By Alexis Fitts May 1, 2015
U.S. GDP Slump, Worker Pay Pickup
This week the Commerce Department announced that GDP growth slowed in the first quarter of 2015—to just 0.2 percent annualized, from 2.2 percent during the last three months of 2014. This news comes on the heels of a disappointing jobs report last month, which indicated that the US added just 126,000 new jobs in February. Analysts had predicted twice that.
New York City, January 2015. © Anthony Quintano
Economists blamed the first quarter stagnation on a number of temporary factors, rather than a longer-term downward trend in the domestic economy. Extreme winter weather and a strong dollar slowed spending, they said, and sinking oil prices have undercut a domestic energy boom.
The Federal Reserve, which has hinted in recent weeks that it may begin to raise interest rates later this year, responded to the news with a statement that it is still waiting for improved economic performance before it makes any moves. Financial markets began pricing in a delay in interest rate hikes from their current range of 0 to 0.25 percent until September, according to The Guardian.
But on Thursday morning, two reports painted a more optimistic picture of the US Economy. Weekly applications for new jobless benefits fell to their lowest figure in 15 years, 262,000. Then, the quarterly report of the Bureau of Labor Statistics showed that total worker pay, which includes benefits and bonuses, had increased at the quickest rate since the end of the recession, rising 2.6 percent last year. This rise in worker compensation, which will boost individual purchasing power, could have significant effects on the domestic economy, counteracting the lull caused by winter weather.
Anonymous Chat App Secret Shuts Down
David Byttow, TechCrunch, May 2014. © TechCrunch
When Secret, a chat app that allows its users to share messages without disclosing their identity, launched 16-months ago, it was hailed as the future of social networking—an industry that experts speculated would turn increasingly to anonymous apps, like Yik Yak and Whisper, as alternatives to sites like Facebook that collect a lot of personal data on their users. Secret raised $25 million from private investors last July, and was then valued at some $100 million.
Yet on Tuesday, co-founder David Byttow announced to Secret employees that the company was closing for good, and handed out severance packages to the remaining workers.
Since landing those big investments last summer, the company had been increasingly struggling. A Brazilian court ordered Apple and Google to remove the app from domestic stores last August after charging the company with promoting cyberbullying. Shortly afterward, company founders sold part of their stake for $6 million, a sale that employees learned about, ironically, on Secret.
Secret’s shuttering, first reported by BuzzFeed News, follows the quick-burn trajectory of a number of recent Silicon Valley startups, which have accumulated audiences faster than they can figure out how to retain or monetize them. On Wednesday, Byttrow announced the news of the company’s demise himself in a blog post on Medium. “Innovation requires failure, and I believe in failing fast in order to go on and make only new and different mistakes,” he wrote.
Parenting Cost Crunch
For millennials, parenting is increasingly becoming economically prohibitive, according to a new policy report from Young Invincibles. Childcare and pre-college education costs have risen from 2 percent of child rearing costs in 1960 to 18 percent. In 20 states, annual child-care costs—which range from $4,300 in Mississippi to over $12,300 in New York—are pricier than housing.
This comes coupled with decreasing salaries for young workers, which make it difficult to meet the rising costs of parenting. According to Census Bureau data, an 18 to 34-year-old earns $2,000 less annually than she did in 1980. And, many youths in this age group are still paying off student loans, adding to the economic burden. This research may help to illuminate why many millenials are delaying parenthood: It’s taking them a little longer to get their finances in order.
Oil Companies See Profit Plunge
Oil train, © Russ Allison Loar
Royal Dutch Shell’s first-quarter profits fell to $3.2 billion—a 56 percent drop versus a year ago. Exxon Mobile also reported a decline in first-quarter profit, which was down 46 percent versus last year to $4.9 billion. Yet, both numbers beat analyst projections, which were more pessimistic in the wake of declining oil prices that have hurt oil company profits in the last year. Stockholders took the earnings numbers as good news.
Oil prices peaked at $115 a barrel in the summer of 2014, but over the second part of last year prices have more than halved, making many drilling projects unprofitable. Exxon announced last month that it was beginning to cut costs, trimming capital spending by 12 percent, to $34 billion this year. The collapse in oil prices has driven outfits that facilitate drilling to cut thousands of jobs, and to adjust their exploration to get greater quantities of oil and gas out of wells that have already been drilled.
Ferguson’s Suburban Segregation
In Bloomberg BusinessWeek, James E. Ellis has created a fascinating series of maps tracing demographic shifts in Ferguson, Missouri from the 1970s to today, when it has gone from 85 percent white to 70 percent black. Ellis attributes the shift to “restrictive zoning rules, local real estate practices, housing prices, and transportation issues,” which have located black residents in suburbs adjoining St. Louis, while whites move further west into “ex-urban” communities such as St. Charles County. “One result: a recreation of the segregated neighborhoods many former city-dwellers had sought to leave behind,” he writes.
