Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.
September 10, 2013 at 10:45 AM
Some top institutional shareholders are reportedly pressuring Microsoft to put Alan Mulally on the short list of candidates to succeed Steve Ballmer as chief executive officer. This is sure to gladden some hearts in Seattle. Mulally was the one who got away. He was the beloved head of Boeing Commercial Airplanes who was passed over when the CEO position went to outsider Jim McNerney. If Mulally had become the head of Boeing, this narrative goes, “things might have been different.” As in, better for the Puget Sound region. Mulally left to run Ford Motor Co. with great success. Ford was the only one of the Big Three that didn’t require a federal bailout to survive.
This involves some selective history. Boeing moved its headquarters to Chicago in 2001 under then-CEO Phil Condit, who wanted a “neutral location.” It’s unlikely that Mulally, in 2005, would have reversed that decision. Mulally also saw the early development of the 787 Dreamliner, and it’s impossible to know if the airplane’s delays and troubles would have been avoided had he stayed with Boeing. It’s also impossible to know if he would have resisted pressure to move some Boeing work out of the region. Maybe so. Maybe not. McNerney is said to “dislike Seattle,” especially the unions. Whether that’s really true or not, Mulally likes Seattle and skillfully handled the United Auto Workers at Ford.
The deeper question is whether the skills of a successful, large-company chief executive translate to any company. Cars aren’t airplanes, but both Ford and Boeing are large manufacturing concerns. Yahoo’s Marissa Mayer was previously with Google. On the other hand, Lou Gerstner, famous turnaround artist of IBM, had been chief executive of RJR Nabisco, and had also worked for American Express and McKinsey & Co.
May 29, 2013 at 10:29 AM
Laying down some markers to watch now that Memorial Day has passed and summer is almost upon us:
Will the recovery hold and expand? Housing prices are finally making a solid move upward. Consumer confidence is at a five-year high. They’re also taking on more debt again. This morning’s correction notwithstanding, stock prices are surging. Banks recorded their best profits on record. Some of the worst outcomes haven’t happened — a double-dip, eurozone contagion and war on the Korean peninsula. All this translates into a widening of the very slow recovery. On July 31st, the government will release its second-quarter gross domestic product report. Unfortunately this will contain revisions that make the economy seem to be growing faster than it is. The best metric of the strength of the recovery will continue to be unemployment. Eleven million Americans are still without jobs and although corporate profits are at a record, hiring has been fairly weak.
Will the stock market keep rocking? Stocks have been a good investment, especially in companies that came through the recession with healthy balance sheets. And where else could investors put their money with the pitiful returns from fixed-income? The big question is how long the run can last. You’ll find predictions across the spectrum. Average investors are just bystanders in this drama. With high-speed trading and huge institutions driving the action, even small macro warnings might trigger at least a modest correction. The big enchilada will be…
What does the Federal Reserve do? The Fed’s QE-eternity bond purchases and expansion of the money base have been a huge factor in the bull run. How Fed Chairman Ben Bernanke would respond to a real recovery has been for years a hypothetical question. Now it’s becoming smash-mouth real, as in the way today’s rise in Treasury yields has tanked the market. Even though he coined the metaphor, Alan Greenspan was never willing to take away the punch bowl as the party was getting going. Will Bernanke? And if so, how will the Fed’s pivot be handled — and received by the markets. Like much since 2007, this is unknown territory.
May 17, 2013 at 10:28 AM
The Dow is over 15,000, corporations are sitting on record amounts of cash, M&A activity is picking up, the deficit problem is on track to being solved, inflation is nearly non-existent and the U.S. economy is performing better than that of almost all other industrialized nations. Metropolitan Seattle, with 5.5 percent unemployment, is getting close to what economists would consider full employment. On the other hand, millions remain unemployed, wages are stagnant and inequality is the highest we’ve seen since the 1920s and perhaps even at a historic record. It’s a recovery, but one very different from those seen in the post World War II era.
Consider that a recession comes along around every seven years or so. Also, the banking industry is as dangerous as ever, and so politically powerful that it was most recently able to push back meaningful regulation of derivatives. Federal austerity is holding back a more robust recovery. Recession in the eurozone, a slowdown in China and political tensions in east Asia are among many concerns. What has you most worried?
Read on for the best links of the week and the haiku:
May 10, 2013 at 10:14 AM
Gov. Jay Inslee has unveiled the state’s Aerospace Industry Strategy. Among its chief goals, as the Seattle Times‘ Dominic Gates reports, is to attempt to do as much work here on the Boeing 777X as possible. We have the tools and we have the talent, as the old expression goes: One of the world’s top two aerospace industry clusters and 92,000 employees, including 86,000 working for Boeing. But achieving this is not assured. Boeing will pit state against state, particularly Washington against South Carolina, for the best package of tax breaks and other incentives.
It’s worth noting that earlier this month Raytheon announced it would move the headquarters of its Space and Airborne Systems unit from El Segundo, Calif., to the Dallas suburb of McKinney. Relatively few employees are involved, but the symbolism is large. Southern California’s aerospace and defense industries employed 272,000 in 1990. It lost 142,000 jobs over the next decade. According to LAEDC, the regional economic-development organization, LA County aerospace employment fell 69 percent from 1990 to 2o11 vs. a national decline of 44 percent (the numbers were 65 and 60 percent declines for Orange and San Diego counties respectively. Southern California aerospace employment was down to 85,700 by 2011.
