Category Archives: Economy

Congress Pulls Back Dodd-Frank

In a bipartisan vote, no less.

The House on Tuesday passed a plan to roll back banking regulations passed in response to the 2008 financial crisis, sending the bill to President Trump to sign.

The measure leaves the central structure of the post-financial-crisis rules in place, but it would make the most significant changes to weaken the Dodd-Frank banking regulations since they were passed in 2010. It would exempt some small and regional banks from the most stringent regulations, and also would also loosen rules aimed at protecting the biggest banks from sudden collapse.

The measure is nearly certain to become law after its passing in the House, 258 to 159, on Tuesday with nearly all House Republicans and 33 Democrats voting for it. The Senate approved the bill in March with bipartisan backing, and White House officials said that Trump plans to sign it in the coming days.

The bill’s supporters say it provides needed relief for community and local banks withering under Washington’s regulations. But critics charge it opens the financial system back up to the abuse and risky behavior that brought the U.S. economy to its knees a decade ago — and does so at a time when financial firms are posting record profits.

This law was a classic legislative over-reaction to a crisis.

Foxconn begins to deliver on its promise

My column for the Washington County Daily News is online. Here you go:

While there is still a long way to go before Wisconsinites can evaluate the full impact of the Foxconn development, so far it is proving to be the economic boon for Wisconsin that Gov. Scott Walker and other supporters of the deal predicted. The official groundbreaking ceremony will be June 28, but the work has already started.

When Walker announced the deal with Foxconn, it marked the largest economic deal the state of Wisconsin had ever struck. Liberals vacillated between bemoaning corporate welfare and declaring that Wisconsin should have gotten a better deal. Conservatives cringed at the massive amount of tax dollars involved to lure one company to Wisconsin. Walker touted the deal as a transformational economic development that would benefit Wisconsin for generations. It is possible that everyone was right, but certainly Walker deserves credit for getting it done.

Before the first shovel could be put in the ground, nearly 500 subcontractors, suppliers, service providers, vendors and other companies attended an information session hosted by Foxconn for the projected $10 billion construction project. These businesses came from all over Wisconsin and the world for the chance to participate in one of the largest construction projects in United States history.

Late last month, Foxconn began announcing the contractors that they would use. True to their word, Foxconn officials strongly favored Wisconsin companies. Ninety percent of the contracts so far have been awarded to Wisconsin companies.

In just the first phase of the project, 27 Wisconsin companies and one Illinois company are sharing $100 million to do the preparation work for the site including excavation, erosion control, soil and water testing and stormwater management. A $100 million project would already be one of Wisconsin’s largest construction projects, and that is only 1 percent of what Foxconn is planning to spend to complete the project. Furthermore, as Walker predicted, the economic benefits are not limited to southeast Wisconsin. One of those Wisconsin companies already working is a Black River Falls construction company which has been tasked with moving about 325,000 dump truck loads of dirt and installing 120,000 linear feet of sewer. That company, Hoffman Construction, has indicated that they will need to hire about 150 additional seasonal workers to handle the work.

MJM Truckin’ LLC of Nekoosa, Wood County, Panacea Group LLC of Seymour, Outagamie County, and other businesses throughout the state are already seeing money flow from Foxconn into their businesses.

The reason that all of Wisconsin will benefit from Foxconn is simple. The Foxconn project is just so incredibly huge that southeast Wisconsin does not have the people or material necessary to complete it. Not only will Foxconn need to bring in workers from all over Wisconsin, they will have to bring people from all over the world to Wisconsin to work.

A study by the Metropolitan Milwaukee Association of Commerce estimates that Foxconn’s new Wisconsin plant will contribute about $51 billion to the state’s economy over the next 15 years. Calculating the exact economic impact of the massive Foxconn development is inherently difficult, but Wisconsin is already seeing a ripple effect spread across the state.

All of this positive development makes the stance of some of the Democratic candidates for governor even more puzzling. While some may disagree with the deal that Walker struck with Foxconn, it is done. The contracts are signed and both sides are obligated to honor their side of the agreement. Yet some of the Democratic candidates are hoping to see it all fail and rip a hole in Wisconsin’s economy as it does.

