Norris: Why has Alabama’s employment rate spiked so dramatically?

In my last column, I mentioned how Alabama seems to be on an employment tear thus far in 2017. While I have read numerous articles and scoured any number of websites, I can’t seem to find an ironclad business reason why the state’s labor market has strengthened so dramatically in such a short period of time.

Consider this: according to the Bureau of Labor Statistics’ Household Data survey, the national economy created roughly 812,000 new jobs during the first five months of the year. Not bad. For its part, using essentially the same methodology, Alabama had 41,464 new workers during that same period. This works out to be around 5.1% of the national total, and is an eye-popping number.

First things first, Alabama is still heavily rural. According to 2010 Census, about 40% of Alabamians lived in non-urbanized areas. Further, agriculture, forestry, and so-called related industries employ a lot of folks around here. So, it isn’t all that surprising many counties in Alabama see spikes in employment staring around March which generally taper off by October. Obviously, this coincides with the planting, growing and calving seasons.

(Read the full article as previously published in the Montgomery Advertiser on July 21st, 2017)

Some Common Cents for July 14th, 2017

The other night, I dreamt a massive meteor hit the earth. Since I typically dream in comedy and am not prone to worrying during waking hours, this was both a departure from the norm and somewhat disconcerting. After all, not much good will come out of a cube with 1 mile edges hurtling into the earth from deep space at what could only be described as a very rapid rate of speed.

Perhaps my dream had something to do with recent articles I have read about some really cool developments in astronomy. Maybe it had something to do with the wall of worry over the North Koreans, and others. It very well could be my subconscious is deeply discouraged by what passes for leadership these days, at all levels of society. You know, it is likely an amalgam of numerous peccadillos in the transom of my mind. I have no idea, and I suppose it really doesn’t matter.

After all, the sun will rise in the East tomorrow.

If it doesn’t, the effect to my personal well-being of being hurtled forward at 1,392.26/kilometers per hour while I slept will take care of any temporal worries I might have had. Huh? Well, Birmingham is at 33.5207 degrees latitude, and the speed of the rotation of the earth where I live is equal to cosine(33.5207) times 1,670/kilometers per hour (which is the speed of rotation at the equator). For the sun to not rise in the East, the earth would have to stop revolving. Voila. …Read More…

The opinions expressed within this report are those of John Norris as of the initial publication of this blog. They are subject to change without notice, and do not necessarily reflect the views of Oakworth Capital Bank, its directors, shareholders, and employees.

John Norris: Fundamental flaw in minimum wage debate

A group of economists recently released a research paper that suggested Seattle’s increase to a $15/hour minimum wage has had a negative impact on the lowest skilled workers. It would seem the market clearing rate for unskilled labor out there is around $13/hour. Up to that level, hourly workers largely benefited from the gradated rate increases, in aggregate. Past that, the report implied the well-intended $15 minimum wage has had some ironic consequences on a decent segment of the local unskilled workforce.

Intuitively, this makes sense.

A major problem with the debate about minimum wage laws is it assumes companies pay workers for their time. They don’t. They pay them for the economic value of their labor, and time is simply a way of measuring it. We can legislate an hourly price floor all we want, but we can’t dictate the actual hourly value of individual workers. If someone is worth, say, $12/hour to an employer, the government can mandate $15/hour all it wants. That person will eventually be out of work, because no business is going to continually pay them more than they are worth.

(Read the full article as previously published in the Montgomery Advertiser on July 10th, 2017)

Some Common Cents for July 7th, 2017

I have recently written about the potential for some form of consolidated government in the Birmingham metropolitan area. For those not in the know, many, if not most, of our suburbs have incorporated themselves over the last 70+ years. The endgame has been a relatively diminished ‘center city’ surrounded by fully functioning municipalities with their own unique identities. Tens of thousands of people, if not hundreds of thousands, in the metro area might not even step foot anywhere in the City of Birmingham  in any given week, if not month, such is the fragmentation.

As a result, I would argue there really isn’t a strong unifying factor when it comes to the metropolitan area as a whole, as compared to some other cities. Essentially, what is it other than proximity which makes us “Birmingham”? What difference does the, say, ongoing revitalization of the Avondale neighborhood mean to someone from, say, Argo, Trafford, West Jefferson, Lipscomb, or even Hoover? I can’t answer this question, and that is big part of the problem with the ideal of a Greater Birmingham.

However, knowing, or admitting, there isn’t a definitive common community thread in our area is also the biggest argument in favor of creating one.

