From the Financial Times: US inflation rose in February to 2.5%, according to Fed’s target index
US inflation rose to 2.5 per cent in February, according to the metric that the Federal Reserve uses for its target. The increase in headline Personal Consumption Expenditures inflation, from 2.4 per cent in the year to January, was in line with market expectations.
Eurozone inflation fell to 2.4% in March, lower than forecast, bolstering expectations that the European Central Bank will cut interest rates by the summer.
From the New York Times: Jerome H. Powell, the chair of the Federal Reserve, said on Friday that resilient economic growth is giving the central bank the flexibility to be patient before cutting interest rates.
Fed officials raised interest rates sharply from early 2022 to mid-2023, and they have left them at about 5.3 percent since last July. That relatively high level essentially taps the brakes on the economy, in part by making it expensive to borrow to buy a house or start a business. The goal is to keep rates high enough, for long enough, to wrestle inflation back under control.
But price increases have cooled notably in recent months — inflation ran at 2.5 percent in February, a report on Friday showed, far below its 7.1 percent peak in 2022 for that gauge and just slightly above the Fed’s 2 percent goal. Given that slowdown, officials have been considering when and how much they can cut interest rates this year.
While investors were initially hopeful that rate cuts would come early in the year and be substantial, Fed officials have recently struck a cautious tone, maintaining that they want greater confidence that inflation was under control. Mr. Powell reiterated that message on Friday.
Oil Prices: from the New York Times: Oil spike ripples through global markets-The price of Brent crude rose again this morning, at one point topping $91 a barrel. Growing tensions in the Middle East have pushed the global benchmark to levels last reached in October.
That poses a potential problem for President Biden ahead of the election and raises new questions about when the Fed will start cutting interest rates.
Some analysts believe the oil rally is just beginning, creating a fresh inflation risk for central bankers who are struggling to keep price-increases in check. JPMorgan Chase forecast last week that oil would climb above $100 by September. And, in a bad sign for motorists, gasoline prices in the U.S. have climbed 6 percent in the past month just ahead of the North American summer driving season.
Employment: (From Bloomberg)-Here are five key takeaways from the March US employment report, released Friday:
- Nonfarm payrolls advanced 303,000 last month following a combined 22,000 upward revision to job gains in the prior two months, the Bureau of Labor Statistics report showed. The rise exceeded all expectations in a Bloomberg survey of economists.
- The unemployment rate fell to 3.8%. But Black unemployment rose to 6.4% from 5.6%.
- Job growth was led by faster hiring in health care, leisure and hospitality, and construction, while a measure of the breadth of job gains increased. Manufacturing employment was unchanged in March after a downward revision to a loss of 10,000 jobs in February.
- Average hourly earnings were as expected, rising 0.3% from February and 4.1% from a year ago, the slowest annual pace since mid-2021. The participation rate rose to 62.7%, the first advance since November, while the rate for workers age 25-54 ticked down to 83.4%
- Treasuries sank on the news, sending yields higher. Traders shifted the full pricing for a Fed rate cut to September from July. Stocks retained their gains, with S&P 500 futures up almost 0.3% ahead of the open on Wall Street. The dollar climbed.
By Enda Curran-Global Economy Reporter
From the Washington Post: Employers in the United States added 303,000 jobs in March, soaring past expectations and reflecting renewed strength in a labor market that continues to prop up the broader U.S. economy.
The unemployment rate ticked down to 3.8 percent last month, the Bureau of Labor Statistics reported Friday, extending the longest stretch of unemployment below 4 percent in five decades.
The jobs market is charging ahead in 2024, churning out more jobs per month on average than before the pandemic. Job growth in March was notably higher than the average monthly gain over the past year, which was around 231,000, according to the agency.
“This was a very strong jobs report across a variety of metrics,” said Nick Bunker, economic research director at the jobs site Indeed. “It gives really positive implications for the short-term health of the labor market and the labor market’s capacity to bounce back from the pandemic.”
President Biden has been making an election-year case that economic gains made during his administration help all voters, and he trumpeted Friday’s jobs report.
