November 16, 2023 • 35 mins
We discuss the effect of inflation on small businesses and restaurants, and how soon the US will reach 2%. Also, we dig into generational economic anxiety. Bloomberg Opinion's Jonathan Levin, Jessica Karl, Erin Lowry, and Justin Fox join. Amy Morris hosts.
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Speaker 1 (00:01):
You're listening to the Bloomberg Opinion podcast. Catch us Saturdays
at one in seven pm Eastern on Bloomberg dot com,
the iHeartRadio app and the Bloomberg Business App, or listen
on demand wherever you get your podcasts.
Speaker 2 (00:15):
Welcome to Bloomberg Opinion I Amy Morris. This week we
focus on your wallet. Members of Generation Z and some
millennials are feeling some intense economic anxiety. How is that
different than any other generation that came before. Also, holiday
shopping is upon us, and you might not be happy
(00:36):
about the rising prices, but you're spending like you don't care.
And you might have also noticed how the dining industry
is going through a sweeping overhaul. But we begin with
a look at small businesses and how America's smallest companies
can tell us a lot about the health of the
US economy and where the vulnerabilities are. Earlier this year,
(00:57):
President Biden rebranded his economic policy with a plan that
includes an investment in small business.
Speaker 3 (01:04):
First, making smart investments in America, Second, educated and empowering
American workers to grow the middle class, and third promoting
competition to lower cost to help small businesses.
Speaker 2 (01:17):
Let's bring in Bloomberg opinion columnists Jonathan Levin, who covers
US markets and economics, and Jonathan, what are you seeing
in America's small businesses that's giving you a read on
the economy and where there might be weaknesses.
Speaker 4 (01:31):
So basically cautious optimism. I always think it is important
to look at the small business space because they can
be sort of a Canara in the coal mine, especially
in an environment like this of contracting credit and higher
interest rates. Of course, you know, small businesses are more
sensitive to something like this because they have fewer financing
(01:51):
options to start with. Right, They're basically dependent on what
their bank will give them. They can't go out to
the bond market, for instance, and they are extremely extremely
exposed to those floating or variable rate loans.
Speaker 1 (02:06):
Right.
Speaker 4 (02:06):
So you like, when we think about housing markets, like,
you know, why is the United States housing market feeling
so much more resilient than say, say Canada. It's it's
that variable rate effect, right, Like you know, when you
have a variable rate, as soon as the Fed goes
out and tightens, everybody feels it. It's not just the
(02:26):
people going out and getting getting new loans. So I
did think it was very important to look at small businesses,
but the big picture is a picture of resiliency, and
to sort of give everybody the tld R at the
at the top, I don't want to say that they
can hang in there forever. I don't think that small
(02:47):
businesses are going to be able to hold up if
the FED stays this tight for the foreseeable future. But
at the moment, there's no reason to think that the
small business sector is at imminent risk of some sort
of collapse.
Speaker 5 (03:03):
Far from it.
Speaker 2 (03:04):
Actually, you actually made a really good point in your
column on the Bloomberg terminal about how federal support during
the pandemic may have impacted. This may have sort of
skewed the numbers a little bit artificially supporting these businesses,
so that you know, even had they not had that
federal support, they might not have been here anyway.
Speaker 4 (03:23):
So you know, one of the reasons I like to
dip into the bankruptcy space from time to time is
to do a little bit of myth busting, right, and
so tourists in the bankruptcy space well, from time to
time on Twitter things like that or act I should say,
they will pull up the chart of the trend in
bankruptcy is. You know, maybe you'll take like a one
(03:45):
year rolling average and you'll say, oh, my goodness, bankruptcies
are trending up. And that is indeed true of small
businesses as as well. But it's important to think about
level as well as trend and buy in law. Large
bankruptcies are still pretty low in the United States of
America relative to what they average, say from like twenty
(04:09):
fifteen to twenty nineteen, to give you a like a
pre pandemic snapshot. And the reason for that is because
you know, the federal government came out with these extraordinary
relief programs during the pandemic that kept some firms afloat
that might have organically gone under in the absence of
(04:30):
the pandemic and that extraordinary support. Right, So there's a
sense that we're really just sort of playing some catch
up here, or in the jargon, doing a bit of normalizing,
and that until we really you see the bankruptcy trends
break out ahead of something that we would consider normal,
(04:52):
it does feel early to be worrying about what's going
on here.
Speaker 2 (04:57):
So with these smaller firms, they are hiring and they
are spending money. It's just slowed but it is stable.
To your point, it's the stabilization you need to watch,
not so much the trend toward fast hiring or a
lot of money versus the slowdown.
Speaker 4 (05:12):
So, like I said, nobody's pretending that they aren't facing headwinds.
This has got to be a difficult environment for them.
When when an extremely interest rate sensitive group of businesses
is suddenly is suddenly faced with the velocity and the
(05:32):
levels of interest rates that we're facing across the country.
Nobody's saying that that isn't heart But the empirical evidence suggests,
as you point it to, that they are still spending money, right,
So Bank of America uses their own internal data to
track spending from small businesses. The headline on the NFIB
(05:54):
is that small business optimism looks to be very weak.
But my interpret rotation of that is, okay, is that
literally telling us something about the economy or is it
telling us more about the partisan nature of the world
we live in today. I think there's some of the former,
(06:16):
but there's also a good chunk of the latter. So
we have to take this weak small business confidence with
sort of a grain of salt. Having said all of that,
you know, to your point, I do think that there's
a self fulfilling aspect to all confidence, So it doesn't
really matter at the end of the day why people
(06:37):
feel bad. They might feel bad because their candidate, you know,
isn't doing well in the polls, or they're chosen president
isn't in the White House. If they feel bad, they
feel bad, and eventually that can actually be reflected in
the amount of investing that they do, the number of
(06:58):
people that they hire, and so on and so forth.
So I say, take the NFIB small business sentiment survey
with a grain of salt. But if it stays a
negative territory for the foreseeable future, could it start to matter? Yeah,
for sure.
Speaker 2 (07:15):
Well let's get into that a little bit. You had
referred to small businesses as acting as something of a
canary in the coal mine when it comes to the
health of the US economy. So over the next quarter,
let's say, what are you going to be looking for?
What should we all be watching for when that canary
goes down into the coal mine.
Speaker 4 (07:35):
So I would, in terms of watching the bankruptcy data itself,
this stuff could get really noisy, So I would not
get excited about small business bankruptcies unless you saw a
really meaningful breakout sort of to the upside. And the
(07:55):
reason for that is it's sort of multi foil. As
I said, we're still at really modest levels of bankruptcy,
so like you would sort of want to wait for
the normalization to take place and see if the trend
keeps going A and number two there is there's something
(08:18):
else going on in the bankruptcy code at the same time,
and it's hard to disaggregate that from the macroeconomic trends.
Speaker 6 (08:27):
Right.
Speaker 4 (08:27):
So basically we often forget this. But in twenty nineteen,
an Act of Congress created this thing called sub Chapter
five in the Chapter eleven code, and it gave a
lot of small businesses access to sort of a form
of reorganization that they probably wouldn't have been able to
(08:48):
access in the past, both because of the complexity of
the code and the inherent costs and all of that.
And so this for the first time, starting when this
became effective in twenty twenty, brought a lot of small
businesses into the bankruptcy data for the first time. And
a lot of proponents of this change would say, this
(09:10):
is actually a good thing, right. This means that more
small businesses are availing themselves of this new structure to
try and survive. Not it's not a bad thing at all,
potentially right, So as sub Chapter five becomes more popular,
(09:31):
we need to be aware of the fact that the
numbers of small business bankruptcies maybe going up, and it
may not necessarily be telling us anything about macroeconomic cycles.