This week, I had a couple of conversations with various people about North Korea. To a person, they were scared about Pyongyang’s potential to upset the global economy, let alone rain down nuclear death & destruction with what one would assume to be its increased missile technology. Clearly, the Kim family is getting more ink in the US press than it has in some time.

But what is the real likelihood North Korea will start an unprovoked (depending on your definition of the word) war, nuclear or conventional, against South Korea and the United States? Also, what is the purpose of these displays of military strength? What is the definition of success here? …Read More…

The opinions expressed within this report are those of John Norris as of the initial publication of this blog. They are subject to change without notice, and do not necessarily reflect the views of Oakworth Capital Bank, its directors, shareholders, and employees.

Some Common Cents for June 30th, 2017

I am able to track how many people who directly receive Common Cents actually go to the trouble to open it. Last week, I apparently touched on a subject of particular interest, because the number of ‘click throughs’ was significantly higher than it has been in, quite literally, months. If you didn’t read it, it was about the discussion surrounding a consolidated form of local government for the Birmingham metropolitan area (MSA).

More specifically, the debate seems to be about a consolidation within Jefferson County (the County), which includes the City of Birmingham (the City) and a whole host of separately incorporated municipalities. In fact, greater “Birmingham” is more appropriately defined as the Birmingham-Hoover metropolitan statistical area, which is the Census Bureau’s actual classification. However, most folks outside of the state probably aren’t familiar with Hoover, which is Alabama’s sixth largest city with roughly 85,000 residents.

Like many cities/towns in the County, Hoover has its own school system which helps shape its identity as a community. Ultimately, these separate school systems are and will be at the heart of the debate about a consolidated form of government in our area. Many of these areas pay significantly higher property taxes than the remainder of the state, with a large percent of the revenue going to fund (and control) their own boards of education. Perhaps as a result, some of these systems score very highly on state and national exams, far better than the outside world would think capable of public education in Alabama. …Read More…

The opinions expressed within this report are those of John Norris as of the initial publication of this blog. They are subject to change without notice, and do not necessarily reflect the views of Oakworth Capital Bank, its directors, shareholders, and employees.

John Norris: Creativity should matter more in Alabama’s economy

Years ago, I had an internationally recognized economist tell me it didn’t matter if the U.S. physically manufactured a single thing. After all, the value added proposition of many finished products, if not most, is in the design, engineering and technology. In her way of thinking, the production process is a means to an end, and people don’t really pay for it. They pay for the creativity behind the product or service.

If this seems a little strange, ask yourself: Do you know who made, say, your iPhone? I mean the actual names of the people making the component parts on assembly lines around the world, specifically for your unit. Of course not. However, who created it? That is a much easier question to answer, isn’t it?

If you don’t think it is, how about this: When you pay for a light bulb, are you paying for the glass and the packaging, or are you paying for the technology that provides the light?

(Read the full article as previously published in the Montgomery Advertiser on June 26th, 2017)

Some Common Cents for June 23rd, 2017

This is sort of part one in an intermittent series.

Recently, I received an email with a link to a study about the need for a consolidated form of government in the Birmingham metro area (MSA). For those of you not familiar with Birmingham, most of the suburbs have incorporated themselves. All of them have their own fire and police departments, and the larger, wealthier ones have their own school systems. Some of these cities/suburbs, have been around for a long time, with mine having incorporated itself back in 1942. As a result, while we all live in “Birmingham,” most of us actually live in other cities or towns, most of them with their own separate identities.

To that end, the population of the City of Birmingham (the City) only makes up less than one-fifth of the population of the entire MSA, and even less of the larger still consolidated statistical area (CSA). As for Birmingham’s media market, the City constitutes only about one-seventh, from the numbers I have read.

Obviously, and admittedly, this means there is a fair amount of duplication of effort and inefficiency in the delivery of public services across the MSA, let alone a lack of coordination in business development efforts. As for the latter, it isn’t uncommon for suburban cities to ‘duke it out’ for retail and local business relocations. After all, it doesn’t benefit, say, Trussville when a new Walmart, or something, opens in Pelham or Gardendale. In fact, you could sensibly argue it potentially hurts it economically. …Read More…

The opinions expressed within this report are those of John Norris as of the initial publication of this blog. They are subject to change without notice, and do not necessarily reflect the views of Oakworth Capital Bank, its directors, shareholders, and employees.