Recent data indicates that Americans’ gloomy mood about the economy has lifted, with consumer sentiment in March up 28 percent from a year earlier, but those better vibes have yet to translate into political enthusiasm. Biden is trailing former president Donald Trump in six of the seven most competitive states in the 2024 election, according to a Wall Street Journal poll from late March, in part because of voter dissatisfaction with the economy.
Major stock indexes all edged up after markets opened Friday, as investors cheered on the good news.
Workers benefited in March from rising wages and more work hours. Average hourly earnings accelerated in March to $34.69 per hour, which is up 4.1 percent from the previous year. Wages have consistently beat inflation since last May after years of falling behind.
Service-related industries continue to prop up the greater economy and contribute to low unemployment that has benefited workers.
Health-care job growth accelerated, adding 72,000 jobs in March largely in hospitals, residential care facilities and nursing homes in a reflection of surging demand from the aging baby boomer population. Government payrolls expanded by 71,000, mostly in local government, as the sector has remained flush with cash.
Leisure and hospitality grew by 49,000 jobs and, in a major milestone, finally caught up to its February 2020 pre-pandemic levels, as demand for dining out and other experiences has continued to swell.
Job growth has also begun to spread into industries that had gone slack over the past year.
Construction added 39,000 jobs in March, more than double its monthly average gain of the past 12 months, surprising experts because that industry tends to be sensitive to higher interest rates. That could be due to the infusion of Biden administration spending on large-scale projects, such as semiconductor plants. Retail added 18,000 jobs, mostly in general-merchandise employers, such as big-box stores.
Still, many rate-sensitive industries appear to remain cautious about hiring as they wait for the Federal Reserve to cut interest rates this year. Employers in manufacturing; wholesale trade; warehousing and transportation; information; professional and business services, which includes parts of tech; and financial services saw little or no growth in March.
The latest job figures will shape the Federal Reserve’s review of how the economy is performing. For the past two years, the central bank’s overwhelming focus has been on fighting inflation, namely through an aggressive interest rate campaign that brought borrowing costs to the highest level in more than 20 years. But officials are also keeping close watch for any signs that their moves have put too much pressure on the economy, such as if the job market starts to weaken or employers pull back, fearing tougher times ahead.
Inflation has come in higher than expected since the start of the year. If that turns out to be a lasting trend, the Fed may end up changing its plans this year for three possible interest rate cuts, which markets expect could start in June.
Consistently, the message from Fed leaders has been that they need more time to see how the data unfolds. Friday’s report was no exception.
Lately, Americans have been spending big on vacations, dining out and entertainment. And that demand is driving employers to hire in those industries.
Hiring in the leisure and hospitality sector is vastly outpacing the overall labor market. Employers made the most hires on record in arts, entertainment and recreation in February, according to a separate report by the Labor Department released Tuesday.
The leisure and hospitality industry has added 458,000 jobs in the past year, accounting for nearly 1 in 6 new jobs across the country.
More than 53,000 restaurants opened last year, up 10 percent from 2022 and exceeding pre-pandemic levels, according to data from the online review site Yelp. That has helped boost hiring across the board, in entry-level positions as well as managerial roles.
Restaurateurs say it is finally becoming easier to find employees after years of worker shortages, relieving the pressure to raise wages. A major pickup in immigration has also helped fill many long-standing openings, with 3.3 million immigrants arriving in 2023, according to the Congressional Budget Office.
99 Cents No More: (From the LA Times) 99 Cents Only to close all 371 stores amid ‘lasting challenges’
City of Commerce deep-discount chain, once a true ‘dollar’ retailer, calls it quits after four decades. By Andrea Chang and Laurence Darmiento
99 Cents Only Stores will close all 371 locations and wind down its operations after more than four decades in business, the City of Commerce discount chain announced Thursday.
99 Cents Only has stores in California, Arizona, Nevada and Texas. The privately held company, which has about 14,000 employees, said it had reached an agreement with Hilco Global to liquidate all of its merchandise and dispose of fixtures, furnishings and equipment at its stores.
