Real Estate, The Economy, and News: Unemployment

Showing posts with label Unemployment. Show all posts

Friday, August 19, 2016

Proposed Changes by LA City Council to Expedite Permitting for Small Businesses

Small businesses in Los Angeles have, for a long while, been facing many difficulties in getting started. Local and city-wide ordinances make it a very long and expensive process to open a new business, especially a restaurant or similar establishment. The main complaint among those trying to get their foot in the door is that they are required to work with and submit paperwork to various departments within the city government that don't necessarily work closely together. In several instances, an aspiring business owner worked with one department for a while to get their plans approved, only to find out from another department that their plans will be rejected due to insufficient parking. Fortunately, according to Amy Edelen's L.A. Times article, members of the Los Angeles City Council are looking to introduce a new plan to make the process faster and easier for all parties involved.

Even for restaurants that already exist, the renewal of a conditional use permit, which is required to get a liquor license, can take a year, between actually submitting the documentation and waiting for it to be approved. Councilman Mitch O'Farrell has taken the first steps toward speeding up the process, by proposing a plan that would create a new department in the city government designed specifically to deal with small businesses and create that connection between all of the other departments. O'Farrell believes that the new department will be beneficial because it will allow new business owners to sit down with a representative of City Hall and spend just a few minutes planning out a checklist of all of their requirements and an approximate timeline.

Too many potential business owners have been forced to give up before ever opening. Small businesses contribute greatly to the economy, so if the process isn't improved, more potential employees will be laid off and new jobs will become much harder to find. Even renewing a permit can be a tiresome and costly process, especially in areas where rent is high. If the permit takes a while to be approved, the business owner is forced to pay rent for months when the business isn't open or making any money. While representatives from the Department of Building and Safety claim that the permitting process isn't nearly as long as people complain, others claim that the delays are due to the convoluted nature of the various departments. With O'Farrell's plan, at least some of that confusion should be resolved, which should help to speed things along.

Even if a business already existed on the property, if the business changes from an office space to a retail establishment, under current regulations, a "change of use" is triggered. That means that the entire process of starting a business has to go back to the beginning as if the original business had never existed. While most of the complaints about the process are related to new restaurants, analysts hope that the new rules will help all small businesses to get their start. O'Farrell believes that the initiative will make the process more straightforward, and as long as it is approved by the City Council, the changes are expected to begin by the end of the year. As O'Farrell said, "Behind every empty storefront, there's a story." Hopefully, the City Council will approve his plan and help make those stories into realities.

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Friday, May 29, 2015

Potential Issues Caused by Inflation Indexing

5/29/15 - The national minimum wage was first created by Congress in 1938, under the Fair Labor Standards Act (FLSA). It was developed to protect workers and ensure that they receive some standard level of pay for their hourly labor. The FLSA banned child labor, set a maximum workweek of 44 hours, and made the minimum rate of pay 25 cents per hour. As inflation has made prices for everything else increase, the minimum wage has increased as well, to its current $7.25 per hour. Many states, however, have their own minimum wages, with some as high as $9 or $10 per hour. In a very controversial decision among business owners and economists, the Los Angeles City Council recently started drafting a plan that would raise the minimum wage annually, raising it to $15 by 2020 and even higher in years to come. Tiffany Hsu and Andrew Khouri, in their LA Times article, address the debate over the wage increase, describing the points made on both sides of the argument.

Raising the minimum wage has always been a difficult undertaking. Through this plan, the minimum wage would go up automatically in response to inflation, which would benefit workers. Unfortunately, inflation also makes rent increase, which will make it more difficult for entrepreneurs, especially owners of small businesses, to be able to afford the higher wages. This would force them to either raise prices or lay off workers. However, prices can only go so high before consumers go elsewhere to make their purchases. This will affect the small businesses most drastically since larger businesses have more flexibility to lower prices without losing as much profit. This competition could potentially lead to a clearing of the market, forcing small businesses out.

This procedure, called inflation indexing, seems to be working well for the twenty-or-so localities with their own wage policies, according to UC Berkeley's Institute for Research on Labor and Employment. Inflation indexing allows the wage to respond directly to increases in the cost of living, without the need for intervention by policy-makers. In an ideal sense, indexing would increase the wage in a gradual manner, rather than shocking the system with large spikes. Int his way, businesses could adjust more easily to changing costs and respond accordingly. Still, consumers and business owners are wary.