Rep. Dana Wachs has said “we will find a way to end it.” Matt Flynn said that he will end the deal, “no matter what.” Madison Mayor Paul Soglin and Rep. Kelda Roys want to renegotiate the deal — whatever that means. Try to imagine a world in which one of these Democrats wins the governor’s chair and uses it to douse the Foxconn economic fire with a vat of cold water. Not only would it hobble the Foxconn economic juggernaut, but it would neuter Wisconsin’s ability to attract business for decades to come. What company CEO in his or her right mind would make a long-term commitment to Wisconsin if all it takes is a new governor to tear up the contracts?

The argument over whether or not the Foxconn deal was a good one for Wisconsin will be decided in the years to come. One would hope that whatever one thought about the terms of the deal, we could all root for it to live up to its promise. Fortunately for our state’s economy, so far it has.

Public Credits Trump for Good Economy

This, if anything, will blunt the Blue Wave.

More than two-thirds of Americans credit President Donald Trump for the country’s healthy economy, a new poll has revealed.

The CBS News poll, which was released on Sunday, shows a sharp partisan divide, with Republicans more likely to give the president positive reviews while Democrats and Independents are not as complimentary.

According to the survey, 35 per cent of Americans say Trump’s policies are ‘a great deal’ responsible for the economy.

Around the same number – 33 per cent – say the president’s policies are ‘somewhat’ responsible.

Unions are Killing Air France

For those of us who remember Midwest Express, this is a somewhat familiar tale.

Air France’s trade unions are demanding an immediate pay rise of 5.1%. That looks bearable set against profits of €1.5bn ($1.8bn) last year. But a decent-looking performance in 2017 owed much to low oil prices. Its finances are weakening fast. Mr Janaillac had warned of a big drop in profits this year. A series of 14 one-day strikes has already cost Air France at least €300m in recent weeks.

The threat of Air France’s inflated cost base swelling further scares investors, says Daniel Roeska of Bernstein, a research firm. Some Air France pilots may earn two to three times as much as those at Europe’s biggest low-cost carrier, Ryanair. Since 2012 Air France has made much less money than its rivals (see chart). Rising fuel costs, only half of which are hedged, and a squeeze on fares caused by airline overcapacity in Europe threaten to plunge Air France into the red sooner than its peers. A huge debt pile also leaves the group looking vulnerable. Ross Harvey of Davy, an investment firm, says its net debt last year (including leases) was 2.4 times gross operating profits, compared with 0.4 for Ryanair and 0.7 for easyJet and Lufthansa.

Other flag-carriers across Europe have also been squeezed, on short-haul routes by the rise of low-cost outfits and on long-haul routes by carriers from the Middle East and China. But their answer has been to slash costs to return to the black. IAG has forced through big cuts to jobs and pay at British Airways and Iberia of Spain, as has Lufthansa in Germany. Facing intransigent unions, Alan Joyce of Qantas in Australia even grounded his airline until they caved in. All have launched their own low-cost carriers to take the fight to their new rivals.

Unable to make much headway against the unions, Air France’s management chose another track. After cancelling Mr de Juniac’s proposed restructuring, Mr Janaillac launched a plan to cover the airline’s costs by improving service and by lobbying in Brussels against low-cost and Middle Eastern competitors.

The problem is that the market is shifting/has shifted. Most consumers are not willing to pay more for the “extras” in air travel. As a frequent flier, I miss the days of bigger seats, better food, and more room. But the market has spoken. And, frankly, I’m willing to pay a little more for the extras, but not a lot.

The the case of Air France, the market won’t allow them to increase their prices to a level to keep up with the costs that the unions are demanding. Fuel prices will continue to fluctuate, but the labor costs are relatively fixed. Air France is attempting to fight their competitors by asking the government to protect Air France, but that’s not working. Air France’s management have limited options and the unions aren’t willing to recognize that the market won’t allow what they are asking for.

Absent a government bailout, I wouldn’t be shocked to see Air France go bankrupt by the end of next year. Their union issues make them unattractive for acquisition or merger, so their competitors will just wait for them to fold and then pick up the pieces.

Statewide Economic Impact of Foxconn

This is good to see.