So my point on the bankruptcy's data is I would
be very cautious with getting carried away about small ticks
(09:52):
up or small ticks in the other direction. I would
tend to watch other indicators more clo including what's going
on with the payments data. Bank of America is a
great resource fairly real time, and of course I would
be watching what's going on with jobs. I think, you know,
(10:14):
people often tell you that the labor market is a
lagging indicator. I think it's more complicated than that. I
think hiring is a great way to express your relative
confidence in the economy. It is sort of a medium
term commitment that you, as business owner make with a
potential employee, and it tells us a great deal about
(10:37):
where the proprietor of that business sees the economy and
their business prospects. In three months or six months or
twelve months down the line, and so far it looks like,
you know, they think things are going to be okay
in that horizon.
Speaker 2 (10:52):
Jonathan Levin is a Bloomberg Opinion columnist who covers US
markets and economics. Bloomberg Opinion continues with a look at
holiday shopping and even with the higher prices, that's not
slowing you down. This is Bloomberg.
Speaker 1 (11:13):
You're listening to the Bloomberg Opinion podcast count US Saturdays
at one and seven pm Eastern on Bloomberg dot com,
the iHeartRadio app, and the Bloomberg Business App, or listen
on demand wherever you get your podcasts.
Speaker 2 (11:27):
This is Bloomberg Opinion. I'm Amy Morris. We are well
into the annual ritual of shopping, baking and planning for
the holiday season, the food and the gifts and the travel.
And in fact, this holiday season is bound to be
a blockbuster. The National Retail Federation expects shopping to hit
record levels this month and in December. Kristin McGrath is
(11:49):
an editor with Retail Me Not, which finds consumers are
spending twenty nine percent more than last year.
Speaker 6 (11:54):
Retailers are starving extra early because they want shoppers to
do multiple rounds of shopping.
Speaker 2 (12:00):
And even though consumers are not happy with these higher prices,
that's not slowing them down. Let's talk about this with
Bloomberg Opinion columnist and author of the Bloomberg Opinion Today newsletter,
Jessica Carl And Jessica, how are things different from last year?
Economists had predicted that the US was going to enter
a recession.
Speaker 7 (12:18):
Yeah, so last year's predictions did not work out this year,
hopefully we won't enter a recession, but people still have
mixed feelings about whether that will happen. But really, what
happened this year was the disconnect between the consumer and
what economists saw. So consumers weren't happy about the economy
all year long, and that was the big economic story.
Speaker 2 (12:39):
Of last year, right right, the big disconnect between consumer
sentiment and consumer behavior. What's causing that disconnect.
Speaker 7 (12:47):
It has to do with the thing called money illusion.
So people love to hate on the economy and they'll say, oh,
everything was cheaper years and years ago, but they don't
recognize that their wages have gone up and things have
just gotten more expensive across the board. But they wouldn't
be like happy about. You know, they're not talking about
their wages. They're talking about this price sticker on the
bag of oreos that they're buying at the store, which,
(13:09):
by the way, it's interesting there's this big theory about
how oreos are also a stagflationary trend, where like the
cream inside of them, the ratio that to the cookie
is going down. So there's these visible, tangible signs that
people start to worry about the economy, and that's like
an interesting thing, and it's totally It says a lot
(13:30):
that they're saying a lot of different things versus what
they're actually spending their money on. So people are still
spending and spending and spending. So economists are very confused
by the sentiment being very negative, but yet they're spending
and the credit card debt's going up and stuff like that.
So it's just interesting.
Speaker 2 (13:45):
When you talk about like shrink flation, like the example
that you just gave with the oreos, many people do
tend to see the economy through the lens of their purchases,
how much they're paying for items and the impact of
I guess shrink flation for lack of a better word,
what are you seeing among consumers is that the going
trend at this point.
Speaker 7 (14:06):
I think they're definitely more observant of when the quality
of their products goes down. There's also you know, and
they're usually lower ticket items. They're you know, bag of chips,
cake mix, which is interesting. People observe that Betty Crocker's
cake mix, the weight of the dry ingredients went down,
so they actually just are putting less cake mix in
(14:28):
the box and telling you to use the same amount
of wet ingredients. So people are picking up on these
little things that are happening in their day to day lives,
and that's causing them to believe that the economy is
really bad. And there's probably a lag right if we're
seeing really great disinflationary data right now, that will take
time for consumers to kind of realize that, oh, things
aren't getting more expensive. But the reality is that those
(14:49):
prices that went up in our inflationary times are going
to kind of stay at that level. So that's not
making people happy.
Speaker 2 (14:56):
I understand the anger or the discontent with the inflation
and with the prices. However, could that disconnect between the
consumer spending and the consumer sentiment be politically motivated?
Speaker 7 (15:10):
It can certainly be politically motivated. I think if you
look at who's president during the different times, everyone blames
the bad economy on that current president if they don't
agree with their political belief Sure. So yeah, I mean
during Trump, Democrats said the economy is awful, and during Biden,
Republicans will say the economy is awful. And the reality
is that Biden's economy is actually really good. He just
(15:32):
has like a messaging problem and he needs to kind
of appeal to more moderate voters in that respect, which
we've also written about. But it's a challenge definitely from
a messaging standpoint, especially when you're seeing little scigns that
make you believe that the economy is bad. And we
also talked about this in terms of the vibe session
all throughout last year, which basically just says people are
(15:53):
saying the vibes are off, the vibes are off, but
what does that really mean. They're still spending, They're still
propping up the economy, and that's hopeful we'll stay true
next year as well.
Speaker 2 (16:02):
And were you You mentioned a few baking items as
far as shrinkflation is concerned. But let's get into it
a little bit because we are entering the holiday season.
This is when we travel, we shop, we give gifts,
we bake. What are we anticipating then, if the consumer
sentiment is down, but the consumer spending of late has
been higher, could this be a big boom for the
(16:25):
holidays shopping season.
Speaker 7 (16:26):
The holiday shopping season has definitely been pushed forward, and
you can already see this week if you go into
your browser, this is the week. You know, we're talking
leading up to Thanksgiving, but we're not Black Friday yet.
You can see that people are already putting things on sales.
Sites are having these big sales even before Black Friday.
I think part of that is because the retailers are
kind are confused about what consumers are willing to spend.
(16:49):
They you know, people say they're on a budget, blah
blah blah, but like all signs point to them spending
a crazy amount of money. There's there's I think that
TSA said they're expected to be a record travel season.
They always say that, but it should be a record
travel season this year. So people are spending on flights,
they're spending on gifts, they're spending on food. So I mean,
I think it could be a blockbuster but nobody really
(17:10):
knows yet, obviously.
Speaker 2 (17:11):
And we are talking with Bloomberg opinion columnist Jessica Carl
about consumer sentiment during the holiday season. Also, Jessica, another
indicator are people saving? Could this spending all of our
money come back to haunt us?
Speaker 7 (17:26):
Yes, I don't know if people are saving as much
as we would hope. During COVID we did have this big,
big build up of consumer saving. So that is good
in respects In that way, our coffers are still pretty strong.
But people are spending money on entertainment. There's just spending
and spending and spending. Bloomberg actually ran a big graphics
piece yesterday about auto loans and how those our auto
(17:50):
loan delinquencies are up. A lot of people take out
these auto loans and they have no ability to pay
them back and credit card that is also, you know, troubling.
So I think there are these signs that going to
the American consumer be weakening a bit, but also the
job market hopefully will stay strong and will continue to
see people spend. But if there are signs that cause
(18:10):
people to pull back, that would not be a good thing.
