Brexit’s Big Border Game: An Emerging Crisis in Northern Ireland

October 12, 2018 by piper Leave a Comment

Picture living under the threat of attack within the town you were born in. High walls and towers divided the very streets you walk to school, work, or a place to meet with friends. The threat of bombs or the reality of violence plaguing your every step. Imagine growing up, watching four decades of violence tear your city and country apart.

That was what living in Northern Ireland was 20 years ago. The “Troubles” as they are commonly referred to, were fought primarily between opposing paramilitary groups of either protestant unionists or Catholic nationalists in Northern Ireland. Civilians were often caught in crossfire and fell victims to homemade bombs or stray bullets.

An estimated 30,000 people were imprisoned for paramilitary offenses during the troubles and over 100 peace walls, adorned with sectarian messages and barbed wire are still standing in the city of Belfast. Though the people of Northern Ireland would do without more literal and physical walls, there’s a chance there might be a few more added in Northern Ireland.

In 2016, the United Kingdom voted to leave the EU. Some hailed the results of the referendum has a chance for the UK to negotiate trade with Europe on its own terms, while others saw the results has a sign of increased xenophobia and warned that the choice would result in unemployment.

However, the majority of Northern Irish citizens voted to remain in the EU, According to the BBC. And though the U.K. and the European Union have until March 29, 2019 to set trade and border terms for Brexit, the clock is ticking for a solution for Northern Ireland.

The problem starts with an an almost 20 year old pact known as the Good Friday Agreement. It ended sectarian violence and created an open border between the two countries. Because of this, citizens of Northern Ireland have the option for Republican passports. In the days of the hard, militarized border between both countries, the border was “a frontier of milk smugglers, gun runners and frequent clashes between British soldiers and Irish Republican Army cells”, according to the Washington Post. Today, many Irish citizens feel that there is a sense of relative peace.

“This city, this country, is like a woman who has given birth,” said Gerry Lynn, an amateur historian of the city Londonderry, to the New York Times. “All the trauma, the pain and the fighting are over. We’ve come out of the Troubles — out of black and white and into color.”

However, in March of Next year, Northern Ireland will leave the EU with the UK, and it’s brother, the Republic of Ireland, will stay, putting the open border policy between the countries up in question.

In response, the EU has offered that the border between the two countries remain the same, the UK is adamant that changes must be made. Regardless, the U.K. and the European Union have until March 29, 2019 to set trade and border terms for Brexit.

While a hard border could stir up memories of a militarized pass in some, it would also disrupt the “frictionless” trade Northern Ireland is able to benefit with its proximity to an EU country. Still, Northern Ireland’s government has created some friction of its own. It’s government has been in deadlock since January 2017. In affect, they’ve been kept out of Brexit negotiations and Westminster is set to bargain on their behalf.

In July, Trevor Lockhart, Northern Ireland chair of the Confederation of British Industry expressed frustration with the UK government over the issue.

“We find ourselves in a set of circumstances where the solutions that will work for Northern Ireland economically, don’t work politically,” Lockhart told BBC Inside Business. “And, those that work politically, don’t work economically.”

If the UK and the EU don’t reach a set agreement, a “hard brexit” would take place as all trade would be cut from the EU. According to Vox, this could temporarily halt air travel and make for empty supermarkets. It would also reinstate a hard border between Northern Ireland and the Republic of Ireland, throwing 20 years of peace into jeopardy.

A hard border between the countries could do more than reignite old grudges from the last half of the 20th century. It would bring a halt to the movement of goods, capital, services and people that Northern Irish businesses and workers so heavily rely on. According to the Irish Times, 30 percent of Northern Ireland’s exports or £2 billion were sent to the Republic of Ireland in 2013. Over 50 percent of Northern Irish exports go to the EU.

These exports are largely food products, live animals, machinery and transport equipment. A lot of these jobs are performed by low-skilled migrant workers that receive passage into Northern Ireland through the European Union, according to a report from the Migrant Advisory Committee.

Still, the rest of the U.K. is Northern Ireland’s single largest primary market for external sales. Nonetheless, nearly three-quarters of exports to Ireland come from small businesses with fewer than 50 employees along the border.

Disruption in cross border-traffic has other ramifications as well. Over 177,000 trucks and 250,000 vans that cross the border for trade every month would be subject to customs duties if a hard border was reinstated, according to the Financial Times. This transport does more than bring goods over the border for sale in small shops and supermarkets. Bailey’s Irish Cream, for example, is manufactured from resources from Northern Ireland the Republic of Ireland, and involves over 5,000 border crossings per year, according to the Atlantic Council.

