|
History > 2015 > USA > Economy (I)
Once a thriving mall, Rolling Acres in Akron, Ohio,
is now a crumbling reminder of better days.
Since 2010,
more than two dozen enclosed shopping malls
have been
shuttered,
and 60 more are on the brink, an analyst says.
Michael F. McElroy for The New York Times
The Economics (and Nostalgia) of Dead Malls
NYT
3.1.2015
http://www.nytimes.com/2015/01/04/business/the-economics-and-nostalgia-of-dead-malls.html
A $15 Minimum Wage Bombshell
in Los Angeles
MAY 20, 2015
The New York Times
The Opinion Pages | Editorial
By THE EDITORIAL BOARD
There are many ways to look at the minimum wage increase in Los
Angeles from the current $9 an hour to $15 by 2020 — some hopeful, some
cautionary, all good.
For starters, uncharted territory is rapidly being charted. Los Angeles is the
fourth city, and by far the largest, to enact a $15 minimum in the past year.
The others are Seattle, San Francisco and Emeryville, Calif. (near San
Francisco). A $15 minimum has been proposed in New York City, Washington, D.C.,
and Kansas City, Mo.
Opponents of higher wages — generally, business groups and their political
allies — have raised the same objections in Los Angeles that have been raised
since the dawn of the federal minimum wage in 1938: that higher pay will lead to
layoffs and business closings or business migration. But experience and research
involving actual minimum wage increases indicate otherwise: The added cost of
higher wages is offset by savings from lower labor turnover and higher labor
productivity.
Higher wages can also be offset by modestly higher prices, which haven’t proved
measurably disruptive, in part because minimum wage increases make somewhat
higher prices manageable. Wages can also be raised by paying executives and
shareholders less. Whatever changes employers may have to make in Los Angeles,
the long phase-in of the increase gives them time to adjust.
A challenge will be to ensure that all employers are held to the new higher
wage. California is already one of eight states that prohibit the deplorable
practice of subminimum wages for tipped workers. So waitresses and waiters in
Los Angeles will be eligible for the higher $15 minimum wage along with everyone
else. Policy makers at all levels of government should follow California’s lead
in outlawing subminimum tipped wages.
The restaurant industry, however, will not go down without a fight. The Los
Angeles City Council has pledged to study the potential effect of allowing
restaurants to add a service charge to bills to meet the increased costs. It is
past time, however, to stop coddling an industry that has come to regard itself
as entitled to special dispensation. If restaurants can’t pay their servers the
minimum wage, they need to pay higher earners less or raise prices. If
restaurants are franchises that can’t afford to pay adequate wages, their
corporate parents should share the burden.
California does not index its state minimum wage, currently $9, to keep pace
with price inflation. But in Los Angeles, the new minimum will be indexed to
inflation starting in 2022, when the increase will have been fully phased in for
large and small employers alike. An inflation adjustment is better than no
adjustment, but it would be better to adjust the minimum wage to wage growth,
since wages generally rise somewhat faster than prices.
Perhaps most far-reaching, California is prepared to expose the extent to which
low-wage employers get a free ride on taxpayers. When employers pay poorly,
workers must rely on public assistance, in the form of Medicaid, food stamps and
other programs. Starting in 2016, California will publish the names of employers
with more than 100 workers on Medicaid, and how much these companies cost the
state in public aid. This could help build and sustain public support for higher
wages.
The pay raise in Los Angeles challenges Congress and other states, particularly
New York. In Congress, the latest Democratic proposal calls for a federal
minimum wage of $12 an hour by 2020. That would be adequate, if a bit on the low
side, and a huge improvement from the current $7.25 an hour, the level since
2009. The big problem is Republican opposition to even considering an increase.
On the state level, 21 states that have not raised their minimums in recent
years will be forced to face the fact that being a competitive place to do
business means ensuring fair pay. Opponents of wage increases often raise the
specter of scary “wage islands” caused by businesses decamping to lower-wage
areas. The outcome is likely to be just the opposite. Businesses, especially in
service industries, would prefer to be where customers have money, and that’s
likely to be where wages are rising.
In New York, Gov. Andrew Cuomo, who has recently earned well-deserved praise for
creating a wage board to help raise the pay of fast-food workers, needs to
realize, and quickly, that cities in California have stolen his thunder.
Establishing a wage board to look into fast-food pay is a big step in the right
direction. But it is no substitute for establishing a separate higher minimum
wage of $15 an hour for New York City, and no substitute for going to the mat
for a state minimum wage that is higher than the proposal for $10.50 an hour
currently on the table.
Workers’ share of the economic pie has been shrinking for decades, as the gains
from labor productivity have flowed increasingly to profits rather than pay. A
result has been an economy that is less resilient and more unequal. Low-wage
workers who have been demonstrating for higher pay are leading politicians where
they need to go, and the real leaders among those politicians are following the
workers.
A version of this editorial appears in print on May 21, 2015, on page A26 of the
New York edition with the headline: A $15 Wage Bombshell in Los Angeles.
A $15 Minimum Wage Bombshell in Los Angeles,
NYT, 20 May 2015,
http://www.nytimes.com/2015/05/21/opinion/
a-15-minimum-wage-bombshell-in-los-angeles.html
Income Inequality
Is Costing the U.S. on Social Issues
APRIL 28, 2015
The New York Times
Eduardo Porter
Thirty-five years ago, the United States ranked 13th among the 34
industrialized nations that are today in the Organization for Economic
Cooperation and Development in terms of life expectancy for newborn girls. These
days, it ranks 29th.
In 1980, the infant mortality rate in the United States was about the same as in
Germany. Today, American babies die at almost twice the rate of German babies.
“On nearly all indicators of mortality, survival and life expectancy, the United
States ranks at or near the bottom among high-income countries,” says a report
on the nation’s health by the National Research Council and the Institute of
Medicine.
What’s most shocking about these statistics is not how unhealthy they show
Americans to be, compared with citizens of countries that spend much less on
health care and have much less sophisticated medical technology. What is most
perplexing is how stunningly fast the United States has lost ground.
The blame for the precipitous fall does not rest primarily on the nation’s
doctors and hospitals.
The United States has the highest teenage birthrate in the developed world —
about seven times the rate in France, according to the O.E.C.D. More than one
out of every four children lives with one parent, the largest percentage by far
among industrialized nations. And more than a fifth live in poverty, sixth from
the bottom among O.E.C.D. nations.
Among adults, seven out of every 1,000 are in prison, more than five times the
rate of incarceration in most other rich democracies and more than three times
the rate for the United States four decades ago.
The point is: The United States doesn’t have a narrow health care problem. We’ve
simply handed our troubles to the medical industry to fix. In many ways, the
American health care system is the most advanced in the world. But whiz-bang
medical technology just cannot fix what ails us.
As economists from the University of Chicago, M.I.T. and the University of
Southern California put it in a recent research paper, much of America’s infant
mortality deficit is driven by “excess inequality.”
American babies born to white, college-educated, married women survive as often
as those born to advantaged women in Europe. It’s the babies born to nonwhite,
nonmarried, nonprosperous women who die so young.
Three or four decades ago, the United States was the most prosperous country on
earth. It had the mightiest military and the most advanced technologies known to
humanity. Today, it’s still the richest, strongest and most inventive. But when
it comes to the health, well-being and shared prosperity of its people, the
United States has fallen far behind.
Pick almost any measure of social health and cohesion over the last four decades
or so, and you will find that the United States took a wrong turn along the way.
How did we get here? How do we exit?
As the presidential campaign draws the political debate to our national
priorities, these questions must take center stage. As candidates argue over the
budget deficit and the national debt, debate what to do about income inequality,
address the problem of mass incarceration or refight the battles over the
Affordable Care Act and the minimum wage, they should be forced to address how
their policy wish list adds up to an answer.
Looking at how the United States compares with other nations is illuminating. As
I noted in last week’s column, over the last four decades or so, the labor
market lost much of its power to deliver income gains to working families in
many developed nations.
But blaming globalization and technological progress for the stagnation of the
middle class and the precipitous decline in our collective health is too easy.
