What To Expect From The Economy This Week

Look for the number of jobs added to the economy in November to top 190,000 when the Bureau of Labor Statistics releases its employment report this Friday at https://www.bls.gov/ces/news.htm. That will be good news for the economy, but remember: The number will be inflated by including 42,000 General Motors workers returning from their now-ended strike. If the Friday release is much below 190k, that would indicate a slowing economy compared with previous reports.

It will also be of interest to see if the unemployment rate ticks up to 3.7% or not. A bump up would signal a bit of a slowdown. Finally, what happens to wage growth will provide an indication of the degree of tightness in the labor market. Wage growth has moderated since August, despite low unemployment. Perhaps companies are holding the line while uncertainty lingers over whether or how much the economy will slow down in 2020.

Continue reading “What To Expect From The Economy This Week”

Will a Slowing Economy Carry Over into 2020?

Evidence so far indicates that fourth quarter GDP growth will be even slower than the third quarter’s 1.9% gain.

While consumers are likely to spend enough to make it a pretty good holiday sales season for retailers, businesses remain cautious, cutting back their spending on equipment and adding to inventories at a reduced pace. The labor strike at General Motors, though now resolved, forced production cutbacks in both September and October. Manufacturing activity in general is being dragged down by poor prospects for the global economy. Continue reading “Will a Slowing Economy Carry Over into 2020?”

Fed Puts Fewer Interest Rate Hikes in Wall Street’s Stocking

The stock market rallied strongly on Nov. 28 as Federal Reserve Chairman Jerome Powell made a dovish comment. Powell said that rates are “just below” the Fed’s targeted neutral level, which most Fed watchers consider to be 3%. This came after Powell called rates a “long way from neutral” on Oct. 3, provoking a major reaction in the financial markets.

Wall Street read his latest remark as a signal that the once-a-quarter rate hikes will stop sooner than expected. The Fed plan was to raise rates four more times. We expect hikes for sure in December and March, and likely in June. But the September 2019 hike looks to be off the table. Continue reading “Fed Puts Fewer Interest Rate Hikes in Wall Street’s Stocking”

What Businesses Should Do With Artificial Intelligence

Artificial intelligence (AI) improves prediction. AI is computer software that learns, finding complex patterns in massive amounts of data. Improving predictions is obviously very useful for most businesses, with a wide range of applications. For example, AI is helping industries from manufacturing to air travel predict when key equipment or airplane parts will fail, reducing downtime. A servicer of printers and copiers can determine when they will run out of toner, based on how many and what types of print jobs are done. The machines will automatically order more just-in-time toner, preventing waste from replacing toner cartridges too early. Google Translator AI “predicts” (recognizes) equivalent speech in different languages. In all of these examples, the AI gets better as it takes in more data, or “learns.”

But businesses can throw a lot of money at AI simply because it’s the “in” thing. So, owners must improve the odds of success.

First, figure out what problem you want AI to solve. What mission critical information are you dying to know? The problem may not require a solution as complex as AI. Basic snags could simply require statistical analysis, such as linear regression. Another key question to ask yourself: Has AI ever been used before for that application? If not, then being the first may be a tad costly. Run small experiments to determine usefulness before committing to a massive project.

Second, do you have good data to work with? Remember the GIGO principle: If the data are old, unstructured or disjointed, then you’re not going to get good results, period. And you need a lot of data—AI is only useful when it has much to work with because its whole purpose is identifying complex patterns in large data sets. Thousands of data points are a minimum, and millions are best. Also, your data needs to be labelled so a machine can understand what it is. Provide the context that is creating the data from the start so that the AI doesn’t make a boneheaded mistake, such as treating Christmas-time sales as the normal monthly level.

Third, AI learns or evolves with experience in real world operations. It will be wrong at first. So, does the application allow room for growth, or is it so important that it has to be right the first time? AI cannot be perfected solely based on in-house training data.

