The Dean of Hamburger University
VIPs
On July 15, the Treasury Department sent out $15 billion in child tax credit payments, averaging $423 per household; per Bank of America customer data, households that received the injection saw spending spike, whereas households that didn’t continued to re-trench
Nominal second quarter GDP was up 16.7% YoY, the fastest advance since 1951, per Deutsche Bank’s Jim Reid; meanwhile, not seasonally adjusted initial claims dropped off, helped along by large states Texas, Georgia, and Florida opting out of additional benefits
While Langer’s Consumer Confidence for those making six-figures continued its march to new heights, it fell for those making $75K-$99K throughout July; a recent UBS report also found the middle class to be falling behind as they miss out on real estate appreciation gains
Founded in 1961 in the basement of one of its restaurants with 14 people, McDonald’s Hamburger University is the stuff of legend. Now boasting several international campuses, those in the know take their hat off to Al Bernadin, the inaugural dean of the University, otherwise known as the father of the Quarter Pounder. His inspiration, in his words, “I felt there was a void in our menu vis-à-vis the adult who wanted a higher ratio of meat to bun.” That void thus filled, there was more to come that left a deeper footprint which bested the revelation that hungry frequenters of the novel fast-food chain wanted more meat and less bread that sealed the deal. Bernadin’s true status as a Double Arches legacy was established in his encore position as VP of product development. As much as we enjoy the fish sandwich and hot apple and cherry pies he conjured, it was the frozen French fry that left its mark on our collective cholesterol. (We’re still good with it.)
While the devilish pommes frites remain on offer, Micky D’s is making its bigger mark in post-pandemic fast food circles due to its pioneering efforts in automation. Little did the iconic American restaurant chain know when it hired Bethany Tate Capozzi from Boeing last October, to play a key role in furthering its “digital acumen for our teams,” how handy her skills would soon be. Per Kevin Bierman, head of digital signage at Moving Tactics, “During the pandemic, McDonald's discovered that digital signage was critical to making quick changes on the fly and in so doing, remain flexible and agile as a business. They have decided to employ a range of digital menu boards, self-service terminals, and drive-thru menu boards as solutions.”
Yours truly experienced such digitization recently in Indiana. (Full disclaimer: it had been a while since I’d been in a McDonald’s.) In I walked to be greeted not by a pimply-faced order taker but rather a kiosk demanding my full faculties. Did the incursion offend? Yes. Did I have a choice? No.
In a February report, McKinsey declared that in a post-pandemic world, “more than 100 million workers in the eight countries (China, France, Germany, India, Japan, Spain, the United Kingdom, and the United States) may need to switch occupations by 2030, a 12% increase from before the virus overall and as much as 25% more in advanced economies.” The United States sits at the far end of this spectrum with an anticipated 28% of workers having to effectively repurpose themselves, or not.
This reality, that of McDonald’s rightsizing itself by substituting kiosks for warm bodies and hotels using the scapegoat of “Green Policies” to ditch daily housekeeping to compensate for a dearth of the lowest-paid workers, forms the ellipses behind the fate of the post-pandemic U.S economy.
What we can tell you is what’s happening in the here and now. The offset to the cessation of supplemental unemployment benefits was purported to be the Child Tax Credit. Per the Treasury Department, on July 15th, some $15 billion hit U.S. households’ bank accounts, or an average household distribution of $423. Bank of America ran an analysis contrasting those who had, and had not, received these disbursements. What was revealed is in today’s lower left chart – a spike in spending the minute the money hit the accounts among recipients.
And then there are those whose fiscal safety net is shrinking and losing unemployment insurance (UI), a sample of which is shown in the lower righthand chart. Three large states that exited emergency and supplemental benefits on June 26th – Florida, Georgia, and Texas – saw sizeable divergences in spending between UI recipients and those not on the dole after the early exit. This is, by the way, the intent – to incentivize the unemployed to rejoin the workforce.
Shifting gears, against the backdrop of yesterday’s blowout GDP – hat tip to Deutsche Bank’s Jim Reid’s noting nominal second-quarter GDP was up 16.7% year-over-year, the fastest pace since 1951 – and the ginormous decline in not seasonally adjusted jobless claims, we must say that the smell of roses was most intoxicating. Stock jocks agreed.
The only dissenting voice was inaudible -- that of those in the middle who earn more than the median household income but less than $100,000. As you see in the upper right chart, this cohort has felt the brunt of the post-pandemic squeeze of late; their confidence declined throughout July as that of the highest income earners queried weekly and reported in Langer’s Consumer Comfort Index steadily rose to fresh heights. The haves have got it good.
We heard echoes of this disconnect between the upper-middle and the top income earners in a UBS report that determined those on the middle of the income ladder had fallen behind to the greatest degree in the post-pandemic era – they don’t occupy the top echelons of owners of residential real estate and equities, nor do they qualify for the most generous benefits the lowest-income earners have enjoyed in the history of capitalism.
Finally, we thought we’d chime in on all the noise pollution being generated about auto plant shutdowns mucking up the weekly state jobless claims data. Truth is, as you see in the orange line in the upper left chart, claims are spot on their decade average level. Perhaps it’s time to step back and order (at a kiosk) a quarter pounder with cheese.