Speaker 2 (18:14):
What is then the conventional wisdom for twenty twenty four.
We all seem to get twenty twenty three a little
bit wrong, a little off. What about twenty twenty four?
Speaker 7 (18:22):
I think the recession stories hopefully behind us. If those
disinflationary trends continue, that will be probably the big story,
and hopefully the economy will improve and strengthen. I think
the job market is also something to keep an eye on.
If people start to feel as though they're stuck in
their jobs whereas though they can't get hired elsewhere, that's
(18:42):
definitely going to cause the economy to weaken. So there's
just some certain things to keep an eye on, like boys.
But the good news is that the CPI numbers are
very positive and hopefully will continue to see those come
down in the future.
Speaker 2 (18:55):
And what are you watching for over the next few months.
We only have a few more weeks before the end
of twenty twenty three.
Speaker 7 (19:02):
I always love to see the holiday shopping trends. I
After Christmas, it's always interesting to look at the returns
and see how many people are returning things and stuff
like that. But yeah, I think hopefully we will see
the consumer sentiment index improve, like ideally that would they
follow the inflation data that we're seeing now. But like
(19:23):
I said, there could be a lag, and I mean
that whole money illusion could continue, but in an ideal
world that would stop.
Speaker 2 (19:31):
Does that create problems for anything more than our ability
to predict what consumers are going to be doing when
there's that disconnect between the sentiment and the actual action.
Speaker 7 (19:43):
And sometimes people talk about it being a self fulfilling prophecy,
which we did hear a lot about last year. If
you say the economy is bad, bad, bad, but it's
actually okay, then you'll start to believe it at some
point and you just will rein back your own spending.
And if everybody's doing that, then that will cause the
econ to enter some type of recession, which is not good.
(20:04):
But if people continue to spend, then that illusion is
kind of a nine. It doesn't really impact as much.
But if people really start to pull back, then that's
where you'll see a problem.
Speaker 2 (20:15):
Jessica Carl is a Bloomberg Opinion columnist and author of
the Bloomberg Opinion Today newsletter, and coming up, we'll look
at generational financial anxiety and how it's impacting millennials in
gen Z. You're listening to Bloomberg.
Speaker 1 (20:40):
You're listening to the Bloomberg Opinion podcast. Catch us Saturdays
at one and seven pm Eastern on Bloomberg dot Com,
the iHeartRadio app and the Bloomberg Business App, or listen
on demand wherever you get your podcasts.
Speaker 2 (20:54):
You're listening to Bloomberg Opinion. I'm Amy Morris. Less than
one third of Generation Z feels financially secure. In more
than half say they're worried about not having enough money,
and not just a little worried either. After years of
being told that everything's going to be just fine, millennials
are treading water. Seventy three percent living paycheck to paycheck. Okay,
(21:14):
let's learn more about this generational financial anxiety with Bloomberg
Opinion columnist Aaron Lowry, who covers personal finance Arin. Why
can't we just tell millennials and Gen z ers simmer down,
It'll be all right, take control of your financial financial
lives like the rest of us had to do.
Speaker 6 (21:31):
This is different, It's never too because again, I just
always feel the need to assert this up top with
millennial conversations. Oldest millennials are forty two years old. We
are no longer children, right, we are.
Speaker 8 (21:44):
No longer in our twenties.
Speaker 6 (21:45):
The very youngest of the millennial generation is very close
to thirty. And I think that that contextually is so important,
because you can't tell a forty two year old just wait,
just wait your turn.
Speaker 8 (21:59):
It's gonna come. Everything's going to even out. We're starting
to feel.
Speaker 6 (22:03):
A little panicked at this point, and I think a
big part of that too is there have been so
many quote unquote once in a lifetime experiences that it
feels like happens every time millennials have almost gotten that
financial foothold. You know, the Great Recession happened as the
eldest of millennials are coming into the workforce. Don't worry,
(22:25):
it's a recession. It'll pass, You'll be fine. Okay, Great,
we started to get control, then the housing market goes
crazy and it's so hard to buy a house, and
then all of a sudden, a pandemic comes. And it
just feels like any time we get the slightest bit
of advancement, something comes to punch us in the mouth
and it's so frustrating.
Speaker 2 (22:44):
Is that why the baseline of financial comfort is more
elusive for this generation. It's just rotten timing.
Speaker 6 (22:52):
Part of its rotten timing, and let's also be honest,
part of it is systemic issues, wage stagnation. It is
not app to apples right now when we're looking at
trying to get into the housing market.
Speaker 8 (23:03):
I wrote a column a while.
Speaker 6 (23:04):
Back about you know, boomers, if you're comping the average
salary that a boomer made to the average salary a
millennials making, and the cost of houses, our homes are
almost four times as expensive for a similar salary. So
we don't have the same level of access that a
lot of our parents had. And so this notion of
(23:26):
we figured it out, you will too is just not
helpful advice.
Speaker 8 (23:30):
And to bring gen Z into this, I think part.
Speaker 6 (23:32):
Of it is, yeah, they are younger and maybe things
will be okay, but they're also watching us.
Speaker 8 (23:38):
Just to be clear, I'm thirty four, im a millennial.
Speaker 6 (23:40):
They're watching us and feeling like maybe it won't be
okay because it doesn't look like it's going to be
okay for those guys.
Speaker 2 (23:47):
Let's dig into that a little bit. What is it?
What else is it that millennials and gen Z may
be facing that the rest of us gen X here
and then there's a boomer in my house as well.
The rest of us didn't have to face as b
and Gen xers. It is different, and you mentioned housing.
What else is out there that's different that we didn't
have to deal with?
Speaker 6 (24:07):
You know? I also want to acknowledge gen x and
boomers had their own things. There have been once in
a lifetime experiences for every generation and it hasn't just
been a fleet a flat straight road for absolutely everybody.
I do feel like what is feeling like a big
gap here? Life is just more expensive. Even when we
(24:28):
compare for inflation, wages have not gone up in the
same way to comp for that. There's a stat flying
around that someone fact checked me on it, but it
basically was like, Hey, if your parents were making one
hundred thousand dollars in their thirties in the eighties, you
have to be making close to three hundred thousand dollars
for that to be the same amount of money.
Speaker 8 (24:49):
And that's heavy to us. For one.
Speaker 6 (24:52):
For two, student loans aren't even comparable, you know, I
know that there are plenty of Gen xers who had
student loan debt. The price of college is not even
remotely the same. It does feel like millennials were sold
this bill of goods.
Speaker 8 (25:05):
Of Hey, if you just go get a four year degree, the.
Speaker 6 (25:08):
World is your oyster. You will be able to go
have job security. Again, that hasn't really proven to be true.
And I do see a little bit of an advantage
for gen Z here where it feels like they have
kind of learned from our example. They are a little
bit more skeptical of college. They are looking at alternative
options that still yield a good salary.
Speaker 8 (25:27):
Technology is really changing the game here. AI is opening
up a lot.
Speaker 6 (25:31):
Of questions, so perhaps things will be different for them.
But it does feel for millennials, and again maybe this
is just a feeling. Maybe factually we are wildly off base.
I don't think so, but that everything feels way more
expensive and that we aren't being given the same kind
of economic opportunities the generations before us had.
Speaker 2 (25:54):
And we are talking with Bloomberg opinion columnist Aaron Lowry
about generational financial anxiety pacifically with millennials and gen Z.
You talked a little bit about housing. You talked about
the cost of an education, which you're absolutely right, gone
it's skyrocketed since I was in school. So let's look
also at healthcare that is often linked with employment. Why
(26:17):
is that so risky for these up and coming generations.
