KPBS Anchor Maya Trabulsi and BottomLine Marketing co-founder and SDSU marketing lecturer Miro Copic discuss some of the week’s top business stories.
Q: The September jobs report helped stocks rebound from a very wild week. But there are some warning signs out there. What does this tell us about the health of our economy in your view?
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A: The jobs report today was kind of a middling report. It doesn't indicate growth and it doesn't indicate contraction. But it was kind of a watchpoint. The other thing that was kind of scary in today's report was that real wages were flat and didn't grow for the first time all year. But the underpinnings of this that made the week on Wall Street so crazy is two indices that came out. When these indices go below 50 they show there's a contraction in that sector.
The manufacturing sector went down to 47.8 and that's a major issue. This is the worst reading since 2009 right after the recession. What really roiled the markets yesterday was the index on services that dropped from 56 to 52. That's a huge drop. It's the biggest drop since 2016 and prior to that 2014. Services are 80% of the economy, over 80% of the jobs. Consumer sentiment is the third pillar. Consumers have driven the growth of the economy. Consumer sentiment is declining. One indicator is that Americans are taking longer and longer car loans, 72 months instead of 36 months or 48 months. This means consumers are tapped out. The Fed is going to talk about rate cuts in their next meeting and that's going to be watched by business leaders and government leaders very closely.
Q: In the past, we've talked about the demise of traditional retail. This week another major brand filed for bankruptcy. What can you tell us about what's next for Forever 21?
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A: Well you know, that was kind of a surprise. Forever 21, which is one of the big stalwarts in the fashion world, especially in fast fashion. They go from the runway to the store in a couple of weeks. This retailer is caught on a couple of things. Number one, superfast international expansion. They're shutting down 60% of their international stores, but still about 35% of their domestic stores including three in San Diego.
One of the reasons is consumers, young adults who shop Forever 21, their behaviors have completely changed since the beginning of this year. Eighteen retailers have declared bankruptcy. 8,200 stores have been closed year to date. That's more stores in nine months than any year in the last 30 years in terms of retail. But one thing that's been common, and this is going to be scary for fashion retailers, are the tariffs. The tariffs that were applied in September effect mostly apparel items. So consumers are going to see prices increases in a Forever 21 in November/December and then certainly by January of 2020. All the clothes are going to be much more expensive.
Q: Let's end with some big news out of the state of California. We're talking about the Fair Pay to Play Act. The NCAA is against it. Will we see this in other states?
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A: This act allows student-athletes to hire agents and to get paid for endorsement deals by companies. There are a lot of other states that are looking at this on both sides of political aisle. You've got politicians agreeing that the law should change. Bernie Sanders said athletes are workers so we have to pay them. And right now, there's a Republican Congressman out of Ohio who's about to introduce legislation at the national level. He's a former Ohio State player and NFL player and he agrees. He said the federal government has to get ahead of this or else it's going to be a mishmash of state laws and that will create a lot of complexity in the future.