Hilco Real Estate is managing the sale of the company’s real estate assets, which are owned or leased.
The announcement by 99 Cents Only reflects a larger weakness in the dollar-store category, said Brad Thomas, equity research analyst at KeyBanc Capital Markets.
Dollar Tree, a Chesapeake, Va., retailer, announced last month that it is closing 600 of its Family Dollar stores this year and an additional 370 in the next few years, he noted.
Rising wages, inflation and higher losses due to shrinkage have reduced profits for retailers in the deep-discount sector, where margins are already extremely low.
99 Cents Only, with its large base of California stores, has been under particular wage pressure, he said. Moreover, it’s at a disadvantage compared with larger chains such as market leader Dollar General, which has a store count close to 20,000 — “a sales base and a store base that is multiple times larger than 99 Cents,” Thomas said.
Last week, Bloomberg reported that 99 Cents Only was considering a bankruptcy filing as it contended with a liquidity shortfall.
Founded in 1982 in Los Angeles by David Gold, 99 Cents Only popularized the single-price retail concept.
At the time, dollar stores were seen as dumping grounds for undesirable products, but the Gold family made the stores bright and well-organized, with high-quality merchandise, including groceries and household supplies.
For years, it remained one of the few true “dollar” stores, with items priced at 99 cents or less or grouped to sell for a total of 99 cents.
That changed in 2008, when — faced with fast-rising inflation, soaring food and fuel prices and a higher minimum wage — 99 Cents Only announced that it was straying from its long-standing price strategy.
Three years later, the company announced that it had agreed to be sold in a deal valued at about $1.6 billion, as investors eyed dollar stores that had grown in popularity during the Great Recession.
In 2013, Howard Gold and the rest of the family management team departed the company.
Today, with stores scattered around Los Angeles County — including in Hollywood, Silver Lake, Mid-Wilshire, Santa Monica, Thai Town, North Hollywood and Glendale — the closure of 99 Cents Only will leave a number of large vacant properties in prime locations.
Fast Food Minimum Wage Increase: (From the LA Times)-Excitement, relief, dread. What $20 an hour means, according to fast-food workers, franchise owners, customers.
A sweeping change unfolded this week inside fast food chains like McDonald’s, El Pollo Loco and Starbucks. The food is the same. But the hourly minimum wage of the workers who serve you is now $20, a notable increase from the previous $16. And the price of that burger or cup of coffee may be rising.
Gov. Gavin Newsom signed Assembly Bill 1228 last year, affecting fast-food chains with more than 60 locations nationwide and more than 500,000 fast-food workers in California. The Times has been regularly covering the wage increase and its potential impacts, including the possibility of price hikes as fast-food operators pass on the increased labor costs to consumers.
We wanted to hear from all sides affected by the new law — primarily workers, but also the franchise owners and customers. We emailed, we called — and we just walked into some restaurants to talk to people. Here’s what they told us:
Workers are excited (plus a little worried)
We asked the workers one basic question: What does the $20 minimum wage mean for you?
Scarlett Arana has worked at an El Pollo Loco in the San Gabriel Valley for about eight months. The 19-year-old said the larger paychecks will be a major help as she struggles with high housing costs and inflation. She said she is literally bringing the money home, where she lives with her family, to pitch in more toward bills.
“I get to not only help out more with rent, but I get to help with other utilities as well [and] groceries,” Arana said. “It’s gonna do really good for us.”
Arana is also somewhat concerned that the higher hourly wage could lead to decreased hours — and that inflation could keep creeping up to where her pay bump flattens out.
“That’s the main thing I worry about,” she said.
Dennise Rodriguez, 20, is the primary wage earner in her family — and the pressure has been intense.
She’s been working at a Wendy’s in the San Gabriel Valley for about a year while juggling classes at Mt. San Antonio College. She’s studying early childhood education and plans to become an elementary school teacher.
“You have to put in so many hours just to reach a certain goal for your rent,” she said from a booth at work, still wearing her drive-through headset. “I have to provide for my school — and school’s expensive.”
