Janet Yellen made a speech on Monday at the National Interagency Community Reinvestment Conference in Chicago, Illinois. The speech, which has been labeled by the press as extremely dovish, focused on unemployment. Yellen stated that she believes that there is still a significant amount of “slack” in the job market. She defined slack a time when “significantly more people willing and capable of filling a job than there are jobs for them to fill” and that “during a period of little or no slack, there still may be vacant jobs and people who want to work, but a large share of those willing to work lack the skills or are otherwise not well suited for the jobs that are available.”

 

Yellen cited the unusually high number of workers who are working part time but would like a full time job, the fact that the decline in unemployment has not helped raise wages, the large number of unemployed who have been out of work for six months or more and the low participation rate as evidence for the “slack.” In fact, Yellen stated that the 63% participation rate could actually be “overstating the progress in the labor market.”

 

She went on to say that the country is experiencing cyclical unemployment and that monetary policy is an effective tool for stretching the recovery and creating jobs.

 

In a somewhat unusual move for a Chair of the Fed, Yellen humanized the issues at hand by specifically mentioning the cases of three individuals: Dorine Poole, Jermaine Brownlee, and Vicki Lira. All three have lost their jobs during the recession and have not been able to find another, and thus are “a reminder that there are real people behind the statistics."

This foray away from the standard hard facts usually found in a speech given by Chairs of the Fed did not exactly go swimmingly, however. As it turns out, two of the individuals cited by have criminal records that may have been preventing them from getting jobs, muddling Yellen’s message somewhat.

http://www.federalreserve.gov/newsevents/speech/yellen20140331a.htm

Price

Can Amazon Rival Apple?

Amazon recently unveiled a new product hoping to draw customers away from ever expanding Apple. In a special debut, which media were invited to, Amazon debuted its Fire TV to compete with Apple TV last week in New York City. The company is marketing the product at $99 and claims it provides faster, more reliable service than similarly priced items. The device is about the size of a cd case and runs Google Android software. While the item's claims and presentation are impressive, it remains to be seen if the product provides any new advantages.

The item is priced the same as consumers, which initially dampens it reception in my eyes. There are already similar products on the market, what would draw consumers to Amazon's product? One of the main advantages it proposes it increased speed and functional performance than its competitors. I've used Apple TV before, the device runs acceptably fast and I found no problem with its performance either. Claims about speed and performance are not going to bring the average consumer to the Fire TV.

Yet, Amazon's Fire TV also offers TV streaming services like Hulu and Netflix. While these services require a fee to use, they still differentiate it between similar products. I don't find this is as a particular improvement though either. Many consumers already have these services and do not need a streaming device for their TV to enjoy them. The Fire TV also comes with free and purchasable games, yet most consumers play games on tablets or video game consuls

Overall, Amazon's release of the Fire TV confuses me. There are already similarly priced items available that offer many of the same services. Amazon may get some new customers, but I doubt the product will do that well. It doesn't differentiate itself enough from previous products to offer the same price. While the Kindle appears to be competing fairly well with the iPad, in my opinion the Fire TV will not compete with Apple TV.

-Det Beal

http://www.charlotteobserver.com/2014/04/02/4811985/amazon-unveils-fire-tv-set-top.html#.Uz4O09xlNU0

McDonald's Fate after the Launch of Taco Bell Breakfast

Preparing for the Taco Bell breakfast launch on March 27, Taco Bell marketers were the pioneers of many new and memorable advertising techniques. Besides being the first brand to take advantage of Snapchat, Taco Bell used promotional tactics such as the Taco Bell Breakfast Phone. The phone was sent to 1,000 Taco Bell lovers. People were instructed to keep the phone on them 24/7 in order to receive missions and win special prizes. Many of these missions involved them tweeting and promoting the breakfast items on social media, essentially just giving more publicity to the launch.

Then there has been the infamous Ronald McDonald commercial all over TV and the Internet. Taco Bell found 25 men, named Ronald McDonald from all around the United States, to endorse its breakfast products in a witty commercial clearly challenging McDonald’s.

These breakfast products that the Ronald McDonald’s promote include:
-A.M. Crunchwrap- Scrambled eggs, a hash brown, cheese and bacon, sausage or steak in a flour tortilla

-Waffle Taco- A waffle wrapped around a sausage patty or bacon, with scrambled eggs and cheese, served with a side of syrup 

-Bacon and Egg Burrito- Bacon, scrambled eggs and cheese wrapped in a flour tortilla
-Sausage Flatbread Melt- A sausage patty topped with cheese wrapped in a flatbread and grilled

McDonald’s originally launched its breakfast menu in 1975 and it currently makes up 20 percent of its U.S. sales. But now, Taco Bell’s breakfast could threaten this revenue stream for McDonald’s. After McDonald’s reported a 1.4 percent sales decline in February, the question is will Taco Bell’s breakfast continue to effect McDonald’s sales in the future?

