production, and effectively, economic stimulation.

Lee's statistics show that while job opportunities have decreased dramatically in such middle-of-the-road fields as manufacturing and construction, employment has risen markedly in positions of both unskilled labor (restaurants, retail outlets) and highly skilled work (computer design, healthcare). In summation, Lee implies that one of the greatest factors in assisting the American economy back to its future glory is the ever-continuing addition of young adults, recent college graduates, into the labor force. It is those young adults who innovate, who expand the diversity of the workforce, who invest in capital such as real estate, and thus, it makes sense that these individuals are the “missing ingredient” in America's future economic recovery.

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