Jobs were lost and wages got stuck in many developed countries.
What set the United States apart — what made the damage inflicted upon American
society so intense — was the nature of its response. Government support for
Americans in the bottom half turned out to be too meager to hold society
together.
The conservative narrative of America’s social downfall, articulated by the
likes of Charles Murray from the American Enterprise Institute, posits that a
large welfare state, built from the time of the New Deal in the 1930s through
the era of the Great Society in the 1960s, sapped Americans’ industriousness and
undermined their moral fiber.
A more compelling explanation is that when globalization struck at the jobs on
which 20th-century America had built its middle class, the United States
discovered that it did not, in fact, have much of a welfare state to speak of.
The threadbare safety net tore under the strain.
Call it a failure of solidarity. American institutions, built from hostility
toward collective solutions, couldn’t hold society together when the economic
underpinning of full employment at a decent wage gave in.
The question is, Is there a solution to fit these ideological preferences? The
standard prescriptions, typically shared by liberals and conservatives, start
with education, building the skills needed to harness the opportunities of a
high-tech, fast-changing labor market that has little use for those who end
their education after high school.
Ensuring everybody has a college degree might not stanch the flow of riches to
the very pinnacle of society. But it could deliver a powerful boost to the
incomes and the well-being of struggling families in the bottom half.
And yet the prescription — embedded in the social reality that is contemporary
America — falls short. In contemporary America, education is widening inequity,
not closing it. College enrollment rates have stagnated for lower-income
Americans. Sean Reardon from Stanford University notes that the achievement gap
between rich and poor children seems to have been steadily expanding for the
last 50 years.
On the left, there are calls to build the kind of generous social insurance
programs, which despite growing budget constraints remain largely intact among
many European social democracies. Senator Elizabeth Warren, Democrat of
Massachusetts, for example, is calling for an expansion of Social Security, paid
for by lifting the cap on payroll taxes so the rich pay the same share of their
income to support the system as everybody else.
That may be desirable, though at the moment, our greatest problems are not about
the elderly. And at least for the foreseeable future, it remains a political
nonstarter in a nation congenitally mistrustful of government. Just in time to
kick off the presidential campaign, Republicans in the House and Senate were
working on a budget that would gut Obamacare — most likely increasing the pool
of the nation’s uninsured — and slash funding for programs for Americans of low
and moderate income.
Yet despite the grim prognosis, there is hope. The challenge America faces is
not simply a matter of equity. The bloated incarceration rates and rock-bottom
life expectancy, the unraveling families and the stagnant college graduation
rates amount to an existential threat to the nation’s future.
That is, perhaps, the best reason for hope. The silver lining in these dismal,
if abstract, statistics, is that they portend such a dysfunctional future that
our broken political system might finally be forced to come together to prevent
it.
Email: eporter@nytimes.com; Twitter: @portereduardo
A version of this article appears in print on April 29, 2015, on page B1 of the
New York edition with the headline: Income Inequality Is Costing the Nation on
Social Issues.
Income Inequality Is Costing the U.S. on Social Issues,
NYT, 28 APRIL 2015,
http://www.nytimes.com/2015/04/29/business/economy/
income-inequality-is-costing-the-us-on-social-issues.html
Working,
but Needing Public Assistance Anyway
APRIL 12, 2015
The New York Times
By PATRICIA COHEN
A home health care worker in Durham, N.C.; a McDonald’s cashier
in Chicago; a bank teller in New York; an adjunct professor in Mayfield, Ill.
They are all evidence of an improving economy, because they are working and not
among the steadily declining ranks of the unemployed.
Yet these same people also are on public assistance — relying on food stamps,
Medicaid or other stretches of the safety net to help cover basic expenses when
their paychecks come up short.
And they are not alone. Nearly three-quarters of the people helped by programs
geared to the poor are members of a family headed by a worker, according to a
new study by the Berkeley Center for Labor Research and Education at the
University of California. As a result, taxpayers are providing not only support
to the poor but also, in effect, a huge subsidy for employers of low-wage
workers, from giants like McDonald’s and Walmart to mom-and-pop businesses.
“This is a hidden cost of low-wage work,” said Ken Jacobs, chairman of the
Berkeley center and a co-author of the report, which is scheduled for release on
Monday.
Taxpayers pick up the difference, he said, between what employers pay and what
is required to cover what most Americans consider essential living costs.
The report estimates that state and federal governments spend more than $150
billion a year on four key antipoverty programs used by working families:
Medicaid, Temporary Assistance for Needy Families, food stamps and the
earned-income tax credit, which is specifically aimed at working families.
This disparity has helped propel the movement to raise the minimum wage and
prompted efforts in a handful of states to recover public funds from employers
of low-wage workers. In Connecticut, for example, a legislative proposal calls
for large employers to pay a fee to the state for each worker who earns less
than $15 an hour. In 2016, California will start publishing the names of
employers that have more than 100 employees receiving Medicaid, and how much
these companies cost the state in public assistance.
“The low-wage business model practiced by many of the largest and most
profitable employers in the country not only leaves many working families unable
to afford the basics, but also imposes significant costs on the public as a
whole,” Sarah Leberstein, a senior staff lawyer with the National Employment Law
Project, testified recently before Connecticut lawmakers.
Other states, as well as several cities, including Washington, D.C., have moved
to raise the minimum wage above $10, while local activists in fast food,
retailing, home care, airport services and other low-wage industries have
organized protests to demand $15 an hour. Organizers of the Fight for 15
movement are planning a nationwide wave of protests and strikes for this
Wednesday — April 15.
Adriana Alvarez, a cashier at a McDonald’s in Chicago, is among the people
pushing for higher wages. After five years with the fast-food giant, Ms.
Alvarez, 22, earns $10.50 an hour, well above the federal minimum wage of $7.25.
Still, she depends on food stamps, Medicaid and a child-care subsidy to help get
through the week.
“He eats a lot,” Ms. Alvarez said of her 3-year-old son, Manny, with a laugh. He
also drinks a lot of milk, she said — “a half-gallon every two days” — and
because he is lactose intolerant, he requires a more expensive brand, using up
most of her $80 allotment of food stamps.
Most everyone else she works with — including many 10-year-plus veterans of the
franchise — receives food stamps, said Ms. Alvarez, who started working at
McDonald’s full time when she was in high school.
She depends on Medicaid for her family’s health care, and receives a subsidy for
the day care center where she drops off Manny on her way to work.
With the recovery now well into its sixth year, stagnant wages have increasingly
become the central economic issue and a political flash point.
A report issued last week by the Federal Reserve Bank of Cleveland said that
labor’s share of overall income had fallen to record lows in recent years while
profits have soared.
A handful of powerhouse companies have cited a tightening labor market as the
reason behind recent wage increases, including McDonald’s, which recently
announced a $1 bump over the local legal minimum for its corporate employees.
(The announcement does not apply to the vast majority of McDonald’s employees,
who work in franchises.)
Several economists, including the Nobel Prize winner Joseph E. Stiglitz, who has
written extensively on inequality, credited political rather than competitive
pressures for the decision by some larger fast-food and retail employers to
raise wages.
William E. Spriggs, chief economist at the A.F.L.-C.I.O., said the McDonald’s
announcement was “a response to worker campaigns to increase the minimum wage
and what is going on in legislatures on the state and local levels.”
Denise Rush, a home health care worker in Durham, N.C., often works seven days a
week, returning home near midnight after her two teenagers have already gone to
bed. At $9.50 an hour, her biweekly paycheck totals just over $700, or the cost
of her monthly rent. There is little left for other expenses.
“It’s a crazy dilemma,” she said. “Do I pay the whole bill or do I gas up the
car to go to work?”
Despite receiving coverage for her children’s health care from Medicaid as well
as about $300 a month in food stamps, Ms. Rush, 41, is still struggling. “We’re
talking about basic needs,” she said, including such staples of modern life as a
cellphone to keep in touch with work and her children and a home Internet
connection to allow her children to do their homework.
Her paycheck also fails to pay for the uniforms and fees for the lacrosse,
basketball and soccer teams that Ms. Rush says she believes are essential to
keep her son and daughter occupied and out of trouble while she is working.