It is still too early to determine the long-term results, however an immediate war has broken out between the two food chains. One aspect of the fast food breakfast competition that Taco Bell will likely capitalize on is that its menu is available 30 minutes longer than McDonald’s menu. McDonald’s stops serving at 10:30 a.m. and Taco Bell will serve breakfast until 11 a.m.  McDonald’s president, Jeff Stratton, even told the Associate Press, “that cutting off breakfast on the weekends at 10:30 a.m. "doesn't go very well" with people in their 20s and 30s in particular.” Therefore, the company is looking into a way to serve both lunch and breakfast at the same time in its limited kitchen space.

In addition, McDonald’s has been trying to combat the Taco Bell breakfast launch by offering customers a free small coffee during breakfast hours from March 31 to April 13. However with this only being a two-week stunt, I do not see it having a lasting effect on customers beyond April 13.

I believe fast food breakfast-goers will be excited to try Taco Bell’s new products, especially following the successful promotional campaigns. This may give Taco Bell an initial jump in revenues. However once all the advertisements and hype over the breakfast have calmed down, I think many customers will go back to their normal ways. Even if Taco Bell succeeds in capturing a portion of McDonald’s customers, Taco Bell only had $7.6 billion in sales in 2012 compared to the $10 billion McDonald’s made in sales from breakfast alone that year. Consequently, if Taco Bell converts some McDonald’s customers to Taco Bell breakfast lovers, McDonald’s will inevitably still rule the fast food world.

By Becca Boehringer

Costco Needs More than Grocery Shoppers

Where else can you buy groceries for the week, shop for Kirkland jeans and buy a new computer? Only at Costco.

The wholesale store has always offered a wide variety of products, but it seems like shoppers know what they want. Last quarter Costco sales rose 6 percent, but profit dropped 15 percent because customers indulged in meat products, not electronics.

For some reason customers did not seem to want a new flat-screen TV to go with their rotisserie chicken.

Costco sells some groceries, specifically meat products for small profit margins. Sometimes they offer the products at a loss just to get customers in the door. But this strategy only works if customers purchase more expensive goods with higher profit margins, like flat-screen TVs.

Rotisserie chickens are a prime example. Costco sold 70 million birds last year at $4.99 each. They have the price point set in stone despite rising chicken prices. In the past year the profit margin on each rotisserie chicken sold has dropped 20 cents because of rising chicken prices. Thats $14 million that Costco misses out on for not adjusting it's chicken price.

And it would all be worth it if shoppers' attention spans were shorter. Perhaps the firm needs to reorganize stores to distract grocery shoppers with expensive electronics.

Mickey Gorman

Robot Economics: Good or Bad?  

The movies, I Robot, Transformers and even Star Wars have given us real life look-ins into what the world would be like should robots possess an independent role in society and take jobs in the world economy. Now, in 2014, robots have obtained a growing role in the United States economy. Some economists in the U.S. are worried about the potential for a robot economics “takeover”. At the same time, analysts and critics are laughing at the notion of a robotic coup in the labor market. So how should we actually feel about this? I would say, somewhere in between.

In recent years, robots have increasingly replaced unskilled jobs in factories and low-end manufacturing. As a result, many factories have been able to increase their production numbers, and therefore profit at levels that had never been possible before robotic use. At the same time, robotic usage takes away jobs in these sectors, and is even starting to sneak into the middle-class job sector.

A recent study estimated that there are 10 million robots used worldwide. Their use makes sense for large factory owners in manufacturing industries. Robots do not have sick days. They do not require or need employment benefits. And they are consistent in production. To further the argument for their use, many economists point to the Internet and digital technology revolution as a similar way in which human jobs were phased out, and then reinvented in some way using the innovations. Essentially, today, email and smartphone apps have expedited tasks that used to require human management. At the same time, the baby boom generation is reaching retirement age. Robots, although not in all cases, may have the ability to replace many diminishing jobs.

The overall argument made is that the increase in efficiency from robots will lead to an increase in income and wages for employees. The increased income will lead to increased spending which will in turn boost the economy. At the same time, not everyone will be able to profit from robotic manufacturing. Regardless, the question as to how robots should be used in manufacturing has yet to be determined. It is likely a question that will never have an exact answer, but instead will work itself out through the coming years.