A Black River Falls construction company will be in on the ground floor — and even below that level — of the massive Foxconn Technology Group development planned in southeastern Wisconsin.

Foxconn and its general contractor, Gilbane Building Co., announced Monday that Hoffman Construction Co. of Black River Falls is one of 28 subcontractors selected to conduct site development work for the up to $10 billion flat-screen display panel plant in Mount Pleasant in Racine County. The contracts awarded have a total value of $100 million.

[…]

James Hoffman, president of Hoffman Construction, said he couldn’t reveal the size of the contract to be the lead excavation and storm water management contractor on the project, but he indicated the work will require moving about 4 million cubic yards of soil — the equivalent of 325,000 dump truck loads.

The project, which also involves installing 120,000 linear feet of underdrain and storm sewer, is scheduled for completion by Oct. 1.

“It’s a very significant business expansion for our company,” Hoffman said of the contract, adding that he expects it to result in hiring 150 more seasonal workers than usual this year.

Foxconn Breaks Ground

Good news for Wisconsin. Wow. $100 million injection into the Wisconsin economy.

Operating bulldozers and other heavy equipment, crews Monday began shaping the site for Foxconn Technology Group’s planned, $10 billion manufacturing complex in Racine County.

More than 20 pieces of earth-moving equipment stood poised at the site along Braun Road in Mount Pleasant on Monday morning, as workers attended safety meetings and portable toilets were delivered.

By early afternoon, they had begun pushing serious loads of dirt — the most graphic sign to date that work is underway to build what Foxconn and government officials have said will be a 22-million-square-foot campus employing as many as 13,000 people.

A Foxconn spokesman said he anticipates a ceremonial groundbreaking within the next month or two, “when we can bring everyone together.”

Monday’s developments came as Foxconn and its general contractor, M+W | Gilbane, named 27 Wisconsin companies and one Illinois firm as subcontractors for the site-preparation work.

The companies — two of which were announced previously — have been awarded contracts totaling $100 million to handle such work as erosion control, mass excavation, stormwater management and testing. The site development phase of the project will require 500,000 hours of work and create 800 direct and indirect jobs, Foxconn said in a statement.

Positive Jobs Report

Some good news. With this level of employment, I’m watching for the wage growth and the inflation that comes with it. We probably won’t see as much of that as we like until more people enter the workforce.

US jobs growth was slower than expected in April, as employers added 164,000 positions.

The unemployment rate nevertheless fell to 3.9%, the first time it has dipped below 4% since 2000.

The average hourly pay of private sector workers increased 2.6% year-on-year to $26.84 (£19.77).

Foxconn To Announce Contractors

Fantastic. Emphasis mine.

Foxconn Technology Group will announce in the next two to three days the subcontractors for the start of its planned $10 billion project in Racine County, the company’s second-ranking executive said.

At the same time, Foxconn will start construction in two to three days on the first phase of the project, which will cover 752 acres in Mount Pleasant, Louis Woo said Wednesday afternoon in Milwaukee. He said the first phase will require 500,000 person-hours of work.

“We will let people know in the next couple days who will be the winners (of contracts),” Woo said. “I’m very pleased to let you know that 90 percent of the winners are from the state of Wisconsin.

Ford Revamps U.S. Lineup

Wow.

Ford (F) said on Wednesday the only passenger car models it plans to keep on the market in North America will be the Mustang and the upcoming Ford Focus Active, a crossover-like hatchback that’s slated to debut in 2019.

That means the Fiesta, Taurus, Fusion and the regular Focus will disappear in the United States and Canada.

Ford will, however, continue to offer its full gamut of trucks, SUVs and crossovers.

Personally, I prefer a car, but I don’t like the Mustang or the Focus. Guess I won’t be buying another Ford for a while. But they clearly know their market and are focusing on what consumers want.

Trump Ratchets Up Trade War

STOP IT!

“In light of China’s unfair retaliation, I have instructed the [United States Trade Representative] to consider whether $100 billion of additional tariffs would be appropriate,” the president said in a statement.

Earlier this week, the United States announced new tariffs on $50 billion worth of Chinese goods, claiming that China is stealing US intellectual property. China responded within hours by announcing $50 billion worth of tariffs on US goods.