Fortunately, she said, the school has helped pick up that tab.
About 48 percent of home health care workers are on public assistance, the
Berkeley researchers found. So are 46 percent of child care workers and 52
percent of fast-food workers.
Even some of the nation’s best-educated workers have turned to taxpayers for
support; a quarter of the families of part-time college faculty members are on
public assistance, the Berkeley researchers found.
“I’m very proud of my doctorate, it was well-earned, but in terms of the work
force, it’s a penalty,” said Wanda Brewer, who lives in Mayfield, a Chicago
suburb, and teaches at DeVry and Concordia colleges. She is paid $2,700 for each
15-week course she teaches. She and her 4-year-old daughter are both on
Medicaid; they also receive $390 a month in food stamps and a child care
subsidy.
She has applied for other jobs at chains like Walmart, Home Depot and Menard’s,
but says she can’t even get a call back because such employers consider her
overqualified.
“When I apply for anything outside education, they laugh at me,” Ms. Brewer
said. “The term professor immediately commands respect. The assumption is you’re
making a fair wage, a living wage, but that is not necessarily so.”
Working, but Needing Public Assistance Anyway, NYT,
APRIL 12, 2015,
http://www.nytimes.com/2015/04/13/business/economy/working-but-needing-public-assistance-anyway.html
McDonald’s Minimum Raise
APRIL 3, 2015
The New York Times
The Opinion Pages | Editorial
By THE EDITORIAL BOARD
The decision by McDonald’s to raise workers’ pay to at least $1
over the local minimum wage offers some help for the 90,000 employees at the
1,500 American restaurants run by its corporate headquarters, but the relief is
minimal and leaves out the far greater number of workers at the company’s
franchise outlets.
On average, the raise for eligible workers will lift pay to $9.90 an hour by
July, up from $9.01, and to about $10 an hour in 2016. It does not apply to
660,000 employees at 12,500 McDonald’s franchises.
The increase follows moves by other low-wage employers but is more limited. It
covers 12 percent of the McDonald’s work force and costs an amount equal to
about 2 percent of profits in 2014. The recent raise at Walmart, to at least $10
an hour, covered nearly 40 percent of workers at a cost of about 6 percent of
Walmart’s 2014 profits.
Clearly, if the McDonald’s raise were a response to the competition for workers,
it would be bigger. And it does not come close to meeting protesters’ demands
for $15 an hour, though the movement to improve fast-food workers’ pay has
helped to push McDonald’s to this point.
One likely motive for giving raises to workers at corporate-run stores is that
McDonald’s is trying to buttress its claim that it is not responsible for pay
and other labor practices at its franchises. Last year, the general counsel of
the National Labor Relations Board disagreed. It found that the control exerted
by McDonald’s over its franchises made it a “joint employer” of their workers.
This week, the N.L.R.B. began holding hearings against McDonald’s and its
franchises over alleged violations of employees’ rights to press for better pay
and working conditions. McDonald’s has said that the joint-employer designation
“improperly strikes at the heart of the franchise system.”
At issue, then, is whether McDonald’s will be allowed to keep maximum control
over franchises while disavowing responsibility for the franchises’ workers. In
recent decades, corporations have increasingly dictated how franchises operate,
while extracting heavy fees and other payments. Those practices have raised
corporate profits and executive pay, but they have squeezed the profits of many
franchisees and, by extension, the pay of the workers.
A fair wage for all McDonald’s workers would be one that allowed them to get by
without food stamps and other public assistance. Research indicates that half of
fast-food workers rely on public aid, with an estimated $1.2 billion a year in
taxpayer dollars going to supplement low wages at McDonald’s. That is money that
should be coming out of corporate coffers and going into worker pay.
A version of this editorial appears in print on April 4, 2015, on page A18 of
the New York edition with the headline: McDonald’s Minimum Raise.
McDonald’s Minimum Raise,
NYT, APRIL 3, 2014,
http://www.nytimes.com/2015/04/04/opinion/mcdonalds-minimum-raise.html
U.S. Economy
Gained 126,000 Jobs in March,
Signaling a Slowdown in Hiring
APRIL 3, 2015
The New York Times
By PATRICIA COHEN
Employers added 126,000 workers in March, a marked slowdown in
hiring, echoing earlier signs that the economy slowed significantly over the
winter.
The unemployment rate held steady at 5.5 percent, and wages rose 0.3 percent for
private-sector workers in March, following a meager 0.1 percent rise in
February.
A survey of economists by Reuters predicted that nonfarm payrolls would increase
by 245,000 workers, with the jobless rate staying the same.
After a year in which job gains exceeded 200,000 every month, the sharp
deceleration in March confirmed other worrying signs in the economy, which grew
2.2 percent last year, lost some momentum in this year’s first quarter,
reinforced by the disappointing jobs numbers on Friday.
The slowdown is likely to reinforce the view among the more dovish policy makers
at the Federal Reserve that interest rates should stay near zero a while longer
because the economy is still not strong enough to stand on its own.
Speaking at a conference in San Francisco last week, Janet L. Yellen, the
Federal Reserve chairwoman, was more cautious in her assessment of the economy
than some of her colleagues at the Fed. Ms. Yellen noted “continued improvement
in economic conditions,” particularly a strengthening labor market, while
acknowledging some of the other anemic indicators.
Durable goods orders declined in February while retail sales were weak despite
increases in household disposable income resulting from lower oil prices,
perhaps because of punishing winter weather in some parts of the country.
Although the trade deficit narrowed in February, the strong dollar, particularly
as compared with the euro, has made American goods expensive for foreign
consumers and been hurting the country’s exports.
Growth in manufacturing is also off to a slower start this year than some
economists had hoped.
But more encouraging economic reports could be found in other quarters this
week. The Labor Department announced that the number of Americans filing for
unemployment last week fell to a 15-year low with 268,000 new claims filed last
week. That brings the four-week moving average — a better indicator because it
smooths out the normal bumps in the road — to an encouraging 285,500.
“The claims numbers simply do not support the idea that the first-quarter
slowdown in growth is indicative of some underlying malaise in the economy,” Ian
Shepherdson, chief economist at Pantheon Macroeconomics, noted before the jobs
report Friday.
Consumer confidence, which faltered a bit in February, recovered in March,
according to a survey by the Conference Board, a business research and
consulting group. Its confidence index rose by 2.5 points, to 101.3.
Housing prices have also continued their slow-but-steady recovery, a result,
economists at the PNC Financial Services Group say, of low mortgage rates,
easier access to credit, and job and income gains.
And there are growing indications that the labor market is beginning to tighten.
McDonald’s, in announcing plans to raise wages for employees at its
company-owned restaurants, cited a strengthening labor market and the need to
keep up with competitors who also depend heavily on low-wage workers. Walmart,
the country’s largest private sector employer, had already announced plans to
raise wages to a minimum of $9 an hour by this month.
Over the last year, employers added an average of 266,000 workers to their
payrolls each month, pushing the unemployment rate to a level not seen since
2008.
The falling overall rate, however, obscures persistent difficulties facing
particular groups of workers.
“The unemployment rate for black communities is at a crisis level, even as the
economy gets closer and closer to a full recovery,” said Valerie Wilson, an
economist at the left-leaning Economic Policy Institute.
The unemployment rate for blacks is typically twice as high as the rate for
whites, she said, but since the recession, that gap has increased. While white
unemployment dropped to 4.5 percent in the last quarter of 2014, for example,
black unemployment remained at 11 percent. Median hourly wages for black workers
have dropped by 3.6 percent since the start of the recession, falling twice as
much as for whites.
Long-term unemployment remains a problem for older workers. A report issued by
the AARP Policy Institute this week noted that last year, on average, 45 percent
of job seekers aged 55 and older were out of work for 27 weeks or more.