Mark Sanders

Sources:

http://www.economist.com/blogs/babbage/2014/01/artificial-intelligence-networks

http://www.businessweek.com/articles/2013-02-11/will-robots-create-economic-utopia

Economic Evolution

With Polar Vortex 3 hitting Lexington in the beginning of March, again the idea of climate change, let alone global warming, seems intangible. This is why the term climate change is key. There is no scientific debate as to whether or not CO2 emissions produced by human industry are altering the earth's climate; climate change is a"an inescapable truth," as The Economist calls it. But the continual division over how to combat this issue stems from two opposing ideologies about man's relationship with his environment. One is that the environment must be protected even at the cost of economic opportunity. The other is that economic growth must be promoted even at the potential harm of the environment. 

Environmental economics attempts to bridge this dichotomy. Environmental economics is a sub-field of economics that studies environmental issues such as the extraction and allocation of natural resources, land use, and carbon policy. This field of study is distinguished from ecological economics, which views the economic system as much a part of the planet's ecosystem as any other. This view of the economy becomes another way to reconcile these two ideologies. 

But regardless of how governments come down this spectrum, countries are responding to climate change by passing more specific laws aimed at cutting carbon emissions. According to The Economist, half of the 66 countries surveyed by a published review of national climate legislation passed environmental laws or energy efficiency acts in 2013. Whether or not they will be effective is another matter. 

The EPA's National Center for Environmental Economics suggests that market based approaches to greenhouse gas policy are most effective at reducing greenhouse gas emissions on a national scale. Market based approaches essentially leave method of reducing emissions to the emitter and incentivize emitters to do comply with the standard by developing low cost ways to reduce pollution. Some market based strategies include tradable permits (cap and trade) or emissions taxes. I think that while the global  impact of these kinds of strategies is still uncertain because of how long term this issue is, we are definitely in a period of intense economic evolution. Over the past 2 centuries our economy has been progressing towards more development, more growth, and more consumption. Now we are going to have to adapt to the natural forces responding to these economic patterns. 

Janey Fugate

Bitcoin

What happened it Bitcoin? A few months ago it was seen as the gold of the future and now it seems like it will flame out by years end.

Bitcoin is a decentralized, peer-to-peer cryptocurrency developed in 2009 by an individual or group under the name Satoshi Nakamoto. Bitcoin has generated substantial media attention over the past 18 months due to its surging popularity and controversy surrounding its use in illegal transactions.

Unlike a traditional currency, Bitcoin is not maintained or manipulated by a central bank. Rather, it is maintained by a decentralized network of individual hosts (referred to as nodes). Individuals secure transactions using digital signatures, which can be thought of as the mathematical analogue of a physical signature. One of the most significant characteristics of Bitcoin is the ability to maintain anonymity as a user; when transactions take place, they take place between mathematical identities in the Bitcoin network that are not associated with real-world identities. Bitcoins are stored by associating them with cryptographically generated addresses, which can be stored via web services, hardware, or on paper printouts.

The future of Bitcoin is extremely uncertain. In December, the currency had returned over 5,000% year-to-date, and reached its peak at $1,147.25 on December 4^th, according to Coindesk.com. The rapid rise in value, growing from $99 at the beginning of October to its peak in December, led many investors to conclude that Bitcoin is a highly overvalued asset bubble. Certain investors are attracted by its anonymity, the ability to transfer funds directly between users, and the upper limit on its supply, which prevents any institution from inflating away its value by printing more.

Last Friday Bitcoin took a huge hit, as exchange center Mt. Gox filed for bankruptcy and announced that they had lost over 100,000 of its own Bitcoin and 750,000 that belong to customers. In total, the loss approached $500 million. US Senator Joe Manchin wants the currency banned, calling it “highly unstable and disruptive to our economy” and an aid to “illicit activity.” Bitcoin gained a lot of its traction from the Silk Road, an illegal drug website that was shut down in October but was running again in November. Users liked that they could use the Bitcoin to buy their drugs and no one could track them.

Today the price of Bitcoin sits around $560 and has been on a steady decline over the past month. Some say that Bitcoin is going to come back from its latest fall even stronger. Barry Silbert, CEO of SecondMarket, which operates an investment fund for owners of Bitcoins, says, “If you look at the short history of Bitcoin, there’s been a series of bubbles and busts, there’s been a series of disruptions, there have been hacks, there have been thefts. And really, after every single event, Bitcoin has emerged stronger.”

While it’s impossible to predict the future value of Bitcoin, its surging popularity and increasing legitimacy make it an exciting new technological phenomenon that is going to be interesting to see how it recovers.

Sam Campbell

http://news.cnet.com/8301-1023_3-57619786-93/mt-gox-call-center-to-answer-bitcoin-queries/

Coindesk.com

Wsj.com