Rodriguez lives at home with her parents and younger siblings. Her mother recently gave birth via C-section and can’t return to work yet and her father is on disability after a workplace injury.
“I’m the one who’s bringing in the income,” she said. “So it’s a little hard.”
For Rodriguez, the higher hourly wage will mean less pressure to work 40-plus hours each week, giving her more time to focus on school “or even get a mental break from work and school,” she said.
Still, Rodriguez is worried that her larger paychecks might not stretch as far in the long run “because California itself is expensive.”
“Yeah, the minimum wage is going higher, but then what’s next?” she wondered. “I just feel like, at the end of the day, it’s gonna come back down to everything rising. It’s not really going to be a living [wage].”
Family-run franchises feel targeted
The California Alliance of Family Owned Businesses gave us a statement reflecting how many of their members are feeling. The group said state lawmakers “have singled out family-owned fast food franchise operators to target with wage and regulatory requirements not imposed upon other businesses.”
“As family-owned businesses, we are proud to provide jobs and opportunities for our valued employees but we also want an even playing field,” the statement reads. “The minimum wage for one should be the same for all.”
Mike Mangione, 74, exemplifies what it means to operate a family owned business. He worked at McDonald’s in Chicago in the late 1960s. As a loyal employee, in 1967, Mangione bought a Long Beach McDonald’s with his father.
Now, 57 years later, Mangione owns and operates 19 McDonald’s restaurants across L.A. and the Inland Empire with his daughter, Jessica D’Ambre, and son, Anthony.
For Mangione and his children, being a franchisee is about more than owning McDonald’s locations. Both of his kids have worked in the kitchen and helped with maintenance. They have taken orders and processed payments, before becoming managers and ultimately licensed operators.
“We run it like any other family business,” D’Ambre, 37, said, adding that she knew she wanted to be her dad’s business partner from the age of 5. “I celebrate birthdays with my employees, we celebrate Christmases together.”
D’Ambre feels the new law is like an “unfair target on our backs.”
“It’s not just this giant corporation that runs things,” D’Ambre, who has more than 20 years of experience in the industry, said. “I think that’s where the misconception lies, especially with politicians. They don’t understand the business and the tight margins we run on.”
D’Ambre said she and her family are trying to approach the change from a positive perspective.
“Maybe there are great people out there who never considered working at McDonald’s before and who never considered this as an option but now they will,” D’Ambre said. Instead of laying off workers, she thinks she will “be hiring more people that are friendlier and faster than before.”
D’Ambre said that she doesn’t foresee any layoffs at her locations and those who “work hard and give our customers a great experience are going to be fine.”
It’s too soon to know whether she will raise prices and she will evaluate each location uniquely. Some of her employees “feel excited,” while “there are other people who are more realistic.”
“Are we really helping anybody?” she asked. “I don’t really know.”
Fewer takeout bags, more leftovers
Wearing a blue Dodgers cap and matching jacket, Jose Navarro was enjoying his lunch at the El Pollo Loco in Marina del Rey on Monday.
The 50-year-old South Gate resident had packed leftovers, fearing that the new law might immediately increase the price of his go-to meal: chicken thighs, mashed potatoes with gravy, mac-and-cheese and flour tortillas. But he forgot his lunch at home.
Navarro said he frequents fast-food restaurants during the workweek because it’s easier to eat a warm lunch. He often works outside the office as a customer service administrator at a telecommunications company — and reheating leftovers isn’t always an option. He may have to change habits if prices go up.
“Before, it was like, ah I don’t want to carry it,” Navarro said. But now, he said he is going to ask himself “Is it really worth paying?” Will he have to “cut back maybe a day or two,” instead of relying on eating out most days?
However, when he needs to, he’ll pay whatever the new price is.
“Everybody should make a living wage,” Navarro said. But he also worries owners could react by cutting workers’ hours or laying them off — maybe replacing them with machines.
“What seemed to be a good idea is actually going to hurt the people that [the law is] trying to help,” he said. “But maybe this will be a good example for other states that might be thinking about doing the same.”