U.S. Economy Gained 126,000 Jobs in March, Signaling a Slowdown
in Hiring,
NYT, APRIL 3, 2015
http://www.nytimes.com/2015/04/04/business/economy/jobs-report-unemployment-march.html
With So Much Oil Flowing,
U.S. May Be Reaching Storage Limits
March 30, 2015
3:42 AM ET
NPR
Never before in history has the U.S. had so much oil spurting up
out of the ground and sloshing into storage tanks around the country. There's so
much oil that the U.S. now rivals Saudi Arabia as the world's largest producer.
But there's been some concern that the U.S. will run out of places to put it
all. Some analysts speculate that could spark another dramatic crash in oil
prices.
Everyone in the oil trading business needs information. One thing they want to
know these days is how full are oil storage tanks in places like Cushing, Okla.
To find out, ask a professional — someone with eyes on the ground, and in the
sky.
Genscape, an oil intelligence service, uses planes, helicopters and satellites
to track where and how much oil there is all over the world. The company "does a
James Bond approach and flies over the storage field twice a week," says Hillary
Stevenson, a manager at the firm.
In the U.S., you can tell how full some oil tanks are by flying over them and
looking down. Others require a little more sleuthing, "by using IR or infrared
technology cameras and flying over the tanks," Stevenson says.
In Cushing, there are fields of giant storage tanks, some the size of high
school football stadiums. Genscape estimates they're about 70 percent full. As
the storage tanks get closer to capacity, some analysts say that will drive
prices lower.
Nobody knows that for certain and there are lots of scenarios. But as space gets
tight, it gets increasingly more expensive to store oil. That should discourage
speculators from buying oil and storing it, hoping to sell it later for a
profit. If fewer speculators are buying, that means there's less demand and
prices fall.
"We're running out of storage capacity in the U.S.," Ed Morse, global head of
commodities research at Citigroup, said at an event recently in New York. "And
we're seeing the indication of the U.S. reaching tank tops. It's hard to know
where the price goes down, but it does go down."
The price of oil has already fallen from $100 a barrel last summer to $45 or $50
lately. Morse said lack of storage space could drive oil down to around $20 a
barrel.
But there's plenty of disagreement about that. Brian Busch, the director of oil
markets at Genscape, says oil prices could fall, but not that much.
"If we saw crude oil that was trading [in the $30 range], $38-$35, that would
not surprise me," he says.
But Busch says no one truly knows. The recent fighting in Yemen pushed prices
higher. If China's economy started growing faster, that could raise prices. But
an Iran nuclear deal might push oil prices down.
Putting those other factors aside, many experts doubt that the U.S. will get
that close to running out of storage space.
Rob Merriam, who tracks oil supplies for the Energy Information Administration,
says some of the current oil glut is seasonal.
"The analogy I would make is if you were in Boston and you look at the last 3
months and say, 'Oh my gosh, we're going to have two feet of snow every month,'
" he says. "If you took that same straight-line projection, you would say by the
end of August we're going to be under 15 feet of snow."
Just like snow melts as the temperature rises, demand for oil rises in the
summer. People drive their cars more, more refineries are up and running and
Merriam expects that those big storage tanks will get less full.
As far as what all this means for gasoline prices, the EIA estimates prices will
stay flat through this summer. That's still more than a dollar cheaper than last
year.
With So Much Oil Flowing, U.S. May Be Reaching Storage Limits,
MARCH 30, 2015, NPR,
http://www.npr.org/2015/03/30/395776212/with-so-much-oil-flowing-u-s-may-be-reaching-storage-limits
International Business
U.S. Oil Prices Fall to Six-Year Low
MARCH 16, 2015
The New York Times
By STANLEY REED
Oil prices fell to six-year lows on Monday in the face of
concerns that a glut in the United States was outpacing already-brimming storage
facilities.
Additionally, the Organization of the Petroleum Exporting Countries published a
report suggesting that the cartel remained reluctant to intervene to prop up
prices.
The direction of oil prices, which had risen sharply from January lows, has
fallen back in recent days. Traders are now focused on the second quarter of the
year, when demand for oil is traditionally weak because of the end of winter and
scheduled refinery shutdowns for maintenance.
On Monday, the price of West Texas Intermediate crude, the main United States
benchmark, fell about 2 percent to about $44 a barrel, a six-year low, while
Brent crude, the international benchmark, fell by about 2 percent to about $53 a
barrel.
Oil markets continue to focus on OPEC because its members could quickly alter
the markets’ balance by cutting production. But while some members, including
Nigeria and Venezuela, would like to see cuts, Saudi Arabia and its Gulf allies
show little inclination to change the policy they agreed to in the fall: Protect
market share regardless of what happens to prices.
As the price of crude oil fluctuates, why some countries are faring much better
than others. By Quynhanh Do on Publish Date January 27, 2015. Photo by Carlos
Garcia Rawlins/Reuters.
While OPEC’s competence at managing the market was always much in question, the
organization’s decision to stay on the sidelines has opened the way for volatile
price movements.
In the view of market participants, OPEC’s role as the swing producer has moved
to the United States and, in particular, to the producers of oil from shale
rock. These companies have helped increase American production by more than four
million barrels a day since 2009, far more than the combined increases in the
rest of the world.
Many analysts say that with low prices discouraging investment in drilling,
production growth in the United States will level off and even begin to decline.
But when this change will happen is a matter of speculation.
A group of oil companies working in Texas and North Dakota and elsewhere is far
different from the gatherings of OPEC oil ministers that decide whether to cut
or increase supply at meetings in Vienna.
“A new math for oil has emerged,” said Bhushan Bahree, an analyst at IHS Energy,
a business information company in Washington. “The new math is the mix of
variables that shape the pace and level of U.S. oil production as well as
investment in high-cost sources of supply.”
Mr. Bahree said that while the market was trying to find a new equilibrium, “it
is likely to flounder in the search for a new price range.”
OPEC made its own guess about when production might begin declining in the
United States in its monthly oil report, published on Monday. Asserting that the
output of a typical shale well can fall by 60 percent annually and noting the
continued decline in the number of drilling rigs operating in the United States,
OPEC suggested that “a drop in production can be expected to follow, possibly by
late 2015.”
While that might seem like encouraging news to oil producers, it also means that
OPEC, or at least Saudi Arabia, may be in no hurry to cut production at the
group’s next meeting, in June.
The Saudis argue that over time, economics will work in their favor because
their oil costs a few dollars a barrel to produce, while oil from shale,
deepwater wells and Canadian oil sands is much more expensive. The Saudis also
contend that any move to prop up prices now will encourage more investment in
production in the United States and elsewhere.
In a speech on Sunday in Doha, Qatar, Ibrahim al-Muhanna, an adviser to the
Saudi oil minister, also seemed to counsel patience. “We have a long-term view,
and we do not make knee-jerk reactions to headlines,” he said, according to a
text of his speech.
Mr. al-Muhanna said he was confident that demand from a strong global economy
would prove sufficient to soak up supplies and that “prices will firm up.”
OPEC’s report on Monday was less sanguine. The group forecast that demand for
its crude would average about 29.2 million barrels a day in 2015. That is about
800,000 barrels a day less than OPEC said it was producing in February.
A version of this article appears in print on March 17, 2015, on
page B1 of the New York edition with the headline: Prices Fall to 6-Year Low for
U.S. Oil.
U.S. Oil Prices Fall to Six-Year Low,
NYT, MARCH 16, 2015,
http://www.nytimes.com/2015/03/17/business/international/glut-of-oil-pushes-us-crude-prices-to-6-year-low.html
Oil Prices Drop
as Production Hums Along
Despite a Brimming Supply
MARCH 13, 2015
The New York Times
By STANLEY REED
LONDON — Just as the oil market appeared to be stabilizing, the
price of crude resumed its descent on Friday.
The drop, of about 4 percent, came after a report from the International Energy
Agency warning that oil pouring into tank farms in the United States might “soon
test storage capacity limits.”
The agency, whose reports are closely monitored by oil traders, said that
overflowing storage “would inevitably lead to renewed price weakness.” American
production of oil continues to increase despite recently announced cutbacks in
new drilling by producers.
The price of West Texas Intermediate, the American benchmark, fell to around $45
a barrel on Friday, while Brent, the international benchmark, fell below $55 a
barrel.