The moves follow US tariffs that were imposed earlier this year on Chinese steel and aluminum, which also prompted retaliatory measures from China.

Trump’s announcement late Thursday that his administration could target another $100 billion of Chinese goods rattled markets and drew criticism from businesses and from within his own party.

Tariffs do nothing by wreck parts of the economy and retard the invisible hand of capitalism.

Foxconn Meeting in Rhinelander

The economic impact of Foxconn will be felt well beyond SE Wisconsin.

A session is being held in Rhinelander next week for contractors, vendors, suppliers and professional services interested in competing for Foxconn contracts in the upcoming construction of the huge plant being built in southeastern Wisconsin.

The first phase of  Foxconn building will begin this spring, involving 1,000 acres of site work, with the vertical building phase to begin late this year or early next year.

President of Grow North Economic Development Corporation, Vicky Oldham, talks about what will be going on…

“…anyone interested in the construction phase of multiple buildings. There’s also material procurement going on and logistics preparation. Any one interested in the logistics part, construction part or any type of building construction material that they would be interested in being a part of that would want to come and learn more…..”

While critics have said the deal will benefit southern Wisconsin the most, leaving citizens away from the economic zone still paying tax breaks for decades, Oldham thinks businesses away from the region will also benefit….

“there’s a though among some that feel that it might not impact northern Wisconsin as the southern part of the state. Their supply needs are so huge that it will have a rippling effect throughout the entire state…..”

500 Businesses Show Up for Foxconn Meeting

Wow.

STURTEVANT — Nearly 500 companies were represented Tuesday afternoon at an information session for hopeful Foxconn Technology Group construction-phase subcontractors, vendors, suppliers and professional services providers.

Two weeks ago, Taiwan-based Foxconn announced that it had selected M+W Gilbane, CH2M and The Sigma Group to serve as the lead contractors and designers for the $10 billion Science and Technology Park it plans to build in the southwestern part of Mount Pleasant.

Tuesday’s session, at Fountain Banquet Hall, 8505 Durand Ave., was led by Adam Jelen, senior vice president of Gilbane Building Co.’s Central Midwest Division; Allen Ware, vice president of M+W; and Matt Moroney, strategic economic initiatives director for the Wisconsin Department of Administration.

Foxconn has committed to spending about $1.4 billion with Wisconsin-based suppliers.

WalMart Looks to Buy Humana

Wow. Yuge. It’s fascinating to see some of the mega-corps cross into different industries.

The Wall Street Journal reports that Walmart is in the early stages of talks to buy Humana, one of the nation’s five largest health insurers.

Humana currently has a market value of around $37 billion. The company has around 14 million subscribers and its net revenues last year were $53.7 billion.

If it happens, this would be a dramatic acquisition. It’s hard to speculate precisely what impact this might have on the health insurance market. Worth remembering: Among many other things, Walmart has one of the nation’s largest chains of pharmacies. It has more than 3,600 pharmacies at its stores and employs more than 6,000 pharmacists (only Walgreens and CVS employ more pharmacists; only those two along with Rite Aid have more pharmacies).

Walmart also offers low-cost care clinics at some locations.

It does appear that some of the remaining large retailers are looking for additional offerings to maintain the relevance of their store fronts. Health care is something that people will go to a “store” for the foreseeable future. The retailization of healthcare delivery and the melding of healthcare insurance with a healthcare delivery organization will have a dramatic impact on the American healthcare system.

Appleton Coated Reboots

Good news from the Fox Valley.

COMBINED LOCKS – Appleton Coated, a mill that shut abruptly last fall when it went into receivership, has been inching back to life, with its third machine restarted Monday and 230 of its 600 employees recalled to work.

Its improbable rebirth is coming under an equally improbable owner, used machine dealer Industrial Assets Corp.

Other mills that shut in the past, like NewPage in Kimberly, are no more than a pile of rocks today.

Appleton Coated, instead, is getting back on its feet.

“The business going forward is going to be a very different model than we’ve had in the past,” said general manager Doug Osterberg, who was previously president and CEO of the company. “There simply will not be as many people. But it’s a much stronger business and will be much more sustainable.”