Richard LoGuercio, the owner of Town & Country Event Rentals, would only have to raise wages for about 100 of his 430 workers under this policy. However, he fears that he will have to raise wages across the board to keep everyone happy. If minimum-wage laborers are receiving $15 or more per hour, everyone else will want to be paid more for their contributions to the business. As wages increase for the lowest-paid level in a company, wages in the higher levels will likely increase proportionally, which would force price increases and contribute to inflation. Thus, raising the minimum wage continuously in response to inflation could turn into an endless cycle of wage increases.

All in all, the major effects of the minimum wage increase will come down to the actions of consumers. Businesses could lay off workers in response to their increasing costs, but in the end, they will have to raise their prices. Consumers are only willing to spend so much before they decide that a product just isn't worth it. So, as long as consumers are willing to spend a few extra dollars per product, the effects of the wage increases may not be so bad.

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Tuesday, May 19, 2015

Where Have All the Workers Gone?

1/16/15 - Unemployment rates have been found to be decreasing throughout the country. The labor force participation rate, on the other hand, which shows the number of people working or not working, rather than just those classified as “unemployed,” has also been shown to be on a downward slope. So, what causes the seeming paradox between these two measurements. According to Michael Hiltzik, in his Los Angeles Times article, this discrepancy is due to a significant number of “missing” workers: those workers who are not working, and at the same time are not considered “unemployed.” Where have these so-called “missing workers” really gone?

How is it possible for both participation rates and unemployment rates to go down? Some economists believe that this phenomenon is due to a lack of effectiveness in current governmental policies meant to create and fill necessary jobs. Such economists theorize that the extreme difficulty many people are having in finding work has led them to stop searching altogether, to drop out of the labor force completely. Hiltzik, on the other hand, disagrees with this conclusion, preferring an alternative explanation.

Hiltzik presents sources in the article that seem to show that up to three-quarters of the perceived decline in participation rate is actually due to such factors as the retirement of baby boomers and the enrollment of workers in universities and other institutions of higher learning, both of which have little to do with the state of the economy. Over the past few decades, participation rates have been steadily declining, for both men and women. Statistics show that as the economy improves, the participation rate should improve as well.

Whatever the reason for the current employment trends, it is evident that the economy needs to get better. Hiltzik concludes his article as such: while the participation rate is declining, there is still room for it to recover. Workers may be out of the labor force due to the Great Recession, or lowering wages, or a variety of other possible reasons, but as the economy improves, workers should return.

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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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G-20 Leaders Present Ideas For Economic Reform

11/28/14 - A group composed of the leaders of twenty of the world's largest economies, also called the G-20, held a meeting in Brisbane, Australia, recently, to discuss ways in which each country could contribute to a future restoration of the global economy. An article, by Don Lee of the L.A. Times, summarizes each of the issues addressed by the members of this group, and their plans for change around the world.

The leaders of the G-20 have long been criticized for being slow and ineffective; but, their newest proposition, including over 800 projects designed to add new jobs, may actually cause some positive stimulation to the currently sluggish economies found in most major countries. Sure, these projects may not be perfect, and they will require political support in their respective countries to be enacted, but some plan is better than nothing. The G-20's current plan aims to increase global output by 2% - over $2 trillion and millions of jobs – over the next five years, a hefty goal in and of itself.

While the main focus of this year's G-20 summit was the aforementioned 2% increase in global productivity, several other topics were broached that are usually viewed as less important to the economy, such as anti-corruption legislation, health issues, and climate change. This year's summit in particular made sure to address the fact that there is more to the economy than just jobs and productivity.

The leaders agreed to work on limiting greenhouse gases and other such pollution, while also making commitments to help contain the current Ebola outbreak, both of which have devastating effects on various economies around the world. Tensions at the G-20 summit were stretched thin, as leaders verbally butted heads based on their differing viewpoints regarding such “unrelated” economic principles.

Altogether, though, the G-20 summit seemed to be successful, to a point. No, most of the proposals will not have a dramatic effect on the global economy immediately, but such projects as those suggested at the meeting will definitely have a major effect on the economy of the future. Only these countries and their political leaders can really determine how far away that future lies.

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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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EB-5 Investment Visas in High Demand

10/3/14 - Some foreigners visit and/or live in America on a student visa, others on a work visa, and still others through diplomatic pathways. However, there is another way, not so well known: investment visas. According to an article by Frank Shyong, of the L.A. Times, Chinese citizens that holds a majority of these visas, which are awarded to those investors who put anywhere between $500,000 and $1 million into various United States businesses.