The Department of Energy has proposed adding five million barrels of oil to the
Strategic Petroleum Reserve. The purchase, which requires congressional
approval, would be added in June and July. But 9.4 million barrels of oil a day
are being produced in the United States. Kevin Book, an analyst with ClearView
Energy Partners, said that the proposed purchase was not an attempt to support
falling prices but instead “appears to derive from a statutory obligation.”
Richard Mallinson, an analyst at Energy Aspects, a London-based research firm,
said that with winter coming to an end in much of the world, the oil market was
most likely due for a spell of softness. Refineries in Europe and Asia will now
be undergoing routine maintenance, leading to a period of weaker demand for
crude. “We are expecting another period of weakness,” Mr. Mallinson said in an
interview.
Additionally, striking refinery workers in the United States reached a tentative
deal this week to end their walkout. Although the walkout affected 12
refineries, it had minimal impact on production as managers and other workers
kept the plants running.
While prices rose to more than $60 a barrel for Brent recently, the fundamentals
in the market had not changed greatly since oil prices hit multiyear lows in the
early part of this year, the agency said in its report. The supply of oil from
the United States, which has increased production by more than four million
barrels a day since 2009 — more than the total output of either Iraq or Iran —
shows little sign of slowing down, the agency said.
At the same time, Russian exports have been rising, and Saudi Arabia, the third
of the world oil production leaders, increased output slightly in January and
February.
The Saudis under King Salman, who succeeded his brother Abdullah in January, are
not showing any signs of readiness to abandon their policy of maintaining
production and defending their share of the market regardless of the
consequences for prices.
Those low prices have helped lift demand for oil to higher levels than
forecasters expected in places like India, Brazil and Indonesia. Even China,
whose economy is widely reported to be slowing, is still lapping up lots of
crude. Overall demand, which is up more than a million barrels per day over last
year, according to Energy Aspects, has trimmed expected inventory builds outside
of the United States.
Stronger-than-expected global demand helps explain the wider-than-usual gap in
pricing between Brent, which is used as a reference in much of the globe, and
W.T.I. With operators in the United States largely barred from exporting crude,
the surplus barrels have nowhere to go, and inventories have risen to near
record levels.
The price snapback did not materialize out of thin air. It was aided by the
frigid weather in the Northeast United States, which raised demand for heating
oil, and other factors like flows into commodity investment funds.
Still, seasoned traders were taken by surprise by the roughly 30 percent rise in
Brent prices to over $60 a barrel since the six-year lows in January. When oil
was scraping bottom, for instance, trading companies like Trafigura Beheer
booked fleets of tankers to use as storage to take advantage of the steep spread
between current prices for crude and those further out. With current prices
having risen sharply, the trading companies have returned most of those ships to
normal duties.
But now the mood is turning. “These props to the market are now starting to
buckle,” analysts at Citigroup wrote in a recent note to clients. If the United
States and other global powers manage to reach a deal with Iran over its nuclear
program, for instance, that could clear the way for a big surge in Iranian
production.
Iraqi production, which was disrupted by weather in February, has also come
back. Exports from Gulf Arab states like the United Arab Emirates and Kuwait are
also running strong, analysts say, aided by aggressive discounting of their
crude.
“There is so much oil out there, and it looks like it is going to build up some
more,” said Michael Lynch, president of Strategic Energy and Economic Research,
a market analysis firm.
Clifford Krauss contributed reporting from Houston.
A version of this article appears in print on March 14, 2015, on page B3 of the
New York edition with the headline: Oil Prices Drop as Production Hums Along
Despite a Brimming Supply.
Oil Prices Drop as Production Hums Along
Despite a Brimming Supply, MARCH 13, 2015,
http://www.nytimes.com/2015/03/14/business/oil-prices-drop-as-production-hums-along-despite-a-brimming-supply.html
Job and Wage Gains
as Americans Rejoin the Work Force
FEB. 6, 2015
The New York Times
By NELSON D. SCHWARTZ
The economy barreled through the last three months with strong
momentum, the Labor Department said Friday, as American employers added 257,000
jobs in January, wage growth rebounded and more people went looking for work in
an improving labor market.
With new figures on the last two months of the year, 2014 turned out to be the
strongest year for job gains since 1999. The government revised upward the
already healthy figures for payroll gains in November and December, increasing
their estimate by 147,000. All told, the economy added, on average, 260,000 jobs
a month over the course of the year.
“This is the best employment report we’ve had in a long time,” said Guy Berger,
United States economist at RBS. “The labor market looks like it’s in really good
shape as we head into 2015.”
The Labor Department said on Friday that the unemployment rate inched up to 5.7
percent, from 5.6 percent. But even that apparent setback was mostly good news,
as it was primarily because more Americans said they were encouraged enough by
their job prospects to actively look for work.
Average hourly earnings rose 0.5 percent in January, the biggest monthly gain in
more than six years, though it followed a disappointing drop in December. Over
the last 12 months, wages advanced at a 2.2 percent pace, significantly ahead of
the inflation rate.
The overall picture was so strong, Mr. Berger said, that the Federal Reserve
might begin its long-awaited move to raise short-term interest rates in June, a
step many economists had been expecting to be delayed until September.
“I still think it will be September, but the odds of a June increase have gone
up somewhat,” Mr. Berger added. “The fact that the economy didn’t lose a step in
January bolsters the case that inflation could hit the Fed’s target.”
Other experts echoed Mr. Berger’s take. “Employment growth is astonishingly
strong,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics, in a
note to clients immediately after the 8:30 a.m. release. “With every indicator
we follow screaming that payrolls will be very strong for the foreseeable
future, wage pressures will intensify.”
A few other signals are still flashing yellow, however. Data last week showed
economic output grew at a slower-than-expected 2.6 percent rate in the fourth
quarter of 2014.
And on Thursday, the government reported a big jump in the country’s trade
deficit in December, as imports surged and exports fell. With the dollar's
gaining strength and the euro and other currencies’ weakening, the trade balance
may continue to weigh on the economy in 2015.
Economists had been looking for a gain of 230,000 jobs last month, but
statistical quirks and the end of the holiday retail season have traditionally
made January a difficult month for experts to get right ahead of time.
Government statisticians try to adjust for the annual exit of workers from
stores after the end of the holiday shopping season, but this factor is always a
wild card. Similarly, snowy weather in some parts of the country can also throw
the numbers.
Another quirk last month was the annual adjustment of population figures used to
calculate the unemployment rate in the household survey, a separate poll from
the data gathered from establishments that produces the monthly change in
payrolls.
In general, the household survey tends to be more volatile than the
establishment survey, but this is exacerbated as benchmarks are adjusted at
year-end.
Along with job creation and the unemployment rate, traders on Wall Street and
policy makers are also closely watching for any sign that long-stagnant average
hourly earnings are finally beginning to rise at a healthy pace.
Last month, hourly earnings rose 0.5 percent, above the consensus forecast of
0.3 percent, compared with a December drop that caught economists by surprise.
Although the unemployment rate has been steadily falling since peaking at 10
percent in October 2009, wage gains have been paltry. January's increase
represents the fastest monthly gain since late 2008.
Even in months when wages did rise more sharply, hopes of sustained gains have
been dashed by weakness the next month, a pattern repeated in November and
December, when a 0.2 percent jump was immediately followed by a 0.2 percent dip.
The Federal Reserve, in particular, has been trying to gauge whether workers’
paychecks are rising and whether the labor market slack built up since the
recession is finally receding.
The central bank has indicated that it will begin the long-anticipated process
of raising short-term interest rates from near zero later this year, but
persistently low inflation and little evidence of building wage pressures could
delay that.
Mr. Berger, the RBS economist, cautioned that more monthly wage gains were
needed before the 0.5 percent gain last month could be declared the beginning of
a trend, but said it was a healthy development after December’s unexpected
decline.
“The data can be noisy but it's hard to find anything negative in this report,”
Mr. Berger said.