Norris: Federal Reserve is walking a tightrope

Last week, the Federal Reserve raised the overnight lending target rate between member banks by 0.25 percent, and said it wants to remove some of the stimulus it provided with its quantitative easing programs. Put another way, it wants to take some of the excess cash out of the banking system over time. To do this, it will sell some of its bond holdings, or simply not reinvest them as they mature. The cash it receives from this will presumably vanish with the press of a keystroke, and any net profit will go to the Treasury.

Academically and in practice, there is more to it than that. However, that is a decent enough explanation for cocktail conversation, if you are so inclined to discuss monetary policy at social events. Trust me, I wouldn’t advise it unless you want to be lonely by the end of the evening. The only way I can think of to bore people more would be to quote Alfred Lord Tennyson during the conversation: “Theirs not to reason why, Theirs but to do and die.”

Frankly, that little snippet sums things up rather nicely I think. But what is the end result?

From a purist point of view, the Fed’s actions will ultimately slow the growth in the money supply. This is an effort to keep inflation in check, and will be effective as long as there isn’t a massive drop in the supply of goods and services due to events outside of the Fed’s control. Secondly, they have thus far telegraphed their intentions to keep from shocking the business community, and thereby disrupting future hiring and capital projects.

If it seems like the Fed is walking a tightrope, I guess it kind of is.

(Read the full article as previously published in the Montgomery Advertiser on June 19th, 2017)

Norris: Get ready for massive changes in Alabama’s economy

In a recent letter to clients, I wrote how the investment industry will likely have to reassess how it defines industry sectors. For instance, Google (Alphabet) is obviously, and correctly, classified as a technology stock. However, Tesla gets lumped in with the rest of the automotive group, and Amazon is considered a consumer discretionary company just like, say, Tractor Supply Co.

We can discuss the merits of these classifications, but do investors really buy Tesla because it makes cars? Or because Amazon sells stuff which you used to buy at the store? Perhaps, but I would counter there are companies which are incredibly disruptive forces in their respective industries, and investors love them primarily for that reason. The three I mentioned are simply low-hanging fruit.

Intuitively, there will be a small number of true disrupters in any economy, which means there were be a lot of base companies. The former will develop new products, services, and technologies which will change how we live our lives and conduct business. The latter will battle it out for market share in what is left of any one economic sector. By the time the dust settles and the smoke clears, a large segment of current corporate America will be, as Charles Dickens might have said, “without a situation.”

The trick will be choosing the likely winners and avoiding the losers, but make no mistake about it: unless the government gets involved and/or there is an evaporation of capital in the global economy, there will be an enormous amount of consolidation in the U.S. economy over the next decade as corporate Darwinism weeds out those “stuck in the middle” firms.

Historically, this would suggest there will be an enormous amount of merger and acquisition activity, and there might be. However, I believe it is more likely the healthier firms in an industry will be far more apt to simply let lagging firms fail on their own, as opposed to buying their capacity. Why? Because there is already “too much” capacity in much of the economy.

While the auto industry is increasingly dear to the Alabama economy, how much capacity does it need in the United States and how much does it have? Would you say cars are still in a growth stage? Or would you think, overall, it is a relatively mature sector, which will grow more proportionately with the population than it did decades ago? At least in terms of units sold over a multi-year period? Yep, that would be my vote.

(Read the full article as previously published in the Montgomery Advertiser on June 12th, 2017)

John Norris: Media outlets give readers what they want

We seem to have entered the news doldrums, where our choices are: 1. an endless barrage of so-called analysis of the Administration’s perceived foibles and follies, or 2. stories which are the journalistic equivalent of delivery pizza. They might be tasty going down, but are ultimately forgettable.

While folks might bemoan what passes for news these days, the media is simply giving us what we want. Every news organization has the ability to track user reading patterns better than even the New York Times could 20 years ago. If a story about plastic milk jugs in Timbuktu gets a zillion reads, guess what? There will be a follow up story or fourteen. If a feature about an obscure Auburn football recruit gets 500 shares, you can expect another article about a different young man in a day or two. However, an article about extraterrestrials breeding mutant grizzly bears in Lowndes County will end up in File 13 if enough folks don’t click, comment, share, and like.

Frankly, it is a numbers game. A news outlet with, say, 500,000 unique user visits, subscriptions, shares, and clicks will command a higher dollar amount for ad space than one with only 5,000. That makes sense. So, it should come as no surprise the media industry simply provides that which pays the bills.

(Read the full article as previously published in the Montgomery Advertiser on June 5th, 2017)