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Stepping Up to the Scale

While you may be reading this on Friday, I need to confess it was written on Thursday.  The reason for the confession is that the jobs report today may have been big news and I didn’t want you to think I forgot to mention it.  You’ll remember last month the actual number fell far short of the expected one million new jobs.   While perhaps not as optimistic as last month, having been burned by the big miss, analysts predict private payrolls likely increased by 600,000 jobs, after rising only 218,000 in April.  If the report meets expectations, it may put to bed the theory that people are choosing not to go back to work in lieu of extended unemployment benefits.  On the other hand, some 25 states are ending the extended unemployment benefit early and if the increase in payrolls rise to meet expectations, it could be viewed as people getting back to work ahead of the expiration of those benefits.  I guess you can read into the data what you choose.  But isn’t that usually the case?

As for legislation, there is a lot of talk but not much action.  Before you get frustrated, I’d point out that gridlock isn’t always a bad thing and the issues at hand are considerably larger than any legislation passed in the modern era.  One of the largest issues is how to pay for everything without continuing to run up huge budget deficits.  The many proposals include raising the top income tax bracket, increasing the capital gains tax (retroactively to April 28, 2021), increasing the corporate tax rate, and reducing the estate tax exemption back to levels not seen since 2009.  The capital gains increase is perhaps one of the more popular ideas being floated around.  And by “popular”, I’m not referring to popular among investors.  But today, we learned that the Biden administration may forgo raising the corporate tax rate in lieu of putting in a 15% tax floor on U.S. companies.  The idea being that companies like Amazon, who earn billions in profits and yet pay no federal income tax, will be forced to participate in supporting the infrastructure it takes for granted.  We are only at the beginning of the negotiations and don’t expect final legislation until later this summer.  Gird yourself for the inevitable news cycle that will be coming shortly.

In company news, we learned that Amazon closed a deal to acquire MGM Studios for $8.5 billion, which is a bit of a coup.  The streaming wars have heated up with the fight for eyeballs reaching new peaks.  Netflix continues to dominate but the competition isn’t sitting still.  Rumor is that Apple may be also on the hunt for a Hollywood studio to increase its ability to produce original content. In other company news, United Airlines is aiming for a return to supersonic flight by the end of this decade.  The company says it has plans to buy 15 jets from Boom Supersonic with an option for 35 more with service being planned for 2029.  While the tickets will undoubtedly be prohibitively expensive, it is nice to see progress made.  For the last few decades the progress we’ve experienced has been smaller seats, more crowded airplanes, baggage fees, and fewer amenities.  Maybe this will be the start of a much-needed renaissance in air travel.

In closing, I came across another story regarding air travel, although one of a more delicate nature.  It seems U.S. airlines may need to start weighing passengers in order to comply with FAA rules.  For safety reasons, carriers need to calculate an aircraft’s weight and balance, and it must be within allowable limits for the plane.  However, the assumptions they’ve been using for passengers are outdated.  Americans are heavier these days and that hasn’t been factored into the assumptions.  In this case, I think we can all agree this isn't progress.  I have a simpler idea.  Either update the assumptions or remove a row or two of seats from each plane.  If it makes you feel any better, the FAA notes that the scale’s readout should remain hidden from public view.  Now you know.
Bruce J. Mason, MBA