What do you think?
Read on for the best links of the week and the haiku:
This Week’s Links:
• JPMorgan: A new type of dirty energy | Naked Capitalism
• The health-care ‘market’ is so not a market | Jared Bernstein
• Mergers and enforcement in 2012 | Conversable Economist
• Triumph of the mercantilists | Clyde Prestowitz
• How oil travels around the world, in one map | Washington Post
• Seven myths about Keynesian economics | The Fiscal Times
Today’s Econ Haiku:
The deficit’s down
As the economy climbs
April 29, 2013 at 8:16 AM
• If you’re attending the Investment Management Consultants Association’s annual conference at the Washington State Convention Center, you’ll get a chance to hear Nassim Nicholas Taleb, who is scheduled to speak today. His 2007 book on random, unpredictable events, The Black Swan, came out in 2007 and the title became a synonym for the financial crash that so few saw coming. (Nouriel Roubini, the NYU professor who also foresaw the disaster, later called it a “white swan” because financial bubbles and crashes go back centuries, but nevermind).
Taleb’s new book, Antifragile, looks at how to build human systems that not only resist shocks but get better as a result. Taleb often takes on critics using Twitter and Facebook. Recently, he was ambushed himself. Mirth ensued. On Wednesday, the conference has scheduled Neil Barofsky, who was the special inspector general over the Troubled Assets Relief Program (TARP).
• Sunday marked the 10th anniversary of the Apple iTunes Music Store. How long is that in Internet years?
April 22, 2013 at 10:04 AM
The first paragraph from the Charlotte Observer’s story might make one think that the South is getting ready to stick it to the high-tax, high-regulation West Coast again: “Google on Friday announced a $600 million expansion of its Lenoir data center, a development state and local officials trumpeted as proof of North Carolina’s attractiveness to high-tech companies.”
Not exactly. Remember that Google is expanding its campus in Kirkland with plans to hire another 1,000 engineering and other highly skilled employees. The North Carolina deal promises 150 jobs, people to babysit the vast complex of servers and other equipment. Winning Google there in the first place required 30 years of state and local tax breaks valued at $260 million, one of the priciest incentive packages in state history. Not only that, but the rural location is hours from Research Triangle Park, where the state is a formidable competitor with talent and start-up ideas fed by the University of North Carolina, Duke University and North Carolina State University.
Needy states bid against each other for data centers, which can be the slag heaps of the technology business with serious issues about high energy use, greenhouse gas emissions and whether the few jobs created are worth the massive giveaways the companies receive. In the “Don’t Be Evil” mode, Google has promised to work with Duke Energy to use renewable energy. Duke is a major nuclear-power utility.
March 15, 2013 at 10:16 AM
Boeing insists that it has fixed the battery problem that grounded the 787 Dreamliner fleet and “no fire is possible.” Read the story and the comments and tell us what you think:
Read on for the best links of the week and the haiku:
March 19, 2012 at 9:55 AM
The Export-Import Bank of the United States has been around since 1934, supported by both political parties, with a mission to help provide financing for the sale of U.S. exports. Now, as part of its anti-everything mission, the political right wants to turn the routine reauthorization of Ex-Im into yet another cudgel with which to cripple the Obama presidency. Columnist George Will, once a Tory of somewhat independent views, calls it “Boeing’s Bank” and laments the losers it creates.
He quotes a Delta Air Lines executive saying that if Delta had received similar help, ” ‘it could have saved approximately $100 million a year in financing costs’ and could have used that money to hire more workers ‘or even purchase additional aircraft from Boeing.’ ” Or not. Much of that theoretical $100 million would likely have gone to added executive compensation. In 2010, Delta’s CEO received more than $8 million from the corporate treasury, 237 times the median workers pay. Delta would as likely have purchased from Airbus, rich in its own subsidies.
Delta’s argument is that it is being undercut on foreign routes by carriers, such as Air India, which bought Boeing airplanes with the help of Ex-Im financing. According to the Wall Street Journal, House Majority Leader Eric Cantor “views the bank’s activities as improper government interference into the private marketplace, putting taxpayers at risk. The U.S. government is ultimately on the hook for bank losses, though the bank consistently earns profits that are returned to U.S. taxpayers.”
March 1, 2012 at 10:00 AM
Seattle becomes the sixth American city with service by Emirates Airline, the national airline of the United Arab Emirates. The airline is a big Boeing customer, helping make Washington the biggest state exporter to the Arabian peninsula country. Exports totaled $2.75 billion in 2011. In addition to the big transportation sector, $119 million in Washington agricultural products were exported, as well as $24 million in computer and electronics products.
According to Danny Sebright, President of the U.S.-U.A.E. Business Council, “the U.A.E. and Washington have shared a rich exchange of goods and ideas in the areas of aerospace, agriculture, information technology, and manufacturing. Washington-based companies such as Boeing Commercial Aircraft, Microsoft, and Starbucks have been instrumental in driving this flow and expansion of commerce. Further, this exchange has helped to support American jobs with a growing number of exports leaving Seattle’s port for the Emirates — a transit point to significant Asian markets, including China and India; and America’s top export market in the broader Middle East North Africa region.”