Explaining Southern California's economy

The future of business is with the world's big cities

Global Cities Initiative

A panel discussion at the Global Cities Initiative, which convened at USC on March 21 at USC in Los Angeles. On the agenda was the shift from trade between countries to trade between cities.

We're accustomed to thinking about global trade as being between countries or large political and economic entities, like the European Union. The U.S. trades with China. China trades with Europe. Australia trades with Japan. And so.

But that wasn't the story presented at the Global Cities Initiative conference I attended last week at USC. The event was put on by the Brookings Institution and J.P. Morgan Chase and featured a series of panels structured around the transformation of trade for something between countries to something between cities. 

The big driver here is that the world's emerging middle classes, in countries as divergent as China and Brazil (to name two of the real heavy hitters), are increasingly moving to cities, rather than staying in the countryside or establishing urban alternatives. 

Read More...

February jobs report: Better than January?

A jobs sign hangs above the entrance to

KAREN BLEIER/AFP/Getty Images

A jobs sign hangs above the entrance to the US Chamber of Commerce building in Washington, DC.

The Bureau of Labor Statistics (BLS) will release its February jobs report on Friday. The January report was better than expected, with the country adding 243,000 jobs and the unemployment rate falling to 8.3 percent. The big question for February is, "Will the improving trend continue?"

Chances are good. The ADP report — which hasn't been all that reliable a predictor of the BLS data of late — came out today and said that the economy had added 216,000 new jobs, barely beating the Bloomberg consensus, which expects a nearly identical 215,000. 

Meanwhile, Business Insider engaged in a very elaborate piece of analysis and came up with — wait for it — 285,000! That would be, as BI notes, the best monthly jobs report in six years. I like that BI zeroes in on auto sales as a key predictor. February saw sales rise to a 15-million annual pace, more than two million better than 2011. 

Read More...

This is where Apple pays Chinese workers $2 an hour to make iPhones

 

It's actually starting to build: the Apple backlash. A decade ago, the company was almost bankrupt. Today, it has a market cap of $481 billion, almost $100 billion cash in the bank, and a share price that some analyst think could go to $1000 by 2015, if not sooner.

Those numbers come from Apple's astonishing growth — around 40 percent since January of last year — and its equally astonishing operating profit margins: 30-plus percent. But what enables that growth and those margins is two things: cheap Chinese labor; and customers who are willing to pay a premium.

The video above is from a February 22 broadcast of ABC's "Nightline." The news program got an inside look at Foxconn, the "iFactory" in China where workers are paid less than $2 an hour for a 12-hour shift. More than a dozen of these workers have committed suicide, although it's unclear whether the working conditions drove them to it or whether Foxconn's facilities employ so many Chinese that suicides are going to be inevitable, as a percentage of the employed population.

Read More...

How to save America: Build better cities

Expo Park/USC Station

Courtesy of the Los Angeles County Metropolitan Transportation Authority

Expo Park/USC Station.

Felix Salmon has an interesting post today about how China has managed to keep it together depsite very trying economic times. The bottom line? Healthy investment in urban infrastructure. Which has fueled a boom in the creation of service-related jobs — just what you want if you need to think long-term about moving your economy away from agriculture and manufacturing. 

Cities, therefore, are good. Of course, China can do fine with a mix of agricultural and manufacturing labor at its core, with services a distant dream. The U.S., on the other hand, needs to push for service employment, as that's where the high incomes are. And we need high-income jobs to define America's future. Felix offers his formulation for how to get them:

How do you create service-industry jobs? By investing in cities and inter-city infrastructure like smart grids and high-speed rail. Services flourish where people are close together and can interact easily with the maximum number of people. If we want to create jobs in America, we should look to services, rather than the manufacturing sector. And while it’s hard to create those jobs directly, you can definitely try to do it indirectly, by building the platforms on which those jobs are built. They’re called cities. And America is, sadly, very bad at keeping its cities modern and flourishing. 1950s-era suburbia won’t cut it any more. But who in government is going to embrace our urban future?

Read More...

Why Apple doesn't build anything in the U.S.

Mercer 18124

Lintao Zhang/Getty Images

Apple Store in Beijing.

A long time ago in a galaxy far, far away — well, actually, it was just the USA — Apple made stuff in America. In fact, it manufactured its computers in California, right in its own Cupertino back yard. As Minyanville points out, until 1992, Apple hardware was made in the USA. Now iPhones and iPads are made anywhere but.

I know, 1992 seems like a century ago. There was no Web to speak of, and certainly no smartphones or tablets. Computers were not yet truly ubiquitous in the workplace. They were far from common in homes. But the writing was on the wall.

So why did Apple move its production overseas? Good question, and one that the New York Times recently asked:

Apple executives say that going overseas, at this point, is their only option. One former executive described how the company relied upon a Chinese factory to revamp iPhone manufacturing just weeks before the device was due on shelves. Apple had redesigned the iPhone’s screen at the last minute, forcing an assembly line overhaul. New screens began arriving at the plant near midnight.

A foreman immediately roused 8,000 workers inside the company’s dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames. Within 96 hours, the plant was producing over 10,000 iPhones a day.

“The speed and flexibility is breathtaking,” the executive said. “There’s no American plant that can match that.”

Read More...