The mill still makes traditional printing and writing papers, he said, but is gradually shifting to corrugated medium and container board grades.

Foxconn to Add $51.5 Billion to Wisconsin Economy

Granted, it is not from an uninterested source, but the numbers are not unreasonable considering the projected size of the facility.

A fully built Foxconn Technology Group plant would add $51.5 billion to Wisconsin’s gross domestic product over the 15 years the state pays incentives to the company, a new analysis by the Metropolitan Milwaukee Association of Commerce concludes.

That would equate to $18 of economic impact for every $1 spent by the state, the business group, which worked to help attract Foxconn, said.

Averaged over the 15 years, the MMAC’s estimate amounts to an additional $3.4 billion annually in state gross domestic product from Foxconn. That would tack another 1% onto Wisconsin’s current GDP of about $313 billion.

Since the recession, the state’s GDP has grown at an average of 3.6% a year.

Wisconsin Reaches Record Employment

Wow. Open for business, indeed.

MADISON – Today, the Department of Workforce Development (DWD) released the Bureau of Labor Statistics (BLS) revisions for January 2018 and preliminary estimates for February 2018 covering the employment and job statistics for the state of Wisconsin. The data showed that Wisconsin’s February unemployment rate reached a record low of 2.9 percent, while the number of people employed and considered active in the state’s labor force also reached record highs.

Trump Imposes Tariffs on China

I don’t like this move.

The US plans to impose tariffs on up to $60bn (£42.5bn) in Chinese imports and limit the country’s investment in the US in retaliation for years of alleged intellectual property theft.

The White House said the actions were necessary to counter unfair competition from China’s state-led economy.

It said years of talks had failed to produce change. China said it was ready to retaliate with “necessary measures”.

Beijing also said it would “fight to the end” in any trade war with the US.

Germany Worries About Decline of UK Market After Brexit

Remember that the reason Germany and other EU members fought Brexit so hard was due to their own self interests. They do not have Britain’s best interests at heart.

For the first time in years, German sweet makers have seen a significant drop in the number of exports to Britain, Stephan Nießner said.

The UK market makes up a significant proportion of Germany’s confectionary exports, with around seven percent of sweets produced in the country bound for Great Britain.

[…]

Sixty-eight percent of the cars produced in the city are shipped to the UK.

News that the German confectionery industry is suffering in the wake of the UK’s Brexit vote comes as Angela Merkel insisted the reason her country enjoyed such a large surplus was because German-made products are in such demand.

Why Are We Protecting Shipwrecks?

I’m going to ask a politically incorrect question, but why are we protecting shipwrecks? What’s the public interest?

TWO RIVERS, Wis. – Dozens of people made a vocal call to Governor Scott Walker to help protect Lake Michigan shipwrecks.
Supporters people rallied in Two Rivers Sunday afternoon.

They’re hoping Walker will name a national marine sanctuary on nearby parts of the lake.

The governor recently pulled back the sanctuary nomination.

Demonstrators say it would bring exposure, tourism, and economic development to the area.

There are a few shipwrecks that are historically significant, but most of them are just human garbage that we left on the bottom of a lake or ocean. They make for interesting diving, but that’s about it.

From what the protesters are saying, the interest seems purely economic. That’s fine, but can we see some financial projections then? What’s the cost of preservation vs. the projected economic benefit? At least we can then make some decisions based on something tangible.

Hiring Outlook Strong for Wisconsin

Excellent.

March 13, 2018 – Employers in Wisconsin expect to hire at a vigorous pace during Quarter 2 2018, according to the ManpowerGroup Employment Outlook Survey. Among survey participants, Wisconsin’s area employment outlook is the second best in the nation.

From April to June, 32 percent of the companies interviewed plan to hire more employees, while 2 percent expect to reduce their payrolls. Another 65 percent expect to maintain their current workforce levels and 1 percent are not certain of their hiring plans. This yields a Net Employment Outlook* of 30%.

“Hiring intentions are stronger compared to Q1 2018 when the Net Employment Outlook was 21%,” said ManpowerGroup spokesperson, Amber Laurent. “The hiring pace is expected to pick up compared to one year ago when the Net Employment Outlook was 22%.”