Speaker 6 (26:21):
It's such an odd practice to be linking health insurance
to employment because we know statistically people will lose their
jobs at some point. Even if you are an exemplary employee,
odds are at some point in your professional career you're
going to get laid off. And the fact that somebody
(26:43):
could get laid off, and if that coincides with a
major medical issue, that could put them in an incredibly
vulnerable position. Even if it doesn't, even if you are
gainfully employed with health insurance, Let's be honest, a big
medical issue could will put you in an incredibly financially
vulnerable position. And it is unbelievable that we have created
(27:06):
a system where it almost feels as if you're one
huge health issue away from bankruptcy. And so much bankruptcy
is tied to medical debt and medical situations. So the
fact that a lot of every generation, but certainly a
lot of Millennials and Gen Z have been experiencing layoffs
and then either have to pay huge out of pocket
(27:28):
premiums in order to gain access to mediocre health insurance
while in between jobs, or just risk it, and then
if something even kind of minor happens, that could be
tens of thousands of.
Speaker 8 (27:41):
Dollars of medical debt that you're going to have to
try to pay off.
Speaker 2 (27:45):
What is it that we can do as a country
to help establish a safety net?
Speaker 6 (27:50):
Oh man, we're going to get right into all of
the hot button, dog whistle type of topics.
Speaker 8 (27:54):
I feel for people. I wish that.
Speaker 6 (27:58):
There was an understanding that we could have a basic
safety net and still be a deeply capitalist country. Sure,
the idea of having baseline safety nets for your population
to just make sure that folks can't easily fall through
cracks does not have to be a tenant of policies
(28:22):
that people feel is how dare you? I'm just going
to say the S word socialist, and I think that
that makes people really anxious for some reason. It doesn't
necessarily have to mean that. It could be that we
are one of the wealthiest nations in the world. Why
are so many of our population incredibly vulnerable and living
(28:43):
in a situation that if one thing goes wrong, one
job layoff, and their one paycheck away from being unable
to afford basic necessities, being unable to afford housing, being
unable to afford transportation, being unable to go to the doctor.
That's just it's not respectful, and it doesn't give our
citizens dignity. And I've always been confused while we're allowing
(29:07):
this to happen, and the fact that we think it's
perfectly okay to have the employer be perterentialistic and provide
retirement benefits and healthcare benefits, but the idea of the
government and us looking after each other as citizens isn't
the same.
Speaker 8 (29:23):
Just doesn't quite make sense to me.
Speaker 2 (29:24):
And briefly, Aerin, you had said in your column that
one of America's strengths, so what is considered one of
America's strengths, it's individualism, might also be very detrimental. How so, well, just.
Speaker 6 (29:37):
Kind of on that same topic, the idea of we
do have this deeply entrenched, bootstrapped narrative belief, and part
of it being true that you know, this is a
country where you can rise up into a different socioeconomic
class than the one that you were born into. That
does certainly still exist. It's perhaps a bit harder than
people pretend that it is, but it exists as an option. However,
(30:02):
I don't know why we can't hold two truths. That
we can both be a society that enables people to
catapult into a different socioeconomic group, but also make sure
that there is base level safety nets so that even
our quote unquote bottom socioeconomic groups still have all of
(30:23):
their basic necessities that and are living a life of
some level of dignity.
Speaker 2 (30:28):
Aaron Lowry is a Bloomberg Opinion columnist. She covers personal
finance and is the author of the three part Broke
Millennial series. You're listening to Bloomberg Opinion. I'm Amy Morris.
The dining industry is going through an overhaul of sorts.
The economics of restaurants is changing. Let's find out more
with Bloomberg Opinion columnists Justin Fox, who covers business. Tell
me what's changing, what has already happened, what changes are coming.
Speaker 5 (30:51):
Basically, Americans are buying about as much food at restaurants
as they were. They're on the same trend as before
the pandemic. It just kept going up and up and up.
And employment at restaurants is still way below that trend.
So it's basically as much as being served with fewer servers.
(31:12):
And that's something I wrote about it a year ago,
and I was checking up on the data to see
whether that had changed, and it hadn't. But then I
looked at something else, which was wages for restaurant workers,
and they actually started going up. I mean they jumped
in early in the pandemic, but they'd been going up
much faster than earnings for everybody else really since around
(31:35):
twenty fourteen.
Speaker 2 (31:36):
And that was before the pandemic.
Speaker 5 (31:38):
You know, some of it might be that working age
population growth was already slowing down, but the really obvious
reason is that a lot of states and cities were
passing minimum wage increases, and basically the restaurant industry is
the most likely to pay minimum wage, and a lot
of places they're allowed to pay something below it until
(32:00):
you count in tips. Those have had a big effect
on restaurants. The funny thing, though, is you look and
you just can't see any effect on employment at restaurants
before the pandemic. But I just get the sense that
with this big shock of the pandemic, with initially this
sort of fifty percent drop in business and employment and
(32:20):
then a pretty quick recovery in how much business they
were getting, but it was much harder to bring that
many employees back. It's just led to this rethinking of
how restaurants work. I mean, and you hear a lot
of it from especially like high end restaurants, like saying
that the business is really hard to make money and
even harder than it was before, and lots of experiments
(32:41):
with alternatives to standard table service.
Speaker 2 (32:44):
So is this then a permanent change? Are we seeing
the evolution of a new way of the dining industry
to survive?
Speaker 6 (32:51):
Yeah?
Speaker 5 (32:51):
I think so. I mean, I think it's combination of
the higher pay for restaurant workers and then this sudden
shock that gave everybody sort of forced everybody to rethink
how they were going to do business, and also I
think gave a lot of restaurant workers this thought that, wow,
maybe I don't want to work in this business anymore.
You can just see in the national economic data these
(33:12):
super big changes, and I mean, one really dramatic one
is that productivity at restaurants, at full service restaurants, which
is just measured as output per hour worked, adjusted for inflation,
it basically went nowhere for the first fifteen years of
this century. You know, productivity growth hasn't been great anywhere,
(33:33):
but it was more than that in the rest of
the economy started to rise a bit after twenty fifteen,
and then this huge jump in twenty twenty one, and
it fell back a little bit last year, but it's
still just much higher than it was before. That just
means you're getting more output, which in this case is
food served to people per hour work in restaurants.
Speaker 2 (33:56):
What's the next step in this readjustment, in this fix.
Speaker 5 (34:01):
Part of what's happened, especially during the pandemic, was that
a lot of work that was done within the restaurant
bringing a meal to you all got outsourced to contractors
for grub Hub and Postmates and all of those kinds
of places. So there, to some extent, what you might
be seeing is not some amazing productivity revolution. It's just Okay,
(34:22):
we don't have waiters anymore. We just make food for delivery.
And so what's happening is those delivery workers tend not
to do super well financially, and some play New York,
where there especially big part of life here. The City
of New York is imposing a minimum wage there too.
It will be interesting to see. The impression from with
(34:42):
restaurants is that initially you won't see that much effect
on how many people are doing it, but over time
it's going to change the choices that places are making.
Speaker 2 (34:51):
All right, justin, thank you for taking the time and
explaining it all to us. We appreciate it.
Speaker 3 (34:56):
Thanks for having me.
Speaker 1 (34:57):
You can get anything you want at Alice's restaurant.
Speaker 8 (35:03):
Walk around.
Speaker 2 (35:04):
Justin Fox a Bloomberg Opinion columnist covering business, and that
does it for this week's Bloomberg Opinion. We are produced
by Eric Mullow and you can find all of these
columns on the Bloomberg Terminal. We are available as a
podcast on Apple, Spotify or your favorite podcast platform. Stay
with us. Today's top stories and global business headlines are
coming up. I'm Amy Morris, and this is Bloomberg.