Fourth, AI requires development—there is no AI “plug and play.” It is unlikely that a company has the expertise to do this in-house. So, finding the right contractor that has the specific knowledge for a particular problem is important. Trusting the contractor is key: AI programs are not very good at explaining how they got their results, so you’ll have to take the contractor’s word for it. Have your experts examine vendors’ results and evaluate both their accuracy and usefulness. Today’s main AI platforms are IBM’s Watson, Amazon Machine Learning (part of Amazon Web Services), Microsoft’s Cortana Intelligence Suite, and Google Cloud Platform. (A website listing a plethora of specialized AI vendors follows below.)

Finally, don’t relegate AI to the IT department. AI will boost worker productivity, but it can also shed light on what lines of business strategy to choose, so CEOs should be fully informed.

Some AI vendors worth a look:

https://appliedai.com/vendors/1

Applications:

Health care: https://www.techemergence.com/machine-learning-healthcare-applications/

Finance: https://www.techemergence.com/machine-learning-in-finance/

Advertising and marketing: https://www.techemergence.com/artificial-intelligence-in-marketing-and-advertising-5-examples-of-real-traction/

What Car Shoppers Need To Know This Year

If you’re in the market for a new ride or might be later in 2018: You’ll find better deals on popular SUVs and crossovers…new or used…if you wait a bit. Manufacturers continue to ramp up SUV and crossover production, so that supply of these popular vehicles may soon outstrip demand. Also, while vehicle sales are off to a good start so far this year, they’re likely to slow later, forcing automakers to rely more on discounting and other buyer incentives. These should approach $5,000 per vehicle, on average.

Given the popularity of SUVs and crossovers, manufacturers are offering more models than ever before, including luxury models. Car-based crossover SUVs are especially prized for their blend of size and practicality. Plus they’re relatively fuel-efficient, so the return of $3 gas won’t ding their popularity. As a result, manufacturers are cutting back on their car models. The Chevy Impala is likely to be cut, and Ford has already announced that it will abandon most of its car models in the next few years to focus on SUV/crossover/pickup truck production. (The Ford F-150 pickup truck is the best-selling model of any vehicle.) Even sedan perennial best sellers Toyota Camry, Honda Accord and Nissan Altima have required incentives to bolster demand. This means that there are likely to be some good deals on car models as the shift occurs, especially full-size and mid-size sedans. Demand for compact cars has ticked up recently as the cost-conscious buyer segment finds fewer low-cost options.

Interest rates are rising, with the rate of the average new car loan expected to jump from 5.0% to 5.5% by the end of the year. However, this is likely to increase the average monthly payment by only $7 over the life of a five-year loan.

For those interested in electric vehicles, hybrids with plug-in capability (called PHEVs) will be the most in demand, according to Jessica Caldwell, executive director of industry analysis at Edmunds. These vehicles have the most flexibility and range, currently. The Toyota Prius Prime, Chevy Volt, Honda Clarity and Ford Fusion Energi are examples. Caldwell expects electrics will account for 4.4% of total sales in 2018. Tax credits of up to $7,500 per vehicle, depending on the size of the battery, make these attractive. But buyers should be aware that the government program may be ending for GM and Tesla electric vehicles this year, unless Congress extends it.

You might want to consider a late-model used car instead of buying new. Jonathan Smoke, chief economist at Cox Automotive, points to record lease returns expected in 2018 and 2019, including more SUVs and crossovers than had previously been the case, so there will be more of these popular vehicles to choose from.

Also consider buying used from rental fleets: Former rental vehicles typically cost 5% to 15% less than the same model sold by used-car dealerships.

Car subscription services are getting attention. Participants can reserve vehicles for shorter periods of time than in leases, allowing members to try many different types and models. However, these plans are still quite pricey.

Will You Have to Pay Sales Taxes on Your Online Purchases?

A pending case before the Supreme Court has many consumers wondering: Am I going to start paying more in taxes to shop online? But you already do, to a certain extent. Amazon, Walmart, Target, Costco, Sears and others have already agreed to collect state sales taxes on online orders. After fighting tax collection efforts for years, Amazon is bowing to the necessity of having a physical presence in every state in the form of distribution centers if it wants to honor its delivery guarantees. That in turn means complying with each state’s sales tax laws.