Northern Ireland’s economy continues to experience challenges of its own. Poverty rates in the region are higher than the rest of the U.K. The children of former prisoners can still be barred from from certain jobs while their parents cannot get public sector positions or insurance. In addition, Northern Ireland has received over £470 million dollars from the U.K. for peace programs in communities that are plagued by both by whispers of sectarian struggles and economic hardship.

On October 11, Michel Barnier, the EU’s chief Brexit negotiator announced that Customs and VAT checks, as well as compliance checks will not be performed at the border between Northern Ireland and Ireland, according to the Irish Times.

However, Barnier was unclear as to the nature of system that would be implemented with the Brexit deal.

“There will be administrative procedures that do not exist today for goods travelling to Northern Ireland from the rest of the UK,” said Barnier. “Our challenge is to make sure those procedures are as easy as possible and not too burdensome, in particular for smaller businesses.”

That same day, 21 of Northern Ireland’s leading business organizations released a public letter to Theresa May, demanding that she take note of upcoming labor shortages, as migrant forces will be forced to move south to the Republic of Ireland if the current negotiations are approved.

“Unfortunately, it fails to provide the necessary solutions and we believe it is therefore critical to create an immigration policy with sufficient flexibility to address Northern Ireland’s labour needs,” the letter states.

Are the deadly “Troubles” set to return if a solution is not reached? At this point in the negotiations, it’s hard to tell. However it is important to consider the economic ramifications of repeating one dangerous memento from the past: a hard border.

Sources Note: All works cited have been properly hyperlinked. Ireland map provided by https://www.cso.ie/en/media/csoie/newsevents/documents/census2016profile6-commutinginireland/Cross_Border_Commuters_2016_v2.pdf.

The Economic Story Behind Lipstick Sales

August 28, 2018 by chan Leave a Comment

The rise in consumer spending is always perceived as a signpost for positive economic growth among analysts, there are, however, exceptions to this rule. Apart from the traditional economic indicators such as the unemployment rate and trade balance, there are sayings that lipstick sales can also serve as an indicator to measure the economic health of the country.

The Leading Lipstick Indicator, also known as the Lipstick Index, was coined by the Leonard Lauder, chairman of Estée Lauder, in 2011 when he witnessed the company’s lipstick sales doubled after the September 11 attacks. The idea behind the Index is that people are inclined to save up amid uncertainties and more prone to small luxuries.

History tells us that the uptick in lipstick spending often happens during economic recessions. The U.S. experienced an 11% surge in lipstick sales during the fall of 2001, while the spending on cosmetic products was up 25% back in the Great Depression. A jump in the Index mirrors a drop in consumer confidence because of the shift to relatively inexpensive luxuries.

Though the Index does not have the backing of official analysis and research to support its recession measurement, the shift in consumer behaviors heralds a diminishing consumer confidence when women forgo the pursuit of lavish handbags and jewelries and turn to affordable indulgences like lipsticks.

Despite not seeing similar lipstick sales trend in 2008, another cosmetic product is emerging as an indicator measuring economic strength. According to an interview conducted by the TIME magazine, nail-enhancing products are outpacing lipsticks that send women into a frenzy, said Lauder. The release of new lipstick shades does not excite women as much as it did decades ago. Instead of splurging on what they already own in their closets, people began to hunt for trending products in the beauty market. During the economic downturn from 2008 to 2011, the sales of nail-related goods increased exponentially by 65%, once again buttressing the analysis that people tend to avoid big purchases and pamper themselves with small luxurious products in times of economic hardship.

As time goes by, the lipstick effect has evolved as a term to describe the rise of smaller-ticket purchases amid economic downturns. As people are pulling back on opulent enjoyment, the odds of a falling economy grow.

So everyone, be wary the next time when you are about to purchase a lipstick. It might signal a slowdown in the economy!

Sources:

What Lipstick Tells Us About the Economy

https://www.economist.com/unknown/2009/01/23/lip-service

Pick A Pickle to Understand Urbanization in China

August 28, 2018 by huang Leave a Comment

We can always rely on food to tell changes in an economy.

Zhacai (榨菜) is a type of pickled mustard plant stem similar to Korean Kimchi. In China, it is popular among low-income group, particularly transient workers. By looking at the change in the sales of zhacai in different regions, one might tell where the workers were flowing into, which reflects how the cities has developed.

There has been large demand for labor forces as China embraces aggressive urbanization since its Reform and Opening-up. More and more breadwinners of rural households have attempted to opt out the life as farmers to pursue an imaginarily decent one in modern cities. In 1950, 13% of people in China lived in cities; by 2010, the urban share of the population had grown to 45%. The idea of using zhacai as an economic indicator was brought up in 2013 by Prof. Ba Shusong, Deputy Secretary General of China Society of Macroeconomics. He predicted that transient workers in east coastal areas would go back to their hometowns in west central China, as labor-intensive industries in the coastal areas had begun to migrate to the central regions since 2008 due to rising costs in land and resource.