These visas, called EB-5 visas, which allow wealthy foreigners to immigrate into the United States in exchange for a hefty investment, are unfortunately being stretched too thin. According to Shyong, so many of these visas have been claimed in recent times that they have all but run out. While this program has been around for 24 years, this is the first time in its history that investors had to be turned away, simply because there weren't any of the EB-5 visas left to grant. Even after the beginning of the 2015 fiscal year with new visas available, changes to the system could make the application process much longer, and thus drive away potential investors.

Shyong's statistics show that 85% of EB-5 investors come from China, likely pursuing such immigration opportunities due to economic and environmental downturn in their home country. California, where approximately 25% of such investments are carried out, is filling up with new projects that both contribute millions of dollars into the economy and create jobs for many of our unemployed workers.

While EB-5 visas are helpful, both for the investor and for the American economy, the new restrictions being placed on such visas will have quite an opposite effect. Wealthy investors would be forced to wait up to three years for paperwork to be completed, and even then not know whether they would get the visa or not. Those American businesses relying on EB-5 funds would have to grind to a halt, unable to continue work without the investment money they need. Many politicians are pushing for decreased restrictions in the granting of EB-5 visas, due to the incredible amount of good these investments due for the American economy. While bills have been submitted for approval, all we can really do is wait and hope: Americans, hoping for continued investment in our economy, and Chinese investors, hoping to make it off the waiting list and finally be allowed to hold a visa.

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Saving Versus Spending: The Ultimate Conundrum

8/8/14 - In times of financial hardship, it is quite common for individuals to build a wall around their finances, to save rather than invest, and statistics show that consumers have been squirreling away any extra cash on hand, ever since the Great Recession first hit. With low interest rates on savings accounts and constant fluctuation of the stock market, it appears that, at this point in time, consumers have little choice but to pad their checking accounts rather than risk losing their savings. An article by E. Scott Reckard of the L.A. Times discusses the economic implications of this phenomenon of consumer saving as opposed to spending and investing.

Before the Great Recession hit, the average American was known for extravagant spending, for commonly over-drafting his/her checking account, and for holding very little savings in a “just in case” account. After we were hit hard by the economic downturn, it seems as if consumer saving has gone into overdrive, as if to compensate for their previous lax attitude toward their finances. While this new development in consumer saving is helping individuals to ride out the ups and downs of economic recovery, this situation does not bode well for continued economic stabilization.

According to Reckard, about two-thirds of economic recovery is represented by consumer spending. Thus, if consumers are saving rather than spending, the recovery is doomed to slow, maybe even halt altogether. With more individuals holding onto money rather than funneling it back into the economy, businesses have less capital on hand to hire new employees. While employment-to-active-searcher rates have improved markedly in past months, the so-called employment-to-population rates are still suffering, and these high rates of unemployment make people want to save even more, in fear that one day their employment might also be terminated.

Thus, while this new development is helping consumers to pay off debt and to learn to keep a “rainy day” fund, this cautious practice of high saving and low spending is not having such a great effect on the economy as a whole. However, as Reckard states, with inflation going down and income going up, it may just be a matter of time before consumers decide to invest once again. All in all, the main message is this: consumers have turned their manner of economic thinking on its head. While these sudden increases in responsible spending and lower rates of overdraft should be celebrated on the individual level, the economy now needs to find some other way to help its recovery.

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Unemployment Rates: Going Down?

7/28/14 - A main indication of a recovering economy is a lowering of unemployment rates, and, according to an article by Jim Puzzanghera of the L.A. Times, the American economy may be seeing precisely that trend. According to current statistics, Puzzanghera states, the number of people filing for first-time unemployment benefits is at its lowest since February 2006.

Of course, this only measures first-time claims for unemployment benefits, not continuing claims nor claims from individuals laid off more than once in the term. Thus, all that these statistics really measure is how many individuals have been laid off for the first time and have filed for unemployment benefits. That being said, Puzzanghera also presents statistics to show that the total number of individuals receiving unemployment benefits has dropped to 2.5 million, the lowest since June 2007.

These numbers, however, can also be skewed, as they measure only individuals receiving benefits, not necessarily the number of individuals actually unemployed. The Labor Department doesn't count individuals who are still unemployed but whose benefits have run out, nor does it count individuals who have quit the job search altogether.

While it is true that statistics can be warped, so as to present the data in a more favorable way, it seems that even when such changes have been accounted for, the number of jobless individuals has indeed been going down in recent weeks. The numbers are looking up for the labor force and the American economy, and this may just be the beginning of our ascent from the seemingly bottomless pit into which we were dropped when the Great Recession first hit.

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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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