The BIG Meeting, consumer survey, CPI, NFIB, Training, and Gen Alpha
The Economic News Before THE Meeting
The Consumer Price Index came in as expected. Bummer.
Month over month, the CPI was up 0.4% compared to 0.1% the month before. Oh well.
Core was up 0.3% higher than last month, with expectations of 0.2%.
Year over year, the CPI was up 3.4%, but the core – less food and fuel - was up 2.4%, at expectations and less than last month's 2.5%.
The U. of Michigan preliminary Consumer Survey was also released.
Confidence is back down to 47.8 from 51. Sigh. Hormuz must have been closed when the survey was taken.
Analysts were expecting 51.4.
Compared to a year ago, the survey is significantly lower.
Consumer sentiment is down 13.25%
Consumers' feelings about current conditions are down 15.7%
Consumer expectations are down 11.4%.
Weekly new jobless claims came in where it’s been coming in fairly regularly: 206,000. Over the last 5 years, the most has been 259,000, and the least has been 189,000, with the average of 219,000 since January 2022.
So, employment, i.e., jobs, is holding pretty well; there isn’t any obvious weakness that the Fed is looking for. This may make them feel OK about raising rates.
The National Federation of Small Business – NFIB – issued its small business survey of optimism. The average score for the last 52 years is 98.0. The score for August came in at 98.7, down from 99.8. This sounds more like radio stations than anything else.
Some background: They send out surveys to 5000 businesses. This time around, they received 476 usable responses. There are 10 optimism indexes.
Of the 476, 82% reported they were looking to hire. Of that 82%, 47% reported few or no qualified applicants. Business owners, you are not alone.
31% reported raising compensation.
Capital spending was down slightly, with 53% reporting capital outlays in the last 6 months.
Only 6% thought that sales would be higher over the next quarter. Hmm.
There’s a lot more, but you get the picture. Of the 10 indexes, two were unchanged, two increased (a good thing), and 6 decreased; hence the decrease in the score from the previous month.
The Fed Meets This Week – A Refresher
Who is this mysterious Fed we always keep hearing about?
There are 19 members of the Federal Open Market Committee: 7 members of the Board of Governors in D.C and the 12 presidents of each Federal Reserve Bank, such as the NY Fed, Philadelphia Fed, San Francisco Fed etc.
Kevin Warsh is one of the 7 members of the Board and is the current Chair of the Federal Reserve Board.
Of the 12 presidents, only the NY Fed president is a permanent voting member. Of the remaining 11, only four can vote at any one time. The other seven rotate in and out of the voting committee annually.
So, there are 12 voting members of the FOMC. However, everyone participates in the meeting, and they are polled on where they think interest rates are headed.
I mention this because this week, on Tuesday and Wednesday, they all get together for drinks and hors d’oeuvres.
I’m not sure about the drinks and hors d’oeuvres, but they do get together and discuss whether they should raise or lower the Fed Funds Rate.
That will be the news of the week. Today, it is set between 3.50% and 3.75%, and Friday it ended at 3.63%.
Kalshi has the odds at 82% that the rate will increase, and yes, you can bet on that in the gambling… er, predictive markets.
The CME Fedwatch group has it at 86%.
Some government officials will NOT be happy, but regardless, you may want to adjust your interest expense forecast.
Training
In California, there are so many attorneys that, as a business owner, you have to make sure you cover your bases in areas like human resource management, workplace safety, and employee time reporting, just to name a few.
Those are the obvious categories, mainly because for many businesses, they are inspected and measured by outside vendors or regulators.
Some other areas are less so.
I go down the YouTube rabbit hole from time to time, and this past weekend I watched a segment done by a senior commercial pilot who analyzes plane crashes and incidents.
This particular video was about the overrunning of the runway by an Amazon Prime Air aircraft that collided with two vehicles, resulting in five fatalities.
1,300 feet past the end of the runway. As they say in the military, they were coming in hot.
The analysis from the pilot pointed out 11 instances that, per FAA regulations, would have warranted a “go around”, meaning that the plane should have broken off the approach and circled back to try again. Not suggestions, not guidelines, but mandatory. 11 chances to avoid the terrible end result.
No one on this distribution list is in the aircraft industry, but there are many people who do own companies that, in turn, own vehicles that are operated by employees. Trucks, forklifts, tractors, scissor lifts etc.
Which makes whatever happens to the vehicle the responsibility of the company.
Are you enforcing your own safety standards, or are you letting some items slide? Are you regularly training your employees on safety procedures, equipment use, and rules, and then reprimanding or dismissing them when they aren't followed? Or would that be inconvenient, because then you’d have to find another employee, and right now, they are fogging a mirror pretty well…
Are you inspecting what you are expecting, or is forklift racing mostly harmless and lets employees have some fun?
Sometimes the consequences can be as innocuous as sending a package to the wrong address; nothing serious, but still, the company experiences a loss.
But sometimes, because an inspection was postponed, or an employee wasn’t disciplined or a shortcut was taken that resulted in a blown-out tire, or whatever, there’s an accident on the freeway or in the warehouse.
And that’s when OSHA is going to knock on the door. Actually, I’m pretty sure they are going to stroll right in; there won’t be a lot of pleasantries.
Gen Alpha
Well, I’ve beat up Zoomers for a while, so let's go to the next generation. These are the kids who are ages 1 to 14. The Alphas!
They are the first generation born entirely in the 21st century, and in four years, you will be hiring them.
Assuming AI hasn’t found humans unnecessary.
Unlike their Gen Z counterparts, Gen Alpha is being raised in a world where uncertainty is engineered out of daily life.
GPS tells them exactly where to go and when they'll arrive.
Digital family calendars show every moment of every day.
Weather apps break down forecasts by the hour.
Smart speakers answer every question instantly.
Youth sports apps notify of every schedule change.
And AI will be second nature to them.
If uncertainty is engineered out, what happens when the power goes out and the boss isn’t around?
Did I say you would be hiring them in four years?
It’s a big week for the economy, and the Fed is in the middle of it. It will be interesting to see how many folks vote for raising the rate and if it happens. The market is accepting it as given. I’m not convinced, but Mr. Warsh has been dodging my phone calls.
We are heading into the last quarter, so finalize your 2027 budget, and then ask AI to manage your employees to maximize their talents. Just be careful about using the phrase ‘terminate’. Gemini might take it literally.
Is looking at your phone for directions while you are driving any worse than having The Thomas Guide in your lap, flipping from page to page? Try that one for a conversation starter, and then get off my lawn!