According to the financial statements of Chongqing Fuling Zhacai, the biggest zhacai manufacturer in the country, from 2010 to 2012, the sales in Central China, Northwest China and Central Plains increased by 67.4%, 65.2% and 56.8% respectively, while the growth rate of South China was only 8.82% during the same period, which was the lowest in the nine sales regions of the country. The data then consolidate the argument of Prof. Ba.

The concept, however, is not entirely academically accurate. A migrant worker, for instance, might stop buying zhacai because of rising income levels or changing dietary preferences, while he himself was not migrating to anywhere else. Such changes would not reflect the physical move of the consumers.

Despite that, government officials in Guangdong Province might felt a huge relief seeing this number, for it suggests that their pressure on resettling the migrant population will be greatly reduced. Officials in the west central China, however, would have to feel a little bit of anxiety, because they might need to cope with tens of millions of people returning to the towns – they would then be crowded with problems of employment, health care and public services…

A Speculated Economic Silver Lining Brightens the Shadow of a Natural Disaster: How the U.S. Economy could benefit from Hurricane Harvey

September 5, 2017 by barrett Leave a Comment

The ruthless storm battering Houston, Texas is said to rank as one of the nation’s costliest disasters, with speculated loss of tens of billions of dollars in economic activity and property damage in an area critical to chemical, energy, and shipping industries.

Despite the widespread devastation and predicted losses of up to $100 billion, economists vocalized optimism that the Texas city is likely to recover quickly and may experience economic growth from rebuilding efforts.

Historically, the U.S. economy has rebounded following natural disasters, most easily associated with the financial resurgence following the $40 billion loss from Hurricane Katrina in 2005 and the $25 billion loss from Hurricane Ike in 2008. Dan Laufenberg, chief economist at Ameriprise Financial, stated, “the U.S. economy rebounded from Katrina, although the region hit by the storm has not, demonstrating once again how amazingly resilient our economy can be.”

The Houston metropolitan area, the U.S.’s fifth largest based on population, accounts for approximately 3 percent of the nation’s gross domestic product (GDP). Texas is often attributed as a center for oil production and refined products like diesel fuel, gasoline, heating oil, and other distillates.

In anticipation of increased demand due to the hurricane, wholesale trading prices for gasoline increased 6 cents to $1.75 per gallon on the benchmark contract set to settle next month. Ellen Zentner, chief United States economist at Morgan Stanley, suggested the lagged effects of rebuilding homes and replacing motor vehicles will outlast the anticipated neutral impact on national gross domestic product in the third quarter, providing a lift to GDP in the fourth quarter and beyond.

Californian Magic Is Real – The GDP Says So

August 31, 2017 by evan Leave a Comment

In many aspects, California has been seen as a unique case – at times an anomaly, even – of an American state. During the Rio Olympics there were many mentions of how many medals from the American roster belonged to California, and how that number would compare to other competing countries. When it comes to GDP, one can most definitely expect the similar kind of discussion taking place, especially in the current political atmosphere where the intensely progressive and liberal California stands among an overall right-leaning U.S.A..

The above graph shows California’s annual GDP growth since 2000. As the data suggests, California’s economy has remained largely healthy throughout the way, only taking a reasonable hit upon entering the 2008 Financial Crisis. However, as Bloomberg noted, California has seen a surprisingly speedy recovery compared to the rest of the nation, which the news agency accredited to the state’s liberal cultural-political environment, even going as far as saying that California “is the chief reason America is the only developed economy to achieve record GDP growth since the financial crisis of 2008 and ensuing global recession”.

The article attributed California’s “magic” to its left-leaning policies, such as securing a strong labor force through laws favoring immigrants. At a time where the President has been very outspoken against the topic, California strives to do the exact opposite, by exercising its autonomy on a state level. From raising taxes instead of lowering to encouraging companies to globalize rather than discouraging, California is almost a “rebellious child” in the eyes of the federal government. However, this rebellion has proven successful, as California’s real GDP growth maintained an upward momentum since climbing out of the recession until 2015, where it attained 4.4% while the entire country had only seen 2.6% that year.

There is no reason to believe that California would change course from what it has been doing and what has been working under the Trump administration. In fact, the President’s orders would act as the inverse-compass for the Californian economy. Despite having seen a dip in 2016, California does not seem to concern itself with this little hiccup, and from the looks of its policies, the state is set on remaining being that “problem child” in Mr. Trump’s classroom.

At Least You’re Always Ready for a Night Out?