However, Amazon only collects taxes on its third-party sellers for two states, Washington and Pennsylvania. And many other sellers that do not have a physical distribution network, such as Overstock.com, do not collect either. Such e-commerce businesses have not been required to collect sales taxes since the 1992 Supreme Court case, Quill v. North Dakota, which held that only those businesses with a physical operation in a state had to collect sales taxes from customers in that state. This issue is being revisited in the current Supreme Court case, South Dakota v. Wayfair, which the Court will decide sometime this summer. Continue reading “Will You Have to Pay Sales Taxes on Your Online Purchases?”

Can Online Shoppers Ever Get Both Personalization and Privacy?

“Anonymous personalization,” or the ability to offer online shoppers personalized promotions while letting them remain anonymous to the seller, is the Holy Grail of online retailers, according to Paula Rosenblum, Managing Partner of RSR Research. Retailers like personalization because it can win new customers and make their marketing more cost-effective. Plus many shoppers do not like having to go to multiple locations and would welcome having items of interest to them all in one place online. Apparel shoppers, especially, want to see in one place ensembles that reflect their preferences, size and style. Retailers would love to provide all this, if customers would be willing to share their personal information.

Some customers are willing to share their data: The online clothier Stitch Fix has two million clients who have taken a 15-minute personal profile survey. Other online apparel sellers following the same model are Wantable and Indochino. Continue reading “Can Online Shoppers Ever Get Both Personalization and Privacy?”

Higher Shipping Rates Will Have Staying Power

Shippers will pay more to trucking companies for a while. A “perfect storm” of surging demand, a driver shortage, cold weather, and tighter safety regulations boosted rates in January by as much as 40% from a year ago. Although the extremely cold weather requiring temperature-controlled trucks has eased, the other factors are still pressuring shipping costs. Spot rates will keep rising, though at a slower pace, until mid-year, but contract rates will rise until mid-2019, according to Avery Vise, vice president for trucking research at FtrIntel.com.

The driver shortage is worsening, when the country is already down approximately 50,000 drivers, as estimated by the American Trucking Association. New safety regulations requiring electronic logging devices (ELDs) on trucks that record actual driver hours, which make it easier to enforce hour limits, are one factor. Larger trucking companies have already adopted these, but many independent truckers will delay until enforcement starts in April. This additional squeeze on driver availability is the reason the shortage may get worse before it gets better. Continue reading “Higher Shipping Rates Will Have Staying Power”

Looking For Interest In Smaller Places

Interest rates on certificates of deposit at small banks, internet banks and credit unions are now a full 1 to 1.5 percentage points higher than at big banks. While all financial institutions have raised the lending rates they charge their borrowers in response to Federal Reserve rate hikes, only the smalls have been raising deposit rates.

Previously, most financial institutions were reluctant to raise deposit rates because their profit margins had been so squeezed by the ultralow rates that prevailed before the Fed finally started hiking at the end of 2016. But now, competitive pressures to attract deposits are forcing small banks, internet banks and credit unions to raise their full range of CD deposit rates in line with the increase in Treasury bill rates (though offerings on lowly savings accounts are still paltry). Continue reading “Looking For Interest In Smaller Places”

Career Training Takes An Old Turn

Apprenticing, the way Ben Franklin and Paul Revere learned their trades, is making a comeback in the U.S. after many decades of being confined mostly to union halls in the construction trades. Interest in a more structured way to prepare young people for a career is growing, as 6 million unfilled jobs illustrate the gap between required job skills and educational preparation for those jobs.

College is not “one-size, fits all,” if it ever was. Only 23% who enter a two-year college program graduate, and only 60% of those entering a four-year school graduate within six years. While there are many good technical education programs at community colleges and private training schools, there has been a need for more structure and stronger employer involvement. Continue reading “Career Training Takes An Old Turn”