Job and Wage Gains as Americans Rejoin the Work Force,
FEB 6, 2015,
http://www.nytimes.com/2015/02/07/business/economy/jobs-unemployment-figures.html
President Obama’s New Budget
FEB. 2, 2015
The Opinion Pages
The new York Times
By THE EDITORIAL BOARD
President Obama’s fiscal 2016 budget, released on Monday, pulls
together the themes and policies set forth in his State of the Union address and
other recent speeches and gives them a force and coherence — an ambitiousness —
that a more piecemeal delivery does not convey.
As a practical matter, the budget details what Mr. Obama believes needs to be
done to help ensure a more prosperous and inclusive future for ordinary
Americans, including greater contributions from corporate America and from those
atop the wealth ladder. Politically, it seeks to frame the terms of the debate
for the 2016 presidential election season. If Republicans simply reject those
terms — if they can’t discuss the ideas and act on them — they may find
themselves, deservedly, struggling for a response.
The core of the president’s 2016 budget is a plan to boost the middle class by
helping low- and middle-income earners pay for education, child care, job
training and other needs, and by vastly expanding investment in the nation’s
infrastructure. These initiatives would be paid for, in the main, by nearly $1
trillion in tax increases that would fall on the wealthy and large financial
institutions over the next decade.
The new taxes, however, are also carefully crafted to spur economic growth more
broadly. A proposed higher rate on capital gains, for example, would discourage
rampant and inefficient tax sheltering, while encouraging investors to deploy
the capital in ways that are more economically productive. Ditto the financial
tax that is structured to discourage speculative activities at banks that
endanger the economy, as well as taxpayers.
The President Obama’s budget also presents a reasonable plan for relieving the
near-term damage from automatic budget cuts, also known as sequestration. Much
like a bipartisan plan that reduced the harm of sequestration in 2014 and 2015,
the proposed budget would raise nonmilitary discretionary spending over the
capped level by $37 billion while offering a dollar-for-dollar increase in
military spending.
Even with those increases, discretionary spending would fall by 2019 to its
lowest level on record as a share of the economy, in data going back to 1962 —
too low to meet the needs of a large economy and a growing population. Still,
easing the sequester as Mr. Obama proposes would help shift the national
discussion to how, when and how much government should spend, rather than how
much it should retreat and retrench from its duties.
Contrary to the Republican charge that the budget is fiscally irresponsible, it
addresses, albeit indirectly, longer-term problems like the financing shortfall
in Social Security — just not in ways that Republicans care to acknowledge. For
example, the budget assumes passage of comprehensive immigration reform, which
would boost the economy by adding millions of newly legalized workers.
Immigration and economic growth are essential to improving the financial health
of the Social Security system.
The president’s budget will not be enacted in whole, and perhaps not even in
part. But enactment is not the only measure of its success. The budget is a
strong discussion draft, detailed in its particulars, unassailable in its aims
and a powerful challenge to the Republicans.
A version of this editorial appears in print on February 3, 2015, on page A22 of
the New York edition with the headline: President Obama’s New Budget.
President Obama’s New Budget,
FEB 2, 2015,
http://www.nytimes.com/2015/02/03/opinion/president-obamas-new-budget.html
How, and Why,
Apple Overtook Microsoft
JAN. 29, 2015
The New York Times
By JAMES B. STEWART
When Microsoft stock was at a record high in 1999, and its market
capitalization was nearly $620 billion, the notion that Apple Computer would
ever be bigger — let alone twice as big — was laughable. Apple was teetering on
bankruptcy. And Microsoft’s operating system was so dominant in personal
computers, then the center of the technology universe, that the government
deemed the company an unlawful monopoly.
This week, both Microsoft and Apple unveiled their latest earnings, and the once
unthinkable became reality: Apple’s market capitalization hit $683 billion, more
than double Microsoft’s current value of $338 billion.
At Apple’s earnings conference call on Tuesday, its chief executive, Timothy D.
Cook, called the quarter “historic” and the earnings “amazing.” Noting that
Apple sold more than 34,000 iPhone 6s every hour, 24 hours a day, during the
quarter, he said the sheer volume of sales was “hard to comprehend.”
Apple earned $18 billion in the quarter — more than any company ever in a single
quarter — on revenue of $75 billion. Its free cash flow of $30 billion in one
quarter was more than double what IBM, another once-dominant tech company,
generates in a full year, noted a senior Bernstein analyst, Toni Sacconaghi. The
stock jumped more than 5 percent, even as the broader market was down.
A far more subdued Satya Nadella, Microsoft’s chief executive, who is trying to
transform the company and reduce its dependence on the Windows operating system,
referred to “challenges.” Microsoft’s revenue was barely one-third of Apple’s,
and operating income of $7.8 billion was less than a quarter of Apple’s.
Microsoft shares dropped over 9 percent as investors worried about its aging
personal computer software market.
Robert X. Cringely, the pen name of the technology journalist Mark Stephens,
told me this week that when he interviewed Microsoft’s co-founder, Bill Gates,
in 1998 for Vanity Fair, Mr. Gates “couldn’t imagine a situation in which Apple
would ever be bigger and more profitable than Microsoft.”
“He knows he can’t win,” Mr. Gates said then of the Apple co-founder Steve Jobs.
But less than two decades later, Apple has won. How this happened contains some
important lessons — including for Apple itself, if it wants to avoid Microsoft’s
fate. Apple, after all, is now as dependent on the success of one product line —
the iPhone accounted for 69 percent of its revenue — as Microsoft once was with
Windows.
The most successful companies need a vision, and both Apple and Microsoft have
one. But Apple’s was more radical and, as it turns out, more farsighted.
Microsoft foresaw a computer on every person’s desk, a radical idea when IBM
mainframes took up entire rooms. But Apple went a big step further: Its vision
was a computer in every pocket. That computer also just happened to be a phone,
the most ubiquitous consumer device in the world. Apple ended up disrupting two
huge markets.
“Apple has been very visionary in creating and expanding significant new
consumer electronics categories,” Mr. Sacconaghi said. “Unique, disruptive
innovation is really hard to do. Doing it multiple times, as Apple has, is
extremely difficult. It’s the equivalent of Pixar producing one hit after
another. You have to give kudos to Apple.”
Walter Isaacson, who interviewed Mr. Jobs for his biography of the Apple
co-founder and chief executive, said: “Steve believed the world was going
mobile, and he was right. And he believed that beauty matters. He was deeply
moved by beautiful design. Objects of great functionality also had to be objects
of desire.”
Like many successful companies, Microsoft nurtured its dominant position, but at
the risk of missing potentially disruptive innovations. “You have to acknowledge
that Microsoft has been successful and it still is,” said Robert Cihra, a senior
managing director and technology analyst at Evercore. “But clearly, they’ve
struggled over how to protect the Windows franchise while not having that hold
them back in other areas. I think even Microsoft would agree that they’ve been
too concerned with protecting Windows over the years, to their detriment.”
By contrast, “Steve ingrained in the DNA of Apple not to be afraid to
cannibalize itself,” Mr. Isaacson said. “When the iPod was printing money, he
said that someday the people making phones will figure out they can put music on
phones. We have to do that first. Now, what you’re seeing is that the bigger
iPhone may be hurting sales of iPads, but it was the right thing to do.”
Mr. Cihra agreed: “Apple laid waste to its iPod business. They’re happier
selling 74.5 million iPhones than they would be even if they still were selling
that many iPods, which they wouldn’t be anyway because someone else would have
cannibalized them.”
Microsoft has repeatedly tried to diversify, and continues to do so under Mr.
Nadella. But “it’s been more of a follower whereas Apple has been more of a
trendsetter, trying to reinvent an industry,” Mr. Sacconaghi said.
In belatedly buying Nokia, Microsoft is offering its own smartphone, the Windows
phone, in head-to-head competition with Apple. While the device has garnered
some critical praise, “I’m not sure consumers need a third option” to the
Android and iOS platforms, Mr. Cihra said. Microsoft’s already tiny share of the
smartphone market has been dropping.
Perhaps more surprising, the Apple model of integrating all aspects of the
design and manufacture of a product, long abandoned by other manufacturers, has
been vindicated. Microsoft was once content to stick to software, ceding
processors to companies like Intel and the PCs themselves to an array of other
manufacturers.