August 29, 2017 by moera Leave a Comment

The lipstick index, created by chairman of Estée Lauder Leonard Lauder in 2011, is the theory that consumers are ready to indulge in cheaper—yet still satisfying—purchases like lipsticks over expensive items like designer bags in rough economic times such as the recession, according to U.S. News.

Lauder “hypothesized that lipstick purchases are a way to gauge the economy. When it’s shaky, he said, sales increase as women boost their mood with inexpensive lipstick purchases instead of $500 slingbacks” (qtd. in New York Times).

In other words, when the economy is low, people are stressed or depressed and what is one way we reduce or momentarily solve that problem? Shopping—but we can’t splurge and treat ourselves with overpriced items so we resolve to the little things in life like a new set of lipsticks.

Although “[this] theory has been debunked many times,” according to Forbes, personally, it is very simple: our morale may be low but at least we look great.

Not to mention, lipstick are not “inferior goods,” as said by the New York Times. In fact, they’re a luxury item that boosts one’s confidence—I don’t think of it as second choice to, for example, a pair of $300 shoes I would have bought instead, but as a deserving little bonus gift for myself that provides me a different kind of happiness. An example of an inferior good would be choosing Taco Bell over having dinner at my favorite taqueria, Gordos, because I should be saving the money.

Sarah Hill and four other researchers studied Lauder’s theory, which was published in the Journal of Personality and Social Psychology, “[confirming] that the lipstick effect is not only real, but deeply rooted in women’s mating psychology” (Scientific American). Hill explains that in a time of economic instability where unemployment rates are high, women want to look their best to attract the financially stable opposite sex who is scarce during recession.

But lipstick sales have been declining since 2007 while sale polish “are up since the first half of 2008,” according to market research firm Mintel (qtd. in Times). Lauder responds that “[nail] polish] is the new lipstick” in Times, and once again reiterates his lipstick index as an idea on the significance of succumbing to smaller luxury items like beauty products, regardless of what it is, during hard financial times.

At a Crossroads: The Future of ESPN

December 9, 2016 by davidson Leave a Comment

The year was 1998. The Entertainment and Sports Programming Network (ESPN) was trying to close a landmark deal with the National Football League. The goal was to finally bring the crown jewel of sports content, professional football, over to ESPN for weekly primetime scheduling. To close this deal, ESPN had to ask its parent company, Disney, and their CEO Michael Eisner for permission to pay the NFL’s exorbitant rights fee. Eisner agreed, on one condition: ESPN would have to divert the cost to cable companies in the form of annually increasing subscription fees. The head of sales, George Bodenheimer who would later become the longest tenured President in company history, had to do the impossible.

Bodenheimer had to convince various cable affiliates to a new seven-year deal with a compounded 20% annual increase in subscription fees. By the stroke of unparalleled salesmanship, and a fair amount of luck, Bodenheimer secured the agreement from the major cable players across the country. Thus, ESPN, only nineteen years old at the time, finally had professional football in primetime. They would soon discover that the landmark seven-year deal, and not football, was the true jet fuel for ESPN’s meteoric rise in revenue and spending power.

This seminal moment in ESPN’s ascent to supremacy in the world of sports television is recounted in deep detail in James Andrew Miller’s oral history of the company, “Those Guys Have All the Fun.” In the book, Miller quotes Hearst CEO Vic Ganzi who estimated “that single stroke of genius sent ESPN’s carriage fees from 40 cents to $3.20.”

The deal reverberated around the entire cable ecosystem because of its shocking potential. To put the deal into perspective, achieving a 20% return annually over seven years would yield a return of 358%. This growth in revenue was so tantalizing and surprising that even Eisner didn’t believe it was possible. Bodenheimer recounts in his memoir the task of relaying the news to his boss. ‘“Impossible!” said Eisner. “Nobody will pay that.”’ Yet they did, and ESPN reaped the rewards.

One of ESPN’s most popular shows with its longtime host Chris Berman

This deal speaks to ESPN’s true competitive advantage as a network. ESPN has the highest subscription fee of any cable network, which is how much cable and satellite TV providers charge per month to users for access to the channel. This tremendous influx of cash flow allows ESPN to outbid other networks with lower subscription fees that are more reliant on advertising as a form of revenue. ESPN also can command exceptionally high advertising rates because they reach the adult male demographic, a prized catch among advertisers.

This potent dual revenue stream is what positioned ESPN as the market leader for rights deals over the last twenty years. As they became the place to find any sort of sporting event, their ratings and popularity exploded further, and their fees and advertising rates climbed even higher. It seemed nothing could stop this blockbuster business in the first decade of the 21^st century. However, recently ESPN has found itself in a business quagmire of epic proportions.