You're listening to the Bloomberg Opinion podcast. Catch us Saturdays
at one in seven pm Eastern on Bloomberg dot com,
the iHeartRadio app and the Bloomberg Business App, or listen
on demand wherever you get your podcasts.
Speaker 2 (00:15):
Welcome to Bloomberg Opinion I Amy Morris. This week we
focus on your wallet. Members of Generation Z and some
millennials are feeling some intense economic anxiety. How is that
different than any other generation that came before. Also, holiday
shopping is upon us, and you might not be happy
(00:36):
about the rising prices, but you're spending like you don't care.
And you might have also noticed how the dining industry
is going through a sweeping overhaul. But we begin with
a look at small businesses and how America's smallest companies
can tell us a lot about the health of the
US economy and where the vulnerabilities are. Earlier this year,
(00:57):
President Biden rebranded his economic policy with a plan that
includes an investment in small business.
Speaker 3 (01:04):
First, making smart investments in America, Second, educated and empowering
American workers to grow the middle class, and third promoting
competition to lower cost to help small businesses.
Speaker 2 (01:17):
Let's bring in Bloomberg opinion columnists Jonathan Levin, who covers
US markets and economics, and Jonathan, what are you seeing
in America's small businesses that's giving you a read on
the economy and where there might be weaknesses.
Speaker 4 (01:31):
So basically cautious optimism. I always think it is important
to look at the small business space because they can
be sort of a Canara in the coal mine, especially
in an environment like this of contracting credit and higher
interest rates. Of course, you know, small businesses are more
sensitive to something like this because they have fewer financing
(01:51):
options to start with. Right, They're basically dependent on what
their bank will give them. They can't go out to
the bond market, for instance, and they are extremely extremely
exposed to those floating or variable rate loans.
Speaker 1 (02:06):
Right.
Speaker 4 (02:06):
So you like, when we think about housing markets, like,
you know, why is the United States housing market feeling
so much more resilient than say, say Canada. It's it's
that variable rate effect, right, Like you know, when you
have a variable rate, as soon as the Fed goes
out and tightens, everybody feels it. It's not just the
(02:26):
people going out and getting getting new loans. So I
did think it was very important to look at small businesses,
but the big picture is a picture of resiliency, and
to sort of give everybody the tld R at the
at the top, I don't want to say that they
can hang in there forever. I don't think that small
(02:47):
businesses are going to be able to hold up if
the FED stays this tight for the foreseeable future. But
at the moment, there's no reason to think that the
small business sector is at imminent risk of some sort
of collapse.
Speaker 5 (03:03):
Far from it.
Speaker 2 (03:04):
Actually, you actually made a really good point in your
column on the Bloomberg terminal about how federal support during
the pandemic may have impacted. This may have sort of
skewed the numbers a little bit artificially supporting these businesses,
so that you know, even had they not had that
federal support, they might not have been here anyway.
Speaker 4 (03:23):
So you know, one of the reasons I like to
dip into the bankruptcy space from time to time is
to do a little bit of myth busting, right, and
so tourists in the bankruptcy space well, from time to
time on Twitter things like that or act I should say,
they will pull up the chart of the trend in
bankruptcy is. You know, maybe you'll take like a one
(03:45):
year rolling average and you'll say, oh, my goodness, bankruptcies
are trending up. And that is indeed true of small
businesses as as well. But it's important to think about
level as well as trend and buy in law. Large
bankruptcies are still pretty low in the United States of
America relative to what they average, say from like twenty
(04:09):
fifteen to twenty nineteen, to give you a like a
pre pandemic snapshot. And the reason for that is because
you know, the federal government came out with these extraordinary
relief programs during the pandemic that kept some firms afloat
that might have organically gone under in the absence of
(04:30):
the pandemic and that extraordinary support. Right, So there's a
sense that we're really just sort of playing some catch
up here, or in the jargon, doing a bit of normalizing,
and that until we really you see the bankruptcy trends
break out ahead of something that we would consider normal,
(04:52):
it does feel early to be worrying about what's going
on here.
Speaker 2 (04:57):
So with these smaller firms, they are hiring and they
are spending money. It's just slowed but it is stable.
To your point, it's the stabilization you need to watch,
not so much the trend toward fast hiring or a
lot of money versus the slowdown.
Speaker 4 (05:12):
So, like I said, nobody's pretending that they aren't facing headwinds.
This has got to be a difficult environment for them.
When when an extremely interest rate sensitive group of businesses
is suddenly is suddenly faced with the velocity and the
(05:32):
levels of interest rates that we're facing across the country.
Nobody's saying that that isn't heart But the empirical evidence suggests,
as you point it to, that they are still spending money, right,
So Bank of America uses their own internal data to
track spending from small businesses. The headline on the NFIB
(05:54):
is that small business optimism looks to be very weak.
But my interpret rotation of that is, okay, is that
literally telling us something about the economy or is it
telling us more about the partisan nature of the world
we live in today. I think there's some of the former,
(06:16):
but there's also a good chunk of the latter. So
we have to take this weak small business confidence with
sort of a grain of salt. Having said all of that,
you know, to your point, I do think that there's
a self fulfilling aspect to all confidence, So it doesn't
really matter at the end of the day why people
(06:37):
feel bad. They might feel bad because their candidate, you know,
isn't doing well in the polls, or they're chosen president
isn't in the White House. If they feel bad, they
feel bad, and eventually that can actually be reflected in
the amount of investing that they do, the number of
(06:58):
people that they hire, and so on and so forth.
So I say, take the NFIB small business sentiment survey
with a grain of salt. But if it stays a
negative territory for the foreseeable future, could it start to matter? Yeah,
for sure.
Speaker 2 (07:15):
Well let's get into that a little bit. You had
referred to small businesses as acting as something of a
canary in the coal mine when it comes to the
health of the US economy. So over the next quarter,
let's say, what are you going to be looking for?
What should we all be watching for when that canary
goes down into the coal mine.
Speaker 4 (07:35):
So I would, in terms of watching the bankruptcy data itself,
this stuff could get really noisy, So I would not
get excited about small business bankruptcies unless you saw a
really meaningful breakout sort of to the upside. And the
(07:55):
reason for that is it's sort of multi foil. As
I said, we're still at really modest levels of bankruptcy,
so like you would sort of want to wait for
the normalization to take place and see if the trend
keeps going A and number two there is there's something
(08:18):
else going on in the bankruptcy code at the same time,
and it's hard to disaggregate that from the macroeconomic trends.
Speaker 6 (08:27):
Right.
Speaker 4 (08:27):
So basically we often forget this. But in twenty nineteen,
an Act of Congress created this thing called sub Chapter
five in the Chapter eleven code, and it gave a
lot of small businesses access to sort of a form
of reorganization that they probably wouldn't have been able to
(08:48):
access in the past, both because of the complexity of
the code and the inherent costs and all of that.
And so this for the first time, starting when this
became effective in twenty twenty, brought a lot of small
businesses into the bankruptcy data for the first time. And
a lot of proponents of this change would say, this
(09:10):
is actually a good thing, right. This means that more
small businesses are availing themselves of this new structure to
try and survive. Not it's not a bad thing at all,
potentially right, So as sub Chapter five becomes more popular,
(09:31):
we need to be aware of the fact that the
numbers of small business bankruptcies maybe going up, and it
may not necessarily be telling us anything about macroeconomic cycles.
