This marks the last article I’ll write as Chair of the Board of Directors for the Oxnard Chamber of Commerce. This position has allowed me the great opportunity to focus on topics that I’m passionate about and express how they affect businesses and residents in our community. As I reflect on this past year and get ready to hand the gavel over to my esteemed colleague, Michael Wynn Song, to take over as Chair, I encourage the Oxnard Community to consider the following points to help businesses and the future economy in Oxnard:
Thank you to Nancy Lindholm, President and CEO of the Chamber, and her staff for attentively responding to the needs of our members and continuously advocating on our behalf. I also appreciate the time, energy and financial contributions made by our Board of Directors. They are truly committed to the Oxnard community. I’m honored to have served in this capacity this year and wish you all happy holidays and prosperous 2018. The National Outlook: Cruising Through Rough Waters It may be tempting to interpret the hurricanes pounding the Southeast, major earthquakes in Mexico, bigger bombs going off in North Korea, and President Trump making a budget deal with the Democrats as the four horsemen of the economic apocalypse. Yet, despite all the scary headlines, under the surface the U.S. economy is ticking along at a steady if unexciting pace. Growth came in at 3% for the second quarter of the year (the best since the first quarter of 2015), making up for a relatively weak first quarter, and the outlook for the rest of the year remains in the 2.5% range. Overall, Beacon Economics expects the U.S. economy to grow faster in 2017 than during the last two years. And the outlook for 2018 looks remarkably similar, short of some major change in government policy. Here are some of the key economic trends we expect to see over the coming months. Businesses are Investing One of the best signs for 2017 is the solid recovery in nonresidential investment. Oil prices have stabilized and production and exploration are yet again on the rise. Globally, the European Union is seeing solid growth, China has stabilized, and commodity economies have started to bounce back, fueling U.S. export growth. The ISM Manufacturing Index for August had the highest reading in six years. The European Central Bank just announced the end of its quantitative easing program and the U.S. dollar is beginning to depreciate from recent high levels, which should help maintain these trends in the second half of the year. Disaster Economics Only halfway through hurricane season, Houston is still in the midst of a major cleanup after Hurricane Harvey inflicted unprecedented damage on this enormous metropolis, and the damage Hurricane Irma wreaked on Florida is still being assessed. The human tragedy of these storms is clear, but it is a mistake to think they will have a negative impact on economic growth. In contrast, the rebuilding that occurs will actually stimulate economic growth in the short term, particularly in the residential sector as billions of dollars will be poured into fixing or replacing damaged homes. This certainly does not imply that natural disasters should be welcomed as a tool for economic stimulus—the surge in activity is driven by the need to replace destroyed capital (not to mention shattered lives). On net, we are worse off. Consumers to Rebalance While business spending is heating up, we expect consumer spending to disappoint in the second half of the year. Solid growth in consumer spending kept the economy humming through the commodity bust—but spending got ahead of incomes by a good margin. The consumer savings rate has dropped below 4% of disposable income for the first time since before the Great Recession—a very worrisome trend since overspending today can lead to future problems. Beacon Economics believes consumers are starting to rebalance their spending, at least as indicated by recent softness seen in auto and retail sales. The expectation is that savings rates will begin to drift back up throughout the rest of 2017. Even better news is that this rebalancing will occur without many “side effects” because consumer debt burdens are still near an all-time low level and the tightness of the labor markets is driving solid wage gains. Beware the Labor Shortage One of the key messages of Donald Trump’s presidential campaign last year focused on the lack of job opportunities for Americans—driven, he claimed, by bad taxes, bad regulations, and the huge number of undocumented workers in the nation. As much as that message resonated with part of the American public, it simply isn’t true. The United States was close to full employment during the campaign and now is not only at full employment, but will start feeling the pinch of labor shortages this year, particularly in relation to the recovery and cleanup efforts that will begin in the Southeastern areas of the nation affected by the recent hurricanes. The country’s headline unemployment rate is now at 4.4%—the lowest since the 1960s with the brief exception of the tech bubble-fueled economy of the late 1990s. There are a number of benefits to a tight labor market—not the least of which is rising wages for workers. This might seem like a contradiction to the vast majority of press coverage of monthly jobs data, which almost always laments the lack of income growth. But the popular press is failing to account for low inflation and certain issues with the labor survey. Once we account for these issues in the data, the picture reveals that, on average, U.S. worker wages are rising at almost the fastest rate they have in 25 years. Rising wages are pulling people back into the workforce and labor force growth is as strong as it has been in over a decade. This is a positive for discouraged workers who may have formerly dropped out of the labor force, as they will be given opportunities to receive training and experience. But the pool of “discouraged” workers is small—2 million to 3 million at most. Soon, even that reserve of workers will be gone, and in addition, the baby boomers are beginning to retire in force. The solution to this problem is the expansion of immigration, an entirely opposite stance from the one the current presidential administration is pursuing. As always, our generals continue to fight the last war—not the next one. The Trump Effect This brings us to federal policy, or perhaps the lack thereof. When President Trump entered office, he promised radical shifts in government policy. Some of those policies could have been modestly stimulating to economic growth, while others could have put the nation on a path straight into recession. This uncertainty