The reason: the technological disruption of the cable industry. Over the last five years, television has been turned on its head. The way individuals consume media has shifted dramatically, and spending preferences have followed accordingly. With options like Netflix, Amazon, and Hulu the new generation of content consumers have more mediums to choose from than ever before. Additionally, DVR and Tivo, mechanisms to record shows, have rendered live television obsolete for the most part. Thus, “cord cutters” can pick and choose their favorite shows and avoid cable altogether.

For those loyalists who want a basic cable package, there is now the “skinny bundle,” a slim selection of channels that provides the necessities. Six months from now there will probably be even more options. In turn, ESPN’s revenue from subscriber fees has declined precipitously and it appears that trend is not stopping anytime soon.

According to Business Insider Intelligence, in October of 2016 ESPN “lost 621,000 cable subscribers, the most it has ever lost in a single month.” While that number, provided by Nielsen, has been disputed inside the kingdom of ESPN, the fact remains that the company is contracting. According to Nielsen estimates, ESPN has dropped below 89 million subscribers for the first time in a decade. Even more alarming is the fact that the company will lose close to three million subscribers in this calendar year alone. 60% of ESPN’s revenue comes from subscriber fees alone.

The dominance of ESPN has always been its robust dual revenue stream. As of now, just ESPN, without the other companion networks like ESPN 2 and ESPNU, commands a staggering $7.04 monthly subscription fee. Losing three million paying customers over the course of the year translates to a decrease in revenue of close to 250 million dollars annually. In the world of ESPN, where double digit growth is the norm, stagnation is unacceptable. One can only imagine what contraction means for the company.

Some experts and executives in the media industry think that ESPN creating a standalone service similar to HBO NOW is the magic antidote to all of their problems. The issue with this is that unlike content on HBO that is watchable at any time, the market has not shown a propensity to watch delayed live sports events. While it is perfectly acceptable and enjoyable to watch Game of Thrones a week late, the same cannot be said of watching a week old showdown between the Lakers and the Thunder. Additionally, this would violate current contracts on their deals and there is no incentive for individual professional leagues to use ESPN as their middleman when they can air direct to consumer.

Even more than that issue is the fact that to match ESPN’s current revenue with the standalone model, the company would need to charge an exorbitant rate per user of the service. The reason the cable model is failing is precisely why ESPN is succeeding. Millions of cable subscribers pay ESPN’s monthly fee without ever turning on the channel. With the new consumer driven economy, this inefficiency is slowly evaporating, and ESPN’s bottom line is feeling the brunt of that damage.

To compound this problem, ESPN is losing a lot of its signature talent while facing stiff competition as well as stagnant ratings on its two marquee programs: Monday Night Football and Sportscenter.

Over the last two years, ESPN has lost its most popular columnist, one of its most prominent radio hosts, and the most polarizing and talked about morning sports show TV host. The three: Bill Simmons, Colin Cowherd, and Skip Bayless all left because of friction with management and for more money. Fox Sports 1, the well-funded and fairly new competitor, flexed its financial might to pick up both Bayless and Cowherd. While Fox may have overpaid, the signings and other marquee additions like Erin Andrews, have put the TV network on the map. These were the types of moves ESPN would make in the past. As a result of its growing popularity, and a historic Chicago Cubs playoff run, Fox Sports 1 actually topped ESPN in ratings over the course of the October 13^th to October 20^th week for the first time since FS1 launched in August of 2013.

An FS1 show taking market share away from ESPN

The ratings drop affects ESPN’s other revenue driver: advertising. Since the advent of ESPN, the reason it has always commanded such high rates is because of its hard to reach demographic. For years, adult men have been the white whale and ESPN has been the bait to lure them in. Unfortunately for the company, ratings are down. Sportscenter, which rose to prominence in the 1990’s with transcendent hosts Keith Olbermann and Dan Patrick, has seen its ratings decline 27% since 2010. According to Sports Business Daily, the coveted 18-34 year old demographic has been hit even harder, with a 36% drop.

The two most popular hosts ever

The reasons for this are twofold. First, Sportscenter has failed to groom and create on air personalities that drive viewers the way Olbermann, Patrick, and many others did in the past. Second, highlights are now ubiquitous. One can access every highlight they want from the palm of one’s hand, without turning on Sportscenter. In a sense, the utility of the show is now obsolete. The only reason to tune in is because of the on air talent as well as the packaging. The company has tried to fix this problem by bringing in well liked Scott Van Pelt to host his own hour. This has created a brief resurgence, but there is a problem that still remains.