So my point on the bankruptcy's data is I would
be very cautious with getting carried away about small ticks
(09:52):
up or small ticks in the other direction. I would
tend to watch other indicators more clo including what's going
on with the payments data. Bank of America is a
great resource fairly real time, and of course I would
be watching what's going on with jobs. I think, you know,
(10:14):
people often tell you that the labor market is a
lagging indicator. I think it's more complicated than that. I
think hiring is a great way to express your relative
confidence in the economy. It is sort of a medium
term commitment that you, as business owner make with a
potential employee, and it tells us a great deal about
(10:37):
where the proprietor of that business sees the economy and
their business prospects. In three months or six months or
twelve months down the line, and so far it looks like,
you know, they think things are going to be okay
in that horizon.
Speaker 2 (10:52):
Jonathan Levin is a Bloomberg Opinion columnist who covers US
markets and economics. Bloomberg Opinion continues with a look at
holiday shopping and even with the higher prices, that's not
slowing you down. This is Bloomberg.
Speaker 1 (11:13):
You're listening to the Bloomberg Opinion podcast count US Saturdays
at one and seven pm Eastern on Bloomberg dot com,
the iHeartRadio app, and the Bloomberg Business App, or listen
on demand wherever you get your podcasts.
Speaker 2 (11:27):
This is Bloomberg Opinion. I'm Amy Morris. We are well
into the annual ritual of shopping, baking and planning for
the holiday season, the food and the gifts and the travel.
And in fact, this holiday season is bound to be
a blockbuster. The National Retail Federation expects shopping to hit
record levels this month and in December. Kristin McGrath is
(11:49):
an editor with Retail Me Not, which finds consumers are
spending twenty nine percent more than last year.
Speaker 6 (11:54):
Retailers are starving extra early because they want shoppers to
do multiple rounds of shopping.
Speaker 2 (12:00):
And even though consumers are not happy with these higher prices,
that's not slowing them down. Let's talk about this with
Bloomberg Opinion columnist and author of the Bloomberg Opinion Today newsletter,
Jessica Carl And Jessica, how are things different from last year?
Economists had predicted that the US was going to enter
a recession.
Speaker 7 (12:18):
Yeah, so last year's predictions did not work out this year,
hopefully we won't enter a recession, but people still have
mixed feelings about whether that will happen. But really, what
happened this year was the disconnect between the consumer and
what economists saw. So consumers weren't happy about the economy
all year long, and that was the big economic story.
Speaker 2 (12:39):
Of last year, right right, the big disconnect between consumer
sentiment and consumer behavior. What's causing that disconnect.
Speaker 7 (12:47):
It has to do with the thing called money illusion.
So people love to hate on the economy and they'll say, oh,
everything was cheaper years and years ago, but they don't
recognize that their wages have gone up and things have
just gotten more expensive across the board. But they wouldn't
be like happy about. You know, they're not talking about
their wages. They're talking about this price sticker on the
bag of oreos that they're buying at the store, which,
(13:09):
by the way, it's interesting there's this big theory about
how oreos are also a stagflationary trend, where like the
cream inside of them, the ratio that to the cookie
is going down. So there's these visible, tangible signs that
people start to worry about the economy, and that's like
an interesting thing, and it's totally It says a lot
(13:30):
that they're saying a lot of different things versus what
they're actually spending their money on. So people are still
spending and spending and spending. So economists are very confused
by the sentiment being very negative, but yet they're spending
and the credit card debt's going up and stuff like that.
So it's just interesting.
Speaker 2 (13:45):
When you talk about like shrink flation, like the example
that you just gave with the oreos, many people do
tend to see the economy through the lens of their purchases,
how much they're paying for items and the impact of
I guess shrink flation for lack of a better word,
what are you seeing among consumers is that the going
trend at this point.
Speaker 7 (14:06):
I think they're definitely more observant of when the quality
of their products goes down. There's also you know, and
they're usually lower ticket items. They're you know, bag of chips,
cake mix, which is interesting. People observe that Betty Crocker's
cake mix, the weight of the dry ingredients went down,
so they actually just are putting less cake mix in
(14:28):
the box and telling you to use the same amount
of wet ingredients. So people are picking up on these
little things that are happening in their day to day lives,
and that's causing them to believe that the economy is
really bad. And there's probably a lag right if we're
seeing really great disinflationary data right now, that will take
time for consumers to kind of realize that, oh, things
aren't getting more expensive. But the reality is that those
(14:49):
prices that went up in our inflationary times are going
to kind of stay at that level. So that's not
making people happy.
Speaker 2 (14:56):
I understand the anger or the discontent with the inflation
and with the prices. However, could that disconnect between the
consumer spending and the consumer sentiment be politically motivated?
Speaker 7 (15:10):
It can certainly be politically motivated. I think if you
look at who's president during the different times, everyone blames
the bad economy on that current president if they don't
agree with their political belief Sure. So yeah, I mean
during Trump, Democrats said the economy is awful, and during Biden,
Republicans will say the economy is awful. And the reality
is that Biden's economy is actually really good. He just
(15:32):
has like a messaging problem and he needs to kind
of appeal to more moderate voters in that respect, which
we've also written about. But it's a challenge definitely from
a messaging standpoint, especially when you're seeing little scigns that
make you believe that the economy is bad. And we
also talked about this in terms of the vibe session
all throughout last year, which basically just says people are
(15:53):
saying the vibes are off, the vibes are off, but
what does that really mean. They're still spending, They're still
propping up the economy, and that's hopeful we'll stay true
next year as well.
Speaker 2 (16:02):
And were you You mentioned a few baking items as
far as shrinkflation is concerned. But let's get into it
a little bit because we are entering the holiday season.
This is when we travel, we shop, we give gifts,
we bake. What are we anticipating then, if the consumer
sentiment is down, but the consumer spending of late has
been higher, could this be a big boom for the
(16:25):
holidays shopping season.
Speaker 7 (16:26):
The holiday shopping season has definitely been pushed forward, and
you can already see this week if you go into
your browser, this is the week. You know, we're talking
leading up to Thanksgiving, but we're not Black Friday yet.
You can see that people are already putting things on sales.
Sites are having these big sales even before Black Friday.
I think part of that is because the retailers are
kind are confused about what consumers are willing to spend.
(16:49):
They you know, people say they're on a budget, blah
blah blah, but like all signs point to them spending
a crazy amount of money. There's there's I think that
TSA said they're expected to be a record travel season.
They always say that, but it should be a record
travel season this year. So people are spending on flights,
they're spending on gifts, they're spending on food. So I mean,
I think it could be a blockbuster but nobody really
(17:10):
knows yet, obviously.
Speaker 2 (17:11):
And we are talking with Bloomberg opinion columnist Jessica Carl
about consumer sentiment during the holiday season. Also, Jessica, another
indicator are people saving? Could this spending all of our
money come back to haunt us?
Speaker 7 (17:26):
Yes, I don't know if people are saving as much
as we would hope. During COVID we did have this big,
big build up of consumer saving. So that is good
in respects In that way, our coffers are still pretty strong.
But people are spending money on entertainment. There's just spending
and spending and spending. Bloomberg actually ran a big graphics
piece yesterday about auto loans and how those our auto
(17:50):
loan delinquencies are up. A lot of people take out
these auto loans and they have no ability to pay
them back and credit card that is also, you know, troubling.
So I think there are these signs that going to
the American consumer be weakening a bit, but also the
job market hopefully will stay strong and will continue to
see people spend. But if there are signs that cause
(18:10):
people to pull back, that would not be a good thing.
Speaker 2 (18:14):
What is then the conventional wisdom for twenty twenty four.
We all seem to get twenty twenty three a little
bit wrong, a little off. What about twenty twenty four?