“Microsoft seemed to have the better business model for a very long time,” Mr.
Isaacson said. “But in the end, it didn’t create products of ethereal beauty.
Steve believed you had to control every brush stroke from beginning to end. Not
because he was a control freak, but because he had a passion for perfection.”
Apple “proved that you want to own the hardware and not just the platform,” Mr.
Cihra said. “With the advent of PCs, everyone gave up on that model except
Apple. But if you get that model right, the upside leverage is huge. If you want
an Android device, you can go anywhere. But if you want an iPhone, you have to
go to Apple.
“If you can do that, you get pricing power, and the profitability is
unbelievable.” Apple reported profit margins this quarter of just under 40
percent.
And then there’s Apple’s successful leadership transition to Mr. Cook, who took
over as chief executive in 2011, shortly before Mr. Jobs died. It’s not that
Steve Ballmer, Bill Gates’s immediate successor, and now Mr. Nadella haven’t
done a decent job at the helm of Microsoft. Until this week’s dip, Microsoft
shares were close to a record high. But Mr. Gates is still very much alive, and
remains engaged with the company.
Mr. Jobs “told me that Tim Cook would be an inspiring leader,” Mr. Isaacson
said. “He knew Tim wouldn’t wake up every morning trying to figure out what
Steve Jobs would do. Steve would never have made a bigger iPhone. He didn’t
believe in it. But Tim did it, and it was the right thing to do.”
Some investors worry that Apple could become the prisoner of its own success. As
Mr. Sacconaghi noted, 69 percent of the company’s revenue and 100 percent of its
revenue growth for the quarter came from the iPhone, which makes Apple highly
dependent on one product line. “There’s always the risk of another paradigm
shift,” he said. “Who knows what that might be, but Apple is living and dying by
the iPhone. It’s a great franchise until it isn’t.”
Apple is also running into “the challenge of large numbers,” Mr. Cihra said.
With a market capitalization approaching $700 billion, the number “scares
people,” he said. “How can it get much bigger? How is that possible?” Apple is
already the world’s largest company, by a significant margin.
But he noted that by many measures, Apple shares appeared to be a bargain. “The
valuation is still inexpensive,” he said. “It’s less than 13 times next year’s
earnings and less than 10 times cash flow,” both below the market average.
“Those are very low multiples. They have $140 billion in cash on the balance
sheet and they’re generating $60 billion in cash a year. All the numbers are
just enormous, which is hard for people get their heads around.”
Mr. Cihra noted that Microsoft already dominates its core businesses, leaving
little room for growth. But, he said, “Apple still doesn’t have massive market
share in any of its core markets. Even in smartphones, its share is only in the
midteens. Apple’s strategy has been to carve out a small share of a massive
market. It’s pretty much a unique model that leaves plenty of room for growth.”
Can Apple continue to live by Mr. Jobs’s disruptive creed now that the company
is as successful as Microsoft once was? Mr. Cihra noted that it was one thing
for Apple to cannibalize its iPod or Mac businesses, but quite another to risk
its iPhone juggernaut.
“It’s getting tougher for Apple,” Mr. Cihra said. “The question investors have
is, what’s the next iPhone? There’s no obvious answer. It’s almost impossible to
think of anything that will create a $140 billion business out of nothing.”
A version of this article appears in print on January 30, 2015, on page B1 of
the New York edition with the headline: Overtaking a Behemoth.
How, and Why, Apple Overtook Microsoft,
NYT, JAN 29, 2015,
http://www.nytimes.com/2015/01/30/business/how-and-why-apple-overtook-microsoft.html
Where’s the Empathy?
JAN. 24, 2015
The New York Times
SundayReview | Op-Ed Columnist
Nicholas Kristof
YAMHILL, Ore. — THE funeral for my high school buddy Kevin Green
is Saturday, near this town where we both grew up.
The doctors say he died at age 54 of multiple organ failure, but in a deeper
sense he died of inequality and a lack of good jobs.
Lots of Americans would have seen Kevin — obese with a huge gray beard,
surviving on disability and food stamps — as a moocher. They would have been
harshly judgmental: Why don’t you look after your health? Why did you father two
kids outside of marriage?
That acerbic condescension reflects one of this country’s fundamental problems:
an empathy gap. It reflects the delusion on the part of many affluent Americans
that those like Kevin are lazy or living cushy lives. A poll released this month
by the Pew Research Center found that wealthy Americans mostly agree that “poor
people today have it easy because they can get government benefits without doing
anything in return.”
Lazy? Easy? Kevin used to set out with his bicycle and a little trailer to
collect cans by the roadside. He would make about $20 a day.
Let me tell you about Kevin Green. He grew up on a small farm a couple of miles
from my family’s, and we both attended the same small rural high school in
Yamhill, Ore. We both ran cross country, took welding and agriculture classes
and joined Future Farmers of America. After cross country practice, I’d drive
him home to his family farm, with its milk cows, hogs and chickens.
The Greens encapsulated if not the American dream, at least solid upward
mobility. The dad, Thomas, had only a third-grade education and couldn’t read.
But he had a good union job as a cement finisher, paying far above the minimum
wage, and he worked hard and made sure his kids did, too. He had no trouble with
the law.
Kevin and his big sister, Cindy — one of the sweetest girls in school — both
earned high school diplomas. Kevin was sunny, cheerful and astonishingly
helpful: Any hint that something needed fixing, and he was there with a wrench.
But then the dream began to disintegrate.
The local glove factory and feed store closed, and other blue-collar employers
cut back. Good union jobs became hard to find. For a while, Kevin had a
low-paying nonunion job working for a construction company. After that company
went under, he worked as shift manager making trailer homes. He fell in love and
had twin boys that he doted on. But because he and his girlfriend struggled
financially, they never married.
Then, about 15 years ago, Kevin hurt his back and was laid off. Soon afterward,
his girlfriend moved out, took the kids and asked for child support. The loss of
his girlfriend, kids and job was a huge blow.
“It knocked him to the dirt,” says his younger brother, Clayton, also a pal of
mine. “It destroyed his self-esteem.”
Kevin’s weight ballooned to 350 pounds, and he developed diabetes and had a
couple of heart attacks. He grew marijuana and self-medicated with it, Clayton
says, and was arrested for drug offenses.
My kids would see Kevin and me together and couldn’t believe he had run cross
country with me, and that he wasn’t 20 years older.
Kevin eventually got disability benefits, but he was far behind in child support
and was punished by losing his driver’s license — which made it pretty much
impossible to get a job in a rural area. Disability helped Kevin by providing a
monthly check that he desperately needed, but it also hurt him because he might
have looked harder for a job if he hadn’t been getting those checks, Clayton
says.
Yet it’s absurd to think that people like Kevin are somehow living it up. After
child support deductions, he was living on about $180 a month plus food stamps
and a small income from selling home-grown pot. He supplemented this by growing
a huge vegetable garden and fishing in the Yamhill River.
Three years ago, Cindy died of a heart attack at 52. Then doctors told Kevin a
few weeks ago that his heart, liver and kidneys were failing, and that he was
dying. He had trouble walking. He was in pain.
He was also worried about his twin boys. They had trouble in school and with the
law, jailed for drug and other offenses. The upward mobility that had seemed so
promising a generation ago turned out to be a mirage. Family structure
dissolved, and lives become grueling — and shorter.
Kevin wrote a will a few days before he died. He bequeathed his life’s savings
of $3,500 to his mom for his funeral expenses. Anything left over is to be
divided between his children — and he begs them not to fight over it. His ashes
will be sprinkled on the farm.
I have trouble diagnosing just what went wrong in that odyssey from sleek
distance runner to his death at 54, but the lack of good jobs was central to it.
Sure, Kevin made mistakes, but his dad had opportunities for good jobs that
Kevin never had.
So, Kevin Green, R.I.P. You were a good man — hardworking and always on the
lookout for someone to help — yet you were overturned by riptides of inequality.
Those who would judge you don’t have a clue. They could use a dose of your own
empathy.
I invite you to visit my blog, On the Ground. Please also join me on Facebook
and Google+, watch my YouTube videos and follow me on Twitter.