The new era with Scott Van Pelt

Sportscenter was the wagon that ESPN hitched itself it prior to signing the NFL. It is central to the ESPN ethos, and it represents more than just sagging ratings. In a way, Sportscenter has to work for ESPN to succeed. USC professor and sports media consultant Jeff Fellenzer says that “Sportscenter is so central to the ESPN brand and what they do that the company has to figure out some way to make it work.”

In addition to Sportscenter, Monday Night Football has also been an issue for the company. When ESPN inked the deal for the crown jewel of sports programming last decade, it unfortunately got stuck with the “B” schedule of games. The NFL moved their highest quality games to Sunday Night Football on NBC, and gave ESPN the former Sunday Night schedule. This dramatically diminished the quality of games on Monday night, and has led to less than primetime matchups. In turn, fewer people have tuned in. Since ESPN pays close to two billion dollars a year for Monday Night Football, in addition to the right to broadcast NFL highlights all week, losing viewers is not an optimal situation for the network.

This decrease in revenue puts the network in a precarious position, with rights deals for sports programming growing more expensive each round. According to Business Insider, ESPN literally will not be able to afford their league contracts if the number of subscribers continues to decrease.

The capital markets have taken notice. ESPN, which was valued by Forbes at 40 billion dollars, only a few years ago, has dragged down the price of Disney’s stock almost single handedly over the last year. In their last earnings report, Disney missed significantly on revenue numbers because of ESPN’s shortcomings.

Overall investors and spectators are concerned about ESPN’s future, and they wonder if the company can somehow find a new deal that rivals the earning potential of Bodenheimer’s signature achievement. Whether that is feasible remains to be seen. What is clear however is ESPN’s need to innovate in some capacity, to avoid the fate of fallen media giants before them.

The company has an array of options to choose from, and the strategy they take moving forward will be interesting. In terms of rights deals, the company can collaborate with other companies to split the monumental asking price of the various leagues. They have done this already, working with Fox on a deal for the PAC 12 and there will be more of these to come in the future. Fellenzer believes this is an absolute necessity as they won’t be able to afford as many rights deals on their own. “You will definitely start to see more of the PAC 12 deal type collaborations, I think it is the way to structure it moving forward,” Fellenzer said.

On the subscription front, the company may be able to work out deals with individual providers and other streaming services. They have started this process, offering ESPN on sling TV, a skinny bundle provider.

At the end of the day, the company is undoubtedly at a crossroads. However, they have the benefit of practically every league deal for the next decade. Live sports is still the one holdout for the rapidly shifting media landscape, and ESPN can use this decade of practically guaranteed viewers to innovate and figure out its next landmark move for the future. The company has been skilled enough to build one of the biggest media brands ever, so betting against them moving forward should be done with caution. There is a reason they are the worldwide leader in sports.

The Floral Industry- In Sync with the Economy

September 8, 2016 by plouff Leave a Comment

When thinking about the economy and the spending habits of Americans, the floral industry came to my mind because it is a product that Americans shift from feeling obligated to buy (for holidays, special occasions like weddings or funerals) or buy on a whim, and this interested me. Gifting a bouquet of flowers may just seem like a kind gesture, but the state of the floral industry can be an economic indicator.

Although the floral industry is a growing industry now (its total retail sales in the U.S. in 2015 was $31.3 billion, it’s highest sales yet) it’s growth and movement typically mirrors the economy. From this list of floral sales over the years, it is revealed that when the recession hit, the sales fell by $1.4 billion. Since the recession, the floral industry has been able to recover and grow by $2.4 billion in sales. This is $1.3 billion more than the industry’s previous peak in sales before the recession.

From my research, I have found that the floral industry’s state moves alongside the economy’s state, or in other words, the floral industry is in correlation with the U.S. economy. As U.S. consumer spending increases overall, floral sales increase. The average U.S. consumer spending monthly average in September in 2008 before the stock market crashed and the recession began, was $97. From then on after that number fell down to being in the $60-$70 from 2009-2012. Now in 2016, that consumer spending is back to an average of $90 a month. An interesting finding though is that the floral sales biggest time of growth in 2012 was much more extreme than the growth of consumer spending, and the sales have continued at this rate. The alignment of U.S. consumption and floral sales yearly are further depicted in the charts attached.

Average Holiday Expenditure on Flowers in the United States from 2004 to 2015 in U.S. Dollars

When consumers have more money Buying flowers to give to someone as a thoughtful gesture or buying flowers for yourself to enjoy can be thought of as being frivolous, this is because the flowers are bound to die shortly after purchasing and are just to be looked at. to spend, and they already typically purchase flowers, they will buy fancier and more expensive flowers. When the floral industry is doing well the economy is as well. But, you can also tell that Americans have less readily available money when they stop spending on floral gifts for loved ones. If floral sales during one of the big bouquet gifting holidays, such as Valentine’s Day or Mother’s Day, isn’t at a similar rate to previous years, this can show that the economy isn’t doing well. This is because people do not have the money to spend on flowers on days that they traditionally buy flowers on. Or those sales can be down because people are buying less expensive flowers than they typically would when the economy is well. The types of flowers being bought and the amount of flowers being bought by consumers can show the economy’s state of being. This makes sense for the floral industry especially since it is a luxury business; people will not buy luxury goods when they think they need to save money or are not financially comfortable.