Speaker 7 (18:22):
I think the recession stories hopefully behind us. If those
disinflationary trends continue, that will be probably the big story,
and hopefully the economy will improve and strengthen. I think
the job market is also something to keep an eye on.
If people start to feel as though they're stuck in
their jobs whereas though they can't get hired elsewhere, that's
(18:42):
definitely going to cause the economy to weaken. So there's
just some certain things to keep an eye on, like boys.
But the good news is that the CPI numbers are
very positive and hopefully will continue to see those come
down in the future.
Speaker 2 (18:55):
And what are you watching for over the next few months.
We only have a few more weeks before the end
of twenty twenty three.
Speaker 7 (19:02):
I always love to see the holiday shopping trends. I
After Christmas, it's always interesting to look at the returns
and see how many people are returning things and stuff
like that. But yeah, I think hopefully we will see
the consumer sentiment index improve, like ideally that would they
follow the inflation data that we're seeing now. But like
(19:23):
I said, there could be a lag, and I mean
that whole money illusion could continue, but in an ideal
world that would stop.
Speaker 2 (19:31):
Does that create problems for anything more than our ability
to predict what consumers are going to be doing when
there's that disconnect between the sentiment and the actual action.
Speaker 7 (19:43):
And sometimes people talk about it being a self fulfilling prophecy,
which we did hear a lot about last year. If
you say the economy is bad, bad, bad, but it's
actually okay, then you'll start to believe it at some
point and you just will rein back your own spending.
And if everybody's doing that, then that will cause the
econ to enter some type of recession, which is not good.
(20:04):
But if people continue to spend, then that illusion is
kind of a nine. It doesn't really impact as much.
But if people really start to pull back, then that's
where you'll see a problem.
Speaker 2 (20:15):
Jessica Carl is a Bloomberg Opinion columnist and author of
the Bloomberg Opinion Today newsletter, and coming up, we'll look
at generational financial anxiety and how it's impacting millennials in
gen Z. You're listening to Bloomberg.
Speaker 1 (20:40):
You're listening to the Bloomberg Opinion podcast. Catch us Saturdays
at one and seven pm Eastern on Bloomberg dot Com,
the iHeartRadio app and the Bloomberg Business App, or listen
on demand wherever you get your podcasts.
Speaker 2 (20:54):
You're listening to Bloomberg Opinion. I'm Amy Morris. Less than
one third of Generation Z feels financially secure. In more
than half say they're worried about not having enough money,
and not just a little worried either. After years of
being told that everything's going to be just fine, millennials
are treading water. Seventy three percent living paycheck to paycheck. Okay,
(21:14):
let's learn more about this generational financial anxiety with Bloomberg
Opinion columnist Aaron Lowry, who covers personal finance Arin. Why
can't we just tell millennials and Gen z ers simmer down,
It'll be all right, take control of your financial financial
lives like the rest of us had to do.
Speaker 6 (21:31):
This is different, It's never too because again, I just
always feel the need to assert this up top with
millennial conversations. Oldest millennials are forty two years old. We
are no longer children, right, we are.
Speaker 8 (21:44):
No longer in our twenties.
Speaker 6 (21:45):
The very youngest of the millennial generation is very close
to thirty. And I think that that contextually is so important,
because you can't tell a forty two year old just wait,
just wait your turn.
Speaker 8 (21:59):
It's gonna come. Everything's going to even out. We're starting
to feel.
Speaker 6 (22:03):
A little panicked at this point, and I think a
big part of that too is there have been so
many quote unquote once in a lifetime experiences that it
feels like happens every time millennials have almost gotten that
financial foothold. You know, the Great Recession happened as the
eldest of millennials are coming into the workforce. Don't worry,
(22:25):
it's a recession. It'll pass, You'll be fine. Okay, Great,
we started to get control, then the housing market goes
crazy and it's so hard to buy a house, and
then all of a sudden, a pandemic comes. And it
just feels like any time we get the slightest bit
of advancement, something comes to punch us in the mouth
and it's so frustrating.
Speaker 2 (22:44):
Is that why the baseline of financial comfort is more
elusive for this generation. It's just rotten timing.
Speaker 6 (22:52):
Part of its rotten timing, and let's also be honest,
part of it is systemic issues, wage stagnation. It is
not app to apples right now when we're looking at
trying to get into the housing market.
Speaker 8 (23:03):
I wrote a column a while.
Speaker 6 (23:04):
Back about you know, boomers, if you're comping the average
salary that a boomer made to the average salary a
millennials making, and the cost of houses, our homes are
almost four times as expensive for a similar salary. So
we don't have the same level of access that a
lot of our parents had. And so this notion of
(23:26):
we figured it out, you will too is just not
helpful advice.
Speaker 8 (23:30):
And to bring gen Z into this, I think part.
Speaker 6 (23:32):
Of it is, yeah, they are younger and maybe things
will be okay, but they're also watching us.
Speaker 8 (23:38):
Just to be clear, I'm thirty four, im a millennial.
Speaker 6 (23:40):
They're watching us and feeling like maybe it won't be
okay because it doesn't look like it's going to be
okay for those guys.
Speaker 2 (23:47):
Let's dig into that a little bit. What is it?
What else is it that millennials and gen Z may
be facing that the rest of us gen X here
and then there's a boomer in my house as well.
The rest of us didn't have to face as b
and Gen xers. It is different, and you mentioned housing.
What else is out there that's different that we didn't
have to deal with?
Speaker 6 (24:07):
You know? I also want to acknowledge gen x and
boomers had their own things. There have been once in
a lifetime experiences for every generation and it hasn't just
been a fleet a flat straight road for absolutely everybody.
I do feel like what is feeling like a big
gap here? Life is just more expensive. Even when we
(24:28):
compare for inflation, wages have not gone up in the
same way to comp for that. There's a stat flying
around that someone fact checked me on it, but it
basically was like, Hey, if your parents were making one
hundred thousand dollars in their thirties in the eighties, you
have to be making close to three hundred thousand dollars
for that to be the same amount of money.
Speaker 8 (24:49):
And that's heavy to us. For one.
Speaker 6 (24:52):
For two, student loans aren't even comparable, you know, I
know that there are plenty of Gen xers who had
student loan debt. The price of college is not even
remotely the same. It does feel like millennials were sold
this bill of goods.
Speaker 8 (25:05):
Of Hey, if you just go get a four year degree, the.
Speaker 6 (25:08):
World is your oyster. You will be able to go
have job security. Again, that hasn't really proven to be true.
And I do see a little bit of an advantage
for gen Z here where it feels like they have
kind of learned from our example. They are a little
bit more skeptical of college. They are looking at alternative
options that still yield a good salary.
Speaker 8 (25:27):
Technology is really changing the game here. AI is opening
up a lot.
Speaker 6 (25:31):
Of questions, so perhaps things will be different for them.
But it does feel for millennials, and again maybe this
is just a feeling. Maybe factually we are wildly off base.
I don't think so, but that everything feels way more
expensive and that we aren't being given the same kind
of economic opportunities the generations before us had.
Speaker 2 (25:54):
And we are talking with Bloomberg opinion columnist Aaron Lowry
about generational financial anxiety pacifically with millennials and gen Z.
You talked a little bit about housing. You talked about
the cost of an education, which you're absolutely right, gone
it's skyrocketed since I was in school. So let's look
also at healthcare that is often linked with employment. Why
(26:17):
is that so risky for these up and coming generations.
