The Middle’s Not Where It’s At; Unemployment Blame Game; The Fed’s Milky White Problem

Stuck in the middle…

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Image courtesy of kittijaroon/FreeDigitalPhotos.net

The middle class is shrinking and that’s not necessarily a good thing. Studies done by the Pew Research Center show that between 2000 and 2014, the middle class actually shrank in 9 out of ten U.S. cities. Of the 229 U.S. cities cited in the study, the amount of households classified as middle class dropped in 203 of those cities. Sure, some of those households left their socioeconomic perches because they graduated to the upper class. But that’s mostly not the case. In fact, the middle class now makes up less than half the population in the cities studied while the income inequality gap keeps growing. That could trigger some ugly economic consequences. The wider the gap gets, the more it is likely to inhibit economic growth. At least that’s what some experts think. What’s worse is that children raised in areas that are predominantly low-income, are less likely to reach the middle class. In case you were wondering, the middle class is defined as a household that earns an annual income between 2/3 to two times the median income. In 2014, a three-person household was considered middle class if its annual income was between $42,000 to $125,000. The largest middle class populations were found to be in the good old midwest. I’m sure there is irony in there somewhere. The largest low-income populations were found to be in the southwest, particularly near the Mexico border, while the highest populations of upper class were found to be in the northeast and the west coast. No matter where you stand on the issue, it’s one that is going to figure prominently in the November elections.

On the Verizon…

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Image courtesy of xedos4/FreeDigitalPhotos.net

Nothing like unemployment numbers to ruin an otherwise pleasant Thursday. The number of first time applicants rose by 20,000 to a grand total of 294,000 seeking jobless benefits. Unfortunately it marked the third straight week of increases of first-time applicants. But at least that number was still below the 300,00 mark  – for 62 weeks straight, mind you  – so the situation isn’t that alarming. Well, except maybe for those who find themselves out of work. Also, economists are actually pointing the finger at Verizon – or rather the 40,000 Verizon workers who went on strike back in April. They are likely the ones who have applied for jobless benefits while on strike.  Economists predicted that the number of applicants would fall to about 270,000, which makes perfect mathematical sense if you figure that the Verizon strike is apparently responsible for that unwelcome surge and without it the numbers would have dropped.

White as a sheet…

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Image courtesy of Stuart Miles/FreeDigitalPhotos.net

The Fed’s been taking a lot of heat lately. And some of that heat has absolutely nothing to do with the fact that it hasn’t raised rates, yet again. Instead, top lawmakers penned a letter to Janet Yellen and company calling out the lack of diversity at the Central Bank which is “disproportionately white and male.” Ha! Who would have thought the Central Bank and the Academy Awards have something in common? Signed by 116 members of the House and 11 senators, the letter expressed disappointment over the Fed’s failure to “represent the public” and would like it to consider a number of factors, including race, when filling posts in the future. The letter did, however, praise Yellen for her strong leadership. So props to her on that. So just how disproportionately white and male is the Fed? Well, of the five current Fed governors, all of them are white. However, to be fair, two of them are women, including Janet Yellen, who happens to be the first women to head the Central Bank in its 100 year history. If that’s not disproportionately white and male, then I don’t know what is. Since monetary policy strongly correlates with hard-working Americans of every ilk, it does seem odd that the Fed is primarily made up of mostly one ilk. Give or take. At least minorities make up 24% of regional Fed bank boards. While that’s not an ideal representation, it’s still a 16% increase from 2010.

 

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Nasdaq’s Getting Crafty; Costco’s Earnings Knock it Out of the Warehouse; Labor Market Laboring

How crafty…

Image courtesy of sattva/FreeDigitalPhotos.net

Image courtesy of sattva/FreeDigitalPhotos.net

Etsy is looking to join the big kids on Wall Street. The online marketplace for all things crafty is looking to score $100 million for its IPO but that number could go much much higher. Brooklyn-based, Etsy, which would trade on Nasdaq under the ticker symbol ETSY (catchy, no?) was founded in 2005 and by 2014 it pulled in $195 million in revenue, a 56% increase over the previous year. Half of that revenue, though, comes from transaction fees. Plenty of that revenue also comes from the services it sells to its sellers, which are basically, payment processing, shipping labels and promoted listings. Impressive numbers definitely, but the company is spooking investors since it also took in a $15 million net loss last year and expects its operating expenses to “increase substantially.” Yikes. So yeah, that little tidbit puts a damper on things. Etsy currently has about 1.4 million sellers with close to 20 million buyers.

Are you even surprised?

Image courtesy of photoraidz/FreeDigitalPhotos.net

Image courtesy of photoraidz/FreeDigitalPhotos.net

Costco came out with its quarterly earnings, easily topping analysts’ predictions and if that is at all shocking to you then clearly you have never stepped foot inside one of its 671 warehouses dotting the world. News of the good earnings sent shares rising today 2.5% and why shouldn’t it? The stock went up 30% during 2014 and is already up 10% this year. And while the strong dollar has been playing some nasty little fiscal tricks with its earnings, the third largest retailer still managed to nail $598 million in profit at $1.35 a share on $27.5 billion in revenue. Analysts were only expecting $1.18 on $27.65 billion in revenue. It should be duly noted that some of that profit came courtesy of a $57 million tax benefit over a special dividend from last month. But it should also be duly noted that same store sales were up 2% and sales up 8%. These earnings come on the heels of Coscto’s AmEx breakup and its new contracts with Citigroup and Visa. Now it even has plans to sell a Kirkland Signature Chevrolet truck – a particularly handy vehicle for your average Costco run.

LinkedOut…

Image courtesy of  winnond/FreeDigitalPhotos.net

Image courtesy of winnond/FreeDigitalPhotos.net

For some not-so-pleasant news on the labor market we look no further than the Labor Department who just shared with us that the number of people seeking jobless claims for the first time rose to a seasonally adjusted 320,000 for the week ending February 28, adding an unwitting 7,000 applicants. That leaves us with close to 2.5 million people getting jobless benefits and that’s the highest number it’s been since May. Analysts actually expected that number to fall to under 300,000. Some people might even be wondering, “Hmmm. What seems to be going on with this fickle little job market of ours?” Excellent question. Naturally weather always makes a good scapegoat for this sort of thing. But otherwise, the Labor Department couldn’t really pinpoint any one reason why that offensive number reared its ugly unwanted head once again. Last week, that number also rose instead of going back down to a cozy semi-acceptable spot below the 300,000 mark. Experts were hoping that it was just a little labor market hiccup that would correct itself by this week. It didn’t.