An interesting note about the floral industry is that demand for flowers has not changed much over time even when the industry has gone through many changes, besides during times of economic instability. The floral industry shifted when America went from an agricultural society to an industrial society. The farming of flowers in the floral market shifted from being grown in the United States to being grown elsewhere and are now imported. Even more recently, the floral industry for the producer took a toll when the 1991 Andean Trade Preference Act was enacted. This act was to motivate South American countries from being involved in drug trafficking to being a part of legal industries, such as growing flowers. This continued to take away from the dwindling amount of flower farms in the U.S. because it has made it more difficult for them to compete with the prices of the South American-grown flowers; now 70% of retail flowers in the U.S. are grown in Colombia. Even local flower farms and retailers have attempted to start movements for consumers to buy locally grown flowers but it has not picked up and the amount of floral imports for American floral companies and retailers has remained.

Like the stable demand for florals, predictions of the floral industry in the future includes the continued growth of the industry due to the shift from Baby Boomers’s spending habits on florals and luxury good to the Millennial’s spending habits for on these goods. From the Retail Feedback Group survey in September 2015, Baby Boomers are more likely than other generations to purchase flowers once a week or every two weeks whereas Millennials buy flowers less often and spend more. As Millennials continue to grow up they will be spending more on florals for events such as weddings, parties, work events and funerals than any generation has before. These occasions are better business for the flower industry, and they will increase alongside the economy’s continued recovery from the recession, since the amount of these events decreased during that time. If the floral industry’s correlation with the economy continues as it has been and if this prediction is correct, the economy can be predicted to grow as well.

https://safnow.org/floral-industry-members-look-ahead-to-2016-with-some-hesitation/

http://www.pma.com/content/articles/2015/11/floral-consumer-trends

https://smartasset.com/insights/the-economics-of-flowers

http://www.aboutflowers.com/about-the-flower-industry/industry-overview.html

http://superfloralretailing.com/january2010/StateIndustry.html

http://www.bls.gov/oes/current/oes271023.htm

https://safnow.org/new-study-provides-insights-three-generations-flower-buyers/

Mosquito Bites: Painful For The Economy as Well

September 1, 2016 by davidson Leave a Comment

No one likes mosquitoes. They act as irritants and leaches, using individuals and animals to survive. Now, there might be an even greater reason to dislike them; they also hurt the bottom line. Recent studies have indicated a correlation between the incidences of mosquito bites and a straggling economy. The greater number of mosquito bites, the worse shape the economy is in.

The theory behind this concept is exemplified in the great recession. Since real estate was at the forefront of the economic plunge, many individuals lost their homes or failed to maintain them. All of these foreclosures left thousands and thousands of abandoned or ill maintained properties. Without anyone to maintain the homes, and more importantly the pools, the water turned stagnant in various locations. Combine that with certain humid climates, and these pools became nesting sites for mosquito breeding.

A Green Pool in Las Vegas

For instance, in Maricopa County, Arizona the unattended ponds and pools have become “green pools, according to authorities.” These pools are the ones where water has gone stagnant due to various levels of negligence, a lack of care driven by market forces. In 2009, 4,000 “green” pools were attended to by crews treating the stagnation. By comparison, only two years earlier the number was closer to 2500. This almost 60% jump correlated closely with an area that was hit extremely hard during the recession.

In areas where building was in a boom, many new developments placed pools in the backyards of individual homes. When people could no longer afford to maintain these pools, and for some, even live in the homes, mosquitoes swarmed.

In short, when the economy is bad, and people have to make hard financial choices, giving up pool maintenance is a necessary cut. The more pools across the country that go untreated, the worst shape the economy is in and the more homes mosquitoes find. So, if you hear more buzzing and see more bites, it is not just those small red dots you have to worry about. It could be a sign of great economic struggle on the way.

Cleaning up the mess

Sources:

http://www.theatlantic.com/business/archive/2009/06/the-5-strangest-economic-indicators/19669/

http://www.kiplinger.com/article/business/T019-C000-S001-10-quirky-economic-indicators.html

Unexpected Indicators

Marine Advertisement Intensity Index

September 1, 2016 by Dan Leave a Comment

It’s a bad economy. Job searches have not been successful. Young people are running out of options.