Speaker 6 (26:21):
It's such an odd practice to be linking health insurance
to employment because we know statistically people will lose their
jobs at some point. Even if you are an exemplary employee,
odds are at some point in your professional career you're
going to get laid off. And the fact that somebody
(26:43):
could get laid off, and if that coincides with a
major medical issue, that could put them in an incredibly
vulnerable position. Even if it doesn't, even if you are
gainfully employed with health insurance, Let's be honest, a big
medical issue could will put you in an incredibly financially
vulnerable position. And it is unbelievable that we have created
(27:06):
a system where it almost feels as if you're one
huge health issue away from bankruptcy. And so much bankruptcy
is tied to medical debt and medical situations. So the
fact that a lot of every generation, but certainly a
lot of Millennials and Gen Z have been experiencing layoffs
and then either have to pay huge out of pocket
(27:28):
premiums in order to gain access to mediocre health insurance
while in between jobs, or just risk it, and then
if something even kind of minor happens, that could be
tens of thousands of.
Speaker 8 (27:41):
Dollars of medical debt that you're going to have to
try to pay off.
Speaker 2 (27:45):
What is it that we can do as a country
to help establish a safety net?
Speaker 6 (27:50):
Oh man, we're going to get right into all of
the hot button, dog whistle type of topics.
Speaker 8 (27:54):
I feel for people. I wish that.
Speaker 6 (27:58):
There was an understanding that we could have a basic
safety net and still be a deeply capitalist country. Sure,
the idea of having baseline safety nets for your population
to just make sure that folks can't easily fall through
cracks does not have to be a tenant of policies
(28:22):
that people feel is how dare you? I'm just going
to say the S word socialist, and I think that
that makes people really anxious for some reason. It doesn't
necessarily have to mean that. It could be that we
are one of the wealthiest nations in the world. Why
are so many of our population incredibly vulnerable and living
(28:43):
in a situation that if one thing goes wrong, one
job layoff, and their one paycheck away from being unable
to afford basic necessities, being unable to afford housing, being
unable to afford transportation, being unable to go to the doctor.
That's just it's not respectful, and it doesn't give our
citizens dignity. And I've always been confused while we're allowing
(29:07):
this to happen, and the fact that we think it's
perfectly okay to have the employer be perterentialistic and provide
retirement benefits and healthcare benefits, but the idea of the
government and us looking after each other as citizens isn't
the same.
Speaker 8 (29:23):
Just doesn't quite make sense to me.
Speaker 2 (29:24):
And briefly, Aerin, you had said in your column that
one of America's strengths, so what is considered one of
America's strengths, it's individualism, might also be very detrimental. How so, well, just.
Speaker 6 (29:37):
Kind of on that same topic, the idea of we
do have this deeply entrenched, bootstrapped narrative belief, and part
of it being true that you know, this is a
country where you can rise up into a different socioeconomic
class than the one that you were born into. That
does certainly still exist. It's perhaps a bit harder than
people pretend that it is, but it exists as an option. However,
(30:02):
I don't know why we can't hold two truths. That
we can both be a society that enables people to
catapult into a different socioeconomic group, but also make sure
that there is base level safety nets so that even
our quote unquote bottom socioeconomic groups still have all of
(30:23):
their basic necessities that and are living a life of
some level of dignity.
Speaker 2 (30:28):
Aaron Lowry is a Bloomberg Opinion columnist. She covers personal
finance and is the author of the three part Broke
Millennial series. You're listening to Bloomberg Opinion. I'm Amy Morris.
The dining industry is going through an overhaul of sorts.
The economics of restaurants is changing. Let's find out more
with Bloomberg Opinion columnists Justin Fox, who covers business. Tell
me what's changing, what has already happened, what changes are coming.
Speaker 5 (30:51):
Basically, Americans are buying about as much food at restaurants
as they were. They're on the same trend as before
the pandemic. It just kept going up and up and up.
And employment at restaurants is still way below that trend.
So it's basically as much as being served with fewer servers.
(31:12):
And that's something I wrote about it a year ago,
and I was checking up on the data to see
whether that had changed, and it hadn't. But then I
looked at something else, which was wages for restaurant workers,
and they actually started going up. I mean they jumped
in early in the pandemic, but they'd been going up
much faster than earnings for everybody else really since around
(31:35):
twenty fourteen.
Speaker 2 (31:36):
And that was before the pandemic.
Speaker 5 (31:38):
You know, some of it might be that working age
population growth was already slowing down, but the really obvious
reason is that a lot of states and cities were
passing minimum wage increases, and basically the restaurant industry is
the most likely to pay minimum wage, and a lot
of places they're allowed to pay something below it until
(32:00):
you count in tips. Those have had a big effect
on restaurants. The funny thing, though, is you look and
you just can't see any effect on employment at restaurants
before the pandemic. But I just get the sense that
with this big shock of the pandemic, with initially this
sort of fifty percent drop in business and employment and
(32:20):
then a pretty quick recovery in how much business they
were getting, but it was much harder to bring that
many employees back. It's just led to this rethinking of
how restaurants work. I mean, and you hear a lot
of it from especially like high end restaurants, like saying
that the business is really hard to make money and
even harder than it was before, and lots of experiments
(32:41):
with alternatives to standard table service.
Speaker 2 (32:44):
So is this then a permanent change? Are we seeing
the evolution of a new way of the dining industry
to survive?
Speaker 6 (32:51):
Yeah?
Speaker 5 (32:51):
I think so. I mean, I think it's combination of
the higher pay for restaurant workers and then this sudden
shock that gave everybody sort of forced everybody to rethink
how they were going to do business, and also I
think gave a lot of restaurant workers this thought that, wow,
maybe I don't want to work in this business anymore.
You can just see in the national economic data these
(33:12):
super big changes, and I mean, one really dramatic one
is that productivity at restaurants, at full service restaurants, which
is just measured as output per hour worked, adjusted for inflation,
it basically went nowhere for the first fifteen years of
this century. You know, productivity growth hasn't been great anywhere,
(33:33):
but it was more than that in the rest of
the economy started to rise a bit after twenty fifteen,
and then this huge jump in twenty twenty one, and
it fell back a little bit last year, but it's
still just much higher than it was before. That just
means you're getting more output, which in this case is
food served to people per hour work in restaurants.
Speaker 2 (33:56):
What's the next step in this readjustment, in this fix.
Speaker 5 (34:01):
Part of what's happened, especially during the pandemic, was that
a lot of work that was done within the restaurant
bringing a meal to you all got outsourced to contractors
for grub Hub and Postmates and all of those kinds
of places. So there, to some extent, what you might
be seeing is not some amazing productivity revolution. It's just Okay,
(34:22):
we don't have waiters anymore. We just make food for delivery.
And so what's happening is those delivery workers tend not
to do super well financially, and some play New York,
where there especially big part of life here. The City
of New York is imposing a minimum wage there too.
It will be interesting to see. The impression from with
(34:42):
restaurants is that initially you won't see that much effect
on how many people are doing it, but over time
it's going to change the choices that places are making.
Speaker 2 (34:51):
All right, justin, thank you for taking the time and
explaining it all to us. We appreciate it.
Speaker 3 (34:56):
Thanks for having me.
Speaker 1 (34:57):
You can get anything you want at Alice's restaurant.
Speaker 8 (35:03):
Walk around.
Speaker 2 (35:04):
Justin Fox a Bloomberg Opinion columnist covering business, and that
does it for this week's Bloomberg Opinion. We are produced
by Eric Mullow and you can find all of these
columns on the Bloomberg Terminal. We are available as a
podcast on Apple, Spotify or your favorite podcast platform. Stay
with us. Today's top stories and global business headlines are
coming up. I'm Amy Morris, and this is Bloomberg.
Host
Vonnie Quinn
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