A version of this op-ed appears in print on January 25, 2015, on page SR13 of
the New York edition with the headline: Where’s the Empathy?
Where’s the Empathy?,
JAN 24, 2015,
http://www.nytimes.com/2015/01/25/opinion/sunday/nicholas-kristof-wheres-the-empathy.html
The Economics (and Nostalgia)
of Dead Malls
JAN. 3, 2015
The New York Times
By NELSON D. SCHWARTZ
OWINGS MILLS, Md. — Inside the gleaming mall here on the Sunday
before Christmas, just one thing was missing: shoppers.
The upbeat music of “Jingle Bell Rock” bounced off the tiles, and the smell of
teriyaki chicken drifted from the food court, but only a handful of stores were
open at the sprawling enclosed shopping center. A few visitors walked down the
long hallways and peered through locked metal gates into vacant spaces once home
to retailers like H&M, Wet Seal and Kay Jewelers.
“It’s depressing,” Jill Kalata, 46, said as she tried on a few of the last
sneakers for sale at the Athlete’s Foot, scheduled to close in a few weeks.
“This place used to be packed. And Christmas, the lines were out the door. Now
I’m surprised anything is still open.”
The Owings Mills Mall is poised to join a growing number of what real estate
professionals, architects, urban planners and Internet enthusiasts term “dead
malls.” Since 2010, more than two dozen enclosed shopping malls have been
closed, and an additional 60 are on the brink, according to Green Street
Advisors, which tracks the mall industry.
Almost one-fifth of the nation’s enclosed malls have vacancy rates considered
troubling by real estate experts — 10 percent or greater. Over 3 percent of
malls are considered to be dying — with 40 percent vacancies or higher. That is
up from less than 1 percent in 2006.
Premature obituaries for the shopping mall have been appearing since the late
1990s, but the reality today is more nuanced, reflecting broader trends remaking
the American economy. With income inequality continuing to widen, high-end malls
are thriving, even as stolid retail chains like Sears, Kmart and J. C. Penney
falter, taking the middle- and working-class malls they anchored with them.
“It is very much a haves and have-nots situation,” said D. J. Busch, a senior
analyst at Green Street. Affluent Americans “will keep going to Short Hills Mall
in New Jersey or other properties aimed at the top 5 or 10 percent of consumers.
But there’s been very little income growth in the belly of the economy.”
At Owings Mills, J. C. Penney and Macy’s are hanging on, but other midtier
emporiums like Sears, Lord & Taylor, and the regional department store chain
Boscov’s have all come and gone as anchors.
Having opened in 1986 with a renovation in 1998, Owings Mills is young for a
dying mall. And while its locale may have contributed to its demise, other
forces played a crucial role, too, like changing shopping habits and
demographics, experts say.
“I have no doubt some malls will survive, but major segments of our society have
gotten sick of them,” said Mark Hinshaw, a Seattle architect, urban planner and
author.
One factor many shoppers blame for the decline of malls — online shopping — is
having only a small effect, experts say. Less than 10 percent of retail sales
take place online, and those sales tend to hit big-box stores harder, rather
than the fashion chains and other specialty retailers in enclosed malls.
Instead, the fundamental problem for malls is a glut of stores in many parts of
the country, the result of a long boom in building retail space of all kinds.
“We are extremely over-retailed,” said Christopher Zahas, a real estate
economist and urban planner in Portland, Ore. “Filling a million square feet is
a tall order.”
Continue reading the main story
Like beached whales, dead malls draw fascination as well as dismay. There is a
popular website devoted to the phenomenon — deadmalls.com — and it has also
become something of a cultural meme, with one particularly spooky scene in the
movie “Gone Girl” set in a dead mall.
“Everybody has memories from childhood of going to the mall,” said Jack Thomas,
26, one of three partners who run the site in their spare time. “Nobody ever
thinks a mall is going to up and die.”
Well aware of the cultural dimensions, as well as the economic stakes, the
industry is trying to turn around public perception of these monuments to
America’s favorite pastime: shopping.
In August, the International Council of Shopping Centers, a trade group based in
New York for the shopping center industry, including mall owners, hired the
public relations firm Burson-Marsteller “to put the real story out there and
stop the negativity around the idea that the mall isn’t going to exist in the
next few years,” said Jesse Tron, communications director for the trade group.
While it is true that many thriving malls will continue to flourish in the years
ahead, it is not clear what the industry can do to prevent more and more malls
from falling on hard times.
About 80 percent of the country’s 1,200 malls are considered healthy, reporting
vacancy rates of 10 percent or less. But that compares with 94 percent in 2006,
according to CoStar Group, a leading provider of data for the real estate
industry.
Nearly 15 percent are 10 to 40 percent vacant, up from 5 percent in 2006. And
3.4 percent — representing more than 30 million square feet — are more than 40
percent empty, a threshold that signals the beginning of what Mr. Busch of Green
Street calls “the death spiral.”
Industry executives freely admit that the mall business has undergone a profound
bifurcation since the recession.
“You see the A-rated malls, the flagship malls, performing very well,” said
Steven Lowy, co-chief executive of Westfield Corporation, which has its roots in
Australia but is now a major global player among mall owners. In the United
States, Westfield has shed properties in the Midwest while focusing on the more
affluent coasts. In Europe, Mr. Lowy prefers wealthy urban centers like London
and Milan.
“Our business is more regional and high-end focused,” he said. “There are
gradients of dead or dying or flat, but anything that’s caught in the middle of
the market is problematic."
Tom Simmons, who oversees the mid-Atlantic shopping center division of Kimco,
another real estate giant, is more blunt. “There are B and C malls in tertiary
markets that are dinosaurs and will likely die,” he said, but “A malls are doing
well.”
But there is a fuzzy line among the categories. White Flint Mall, a once-upscale
destination in the affluent Washington suburb of North Bethesda, Md., is now
sealed and awaiting demolition. A half-hour’s drive to the east, in the
economically and ethnically diverse Prince George’s County, the Landover Mall
was torn down in 2006, leaving empty parking lots and one stand-alone Sears,
which closed in early 2014.
Both properties belong to the Lerner family of Washington, who are also the
majority owners of the Washington Nationals baseball team. Lerner Enterprises
has said it wants to redevelop both sites, but there are few signs of it in
evidence.
Outside Akron, Ohio, the Rolling Acres mall has defied every attempt to
redevelop it and now sits forlorn, with boarded-up windows and trees growing
through cracks in the concrete. Before it was sealed, squatters occupied it and
vandals pilfered copper wire for scrap.
When it was thriving, “people would come from all over in busloads,” said
Timothy A. Dimoff, a retired Akron detective who once advised on security at
Rolling Acres. “Everybody in Akron still talks about the caramel popcorn in the
food court.”
Owings Mills may be on the verge of becoming a dead mall, but it is not in a
dead-end market.
The original owner of Owings Mills, General Growth Properties, sold a 50 percent
stake to Mr. Simmons’s company in 2011, and now Kimco is working to redevelop it
into a hybrid of an open-air shopping center and enclosed mall.
Resurrecting a dead mall isn’t an easy process, however. Demolition of the old
Owings Mills and construction of what is known in the industry as a “power
center,” with big-box stores like Costco, Best Buy and Target, would cost $75
million to $100 million and take two to five years, Mr. Simmons said. He expects
Owings Mills to persist in its current, zombielike state at least through the
end of 2015.
Its demise, he said, was primarily because shoppers were drawn to other
properties nearby like the more upscale Towson Town Center. Although Owings
Mills was originally designed as a luxury property, the mall found it harder to
compete after Saks Fifth Avenue closed its anchor department store there in the
mid-1990s.
“The mall genie was out of the bottle,” Mr. Simmons said, “and it was never
going to come back.”
A version of this article appears in print on January 4, 2015, on page A1 of the
New York edition with the headline: The Economics (and Nostalgia) of Dead Malls.
The Economics (and Nostalgia) of Dead Malls,
NYT, 3.1.2015,
http://www.nytimes.com/2015/01/04/business/
the-economics-and-nostalgia-of-dead-malls.html
|