What can they do?

Perhaps joining the military is not a bad idea.

This may have been a thinking process for the youth during recession in the U.S.. In 2011, non-profit research organization National Priority Project (NPP) has published a military recruitment research for 2010. According to the NPP research, there was not enough data to prove a correlation between unemployment rate and recruitment rate. However, it does infer how the poor economy may drive youths to think of military as a career option.

According to NPP, the accession rate increased from FY2009 to FY2010, which indicates how more people wanted to join the military. By the FY2011 recruitment period, the US military already fulfilled the whole year’s recruitment demand and the half of FY2012’s recruitment goal. Comparing NPP’s analysis and the U.S. unemployment rate from U.S. Bureau of Labor Statistics, the correlation between the unemployment rate and demand for youth to join the military seems to make more sense. Looking at the unemployment rate trend from the end of 2009 to the beginning of 2011, the unemployment rate fluctuate between 10% and 9%. Considering the recruitment dates starting on September-October period, the unemployed youth may have felt hopelessness on looking for jobs; consecutively, they thought of enlisting.

As mentioned above, the recruitment goal for FY2011 overfilled the government’s demand. Consecutively, the government would want less recruits on next recruitment period. Of course, there the other factors influencing the military recruitment. For instance, 9/11 incident inspired many young Americans due to the rising patriotism. Yet, the recruitment goals by the year of 2005 supports correlation between unemployment rate and enlisting rate because the goal “had fallen short of its 80,000-person” according to New York Times.

To meet the recruitment goal, the U.S. military needs either inspire or scare to influence the American youth so the recruitment goal is met. There is a myriad ways to influence the public, but Business Insider and New York times theorized how Marine Corps advertisements may be the economic indicator that speaks about the correlation between unemployment rate and enlisting rate.

Business Insider and New York Times suggest that the intensity of Marine recruitment advertisements can be a measure of economy. The general concept goes something like this: when people cannot find suitable jobs due to bad economy, the Marine Corps terrifies the potential recruits with intense imagery in the advertisements because the Marine Corps does not want too many recruits. Though there is no easy to measure the intensity of the advertisements due to its qualitative nature, it is certainly interesting to look at in the light of communication.

“The Climb”

The proof Business Insider and New York Times provides is the comparison of advertisements after and before the year of 2002. In 2002, the Marine Corps released an advertisement called “The Climb”. The advertisement showcased a man rock-climbing on a cliff. As the man ascends, the imagery of deployment, courageous Marines, American flag, troops helping people in needs, and many patriotic symbols appear on the cliff. At the end of the climbing, the man sees himself in the Marine uniform. The man gets picked up by himself in the uniform and they emerge into a proud Marine with a halo his back. Watching “The Climb”, being a Marine does not seem to be a bad idea. After watching the advertisement, it does not seem to matter how hard the training is because being a Marine looks like the most worthwhile occupation in the world. This advertisement highlights the slogan of Marine Corps “The Few, The Proud” because the advertisement sends powerful imagery to state how every recruit can become a proud Marine after a rigorous training and self-development.

The advertisement on the 2002 definitely seems to attract many recruits. On the year of 2008, however, the advertisement changed the look of military. Preparing the next fiscal year, the Marine Corps released “America’s Few” advertisement. The advertisement starts with young men from different backgrounds. They rally at the same location and the scene shifts to the series of hardcore training the cadets go through. The commercial shows the images of very intense training such as rope climbing, diving into the water with full battle gears , getting exposed to tear gas, training in the mud, getting thrown into the hand to hand combat with no protective gears, war simulations, and rigorous combat practices.

“America’s Few”

Towards the end of the commercial, the narrator says that only a few can earn the title of proud Marines. Compare to the 2002 commercial, the advertisement on 2008 highlights how selective the Marine Corps is on picking its candidates. The images of trainees in pain from the training were repeating throughout the commercial. If the 2002 commercial was about the glory of becoming a Marine to attract many candidates, the 2008 commercial was definitely about influencing potential candidates to be hesitant on enlisting. On the year of 2009, the unemployment rate was 9.8% on September. In other words, there may have been a need to reduce the number of candidates to the Marine Corps as the unemployment rate rose; hence, “The Few” was more emphasized in the commercial than “The Proud”.

Of course it is not an accurate measure because the intensity can be subjective; however, the Marine Corps advertisement intensity index certainly has a value of studying. It definitely reflect on how the government communicates with people for the supply and demand. Just as other economic indicators influence how people feel about economy, Marine Corps advertisement intensity index influence how people feel about the government’s demand and supply.

MMM

Money Marks & Media - Spring 2014