Norris: Income inequality is about to accelerate

The other day, I saw an advertisement on the television for a company which delivers snacks to your house. While I doubt executive management would put it like that, that about sums it up. My initial reaction was: “Are are we really so lazy we can’t even go to the store to stuff our face between meals?”

My second one was wondering where the pretzels and ranch dressing were. What was this with all the healthy stuff and the theatrics with the cocoa powder? They were talking about snacks, right? Then it dawned on me; maybe I just don’t get it. Perhaps I have become the crusty old man who used to walk to school uphill both ways in the driving snow and pouring rain.

To be sure, there are great changes afoot in our country’s economy, and maybe snack delivery is one of them. I strongly believe technology has advanced to the point where all but a small percent of the workforce is completely fungible. A somewhat larger number of folks realize they are, and take steps to differentiate themselves. However, I would argue the majority of American workers either don’t truly appreciate their redundancy.

(Read the full article as previously published in the Montgomery Advertiser on July 25th, 2017)

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.

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)

Some Common Cents for June 2nd, 2017

This morning, the Bureau of Labor Statistics (BLS) released The Employment Situation report for the month of May 2017. I will cut to the quick, and tell you it might be one of the more boring releases of its type I have ever read. So much so, I felt sorry for the folks who had to compile the data by the time I finished reading the thing.

In a lot of ways, I found it similar to, say, one of Nicholas Sparks’ books. Yep, I kind knew how the report would end when I first picked it up. Except the ending of The Employment Situation was ‘Table B-9. Indexes of aggregate weekly hours and payrolls for production and nonsupervisory employees on private nonfarm payrolls by industry sector, seasonally adjusted,’ as opposed to a well-telegraphed, melodramatic plot machination (usually involving either the death or sickness of a loved one/interest). Indeed. To say there was an element of ‘déjà vu all over again’ would be an understatement.

But, wasn’t there anything in the report which shed some kind of new light on the economy, etc.? Absolutely not. It suggested a modestly growing GDP, coupled with modest earnings growth. It was the economic report equivalent of conference/banquet chicken.

With that said, it is/was likely decent enough to keep the Federal Reserve on track to raise the overnight lending target at its next official FOMC meeting on 6/14/2017. In all probability, according to the futures market, the Fed will increase the overnight lending target rate between member banks 0.25% (25 basis points) to take the ‘range’ to 1.00-1.25% from the current 0.75- 100%. In fact, the odds are so overwhelming the Fed will do just that the markets will likely freak out a little if it doesn’t. The direction will depend on what the official statement says after the meeting. …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 May 26th, 2017

This week, a reporter friend of mine asked my thoughts on the prospects of traditional banks and credit unions getting into, what can only be called, the payday lending space IF the Administration’s regulatory reform proposals get through the Congress. It seems some banks have made overtures about doing just that, but this is very anecdotal and far from the norm. Frankly, I am kind of professionally ambivalent on the matter, but I still gave these bullet points to him:

  • Due to the costs associated with extending credit, it is hard to imagine banks falling over themselves to start making a bunch of $300 two week loans for business purposes.
  • There is a difference between making a small, short-term loan for an established client and making one to a stranger off the street.
  • At a 10% annual rate, a $500 two-week loan generates about $2 in interest for the lender. Can they originate, underwrite, and service the thing for that of money, let alone overhead? Candidly, it makes more business sense to let people bounce checks.
  • There is a difference between what the company spokespeople say and the what the CFO offices think. Guess who normally wins that argument.
  • Those banks which enter this lending arena will do so up to the point where they maximize their Community Reinvestment Act rating, and probably not much more than that. That is cynical but honest, and better than nothing. …Read More…