has been a concern for Beacon Economics—if not the stock markets, which have continued their climb into the stratosphere. But despite our unease, nothing has happened at the federal level except the most basic functions of state. In many ways, the stasis currently gripping Washington D.C. looks to be a lot like what occurred under the Obama administration, with the exception that it is incompetence rather than partisanship that is now freezing the wheels of government. At this point, Beacon Economics believes the chance of a major change in policy (positive or negative) occurring is small but real. In the meantime, we’re sitting back and taking in this year’s must-watch TV—Survivor: White House. Janet’s Choice And what about equities? Banks have been slowing their lending, commercial real estate markets seem to be plateauing, there are a variety of political and global worries, and rising wages are putting pressure on profits. But despite all this, equity markets continue to break records month after month. In Beacon Economics’ view the market has become frothy—and apparently this is the view held by the Fed as well. It has continued to tighten despite the fact that bond rates have barely budged and inflation is already slowing from the very brief surge seen at the start of the year. The Fed is in a tough spot. It needs to figure out how to slow equities before they end up popping on their own with potentially dangerous consequences. Yet, to date, raising the Federal Funds rate and starting to sell off the balance sheet clearly isn’t doing the job. Confounding the issue further is the question of leadership at the Fed in 2018 when Janet Yellen’s term comes to an end. The prediction as to what the Fed does next boils down to a coin toss. California Forecast Economic Growth Limits For most of the post-recession era, the California economy has been among the fastest growing of the 50 states, both in terms of job gains and growth in economic activity. Credit for this growth trajectory has largely been attributed to high tech, which has experienced phenomenal growth since the recession. But it also was made possible by enormous slack in the labor market as the state recovered from the highest rates of unemployment seen in at least 40 years. For more than 60 months from early 2012 through mid-2016, California added jobs at roughly twice the rate as the United States. Job gains were impressive, at times exceeding 3% year-over-year, and the state gradually chipped away at its double-digit unemployment rate, which fell from 12.2% in 2010 to 5.4% in 2016. Yet, by the third quarter of 2016, that slack had been squeezed out: Instead of handily outpacing U.S. job gains, California’s growth rate slipped to just above 1.5%, putting it roughly on par with the nation. But by early 2017, slack in the labor force was wrung out as California saw its unemployment rate hit a 16-year low, effectively at full employment. Job gains continued in most industries, to be sure, but the pace of growth was much slower than in recent years. Entering the final quarter of 2017, some observers have worried that the slowdown in the labor market is a precursor to a stalling statewide economy. Not So Fast! Yes, California’s pace of job growth has slowed considerably, but not because the expansion is stalling out. In fact, the state continued to add jobs through the first several months of this year, but at a slower rate. Wage and salary jobs rose by 1.7% year-over-year in July, adding 276,300 jobs year-to-year, second only to Texas. In the private sector, the Health Care industry made the largest contribution, followed by Construction, and Accommodation and Food Services (by far the largest sector within Leisure and Hospitality). Professional Scientific, and Technical Services, the source of so much job growth in recent years, was essentially flat, as was Retail Trade. The Government sector saw a significant gain, mostly due to hiring by local governments. Otherwise, job losses occurred only in Mining and Logging and in Durable Goods. In all, growth across the state has driven the unemployment rate below 5% in recent months, to the lowest rate since 2000. Despite the slowdown in job growth, California’s gross state product continues to advance nicely, increasing by 3.1% from the first quarter of 2016 to the first quarter of this year. Taxable sales growth slowed considerably, however, advancing by just 2.7% year-to-year in the first quarter of 2017 compared to a 6.7% increase in the final quarter of 2016. With the state at full employment, job growth and general economic gains will largely be constrained by the availability of workers. This is good for workers who might achieve pay increases in the coming months and quarters, but it poses a challenge for firms that want to grow but cannot because they are unable to hire the necessary workers. Data at the national level indicates that job openings in general have reached historic highs. This holds true for most industries, from professional and business services to manufacturing to food and beverage establishments. There are shortages of skilled workers in well-paying occupations, of unskilled workers in food services and similar industries, and even of skilled and semi-skilled occupations in manufacturing and construction. What is holding back growth and can anything be done about it? There is an easy answer to the first question, but the second is a different story. Build It…They’re Already Here For decades, California augmented its homegrown labor force with workers from elsewhere, drawing from both other states and other countries. Through much of the post-World War II era, the state was a magnet for workers from around the country and the world. There were opportunities for aerospace engineers, fruit pickers, and everything in between. In the 1970s and 1980s, California’s labor force grew by an average of 3.1% per year, during which time net migration matched or exceeded California’s internal population gains. But net migration turned negative with the 1990s recession, and in turn, growth in the labor force has slowed to just 0.9% annually since 1991. Significantly, in the last decade and a half, consistent state-to-state migration out of California has been offset only by international migration into the state. It is no coincidence that slower labor force growth has occurred as the cost of living has soared in California. As recently as the mid-1970s, the median price of a California home was just a few thousand dollars higher than the national median. But since 1990, the California median has consistently exceeded the U.S. median by more than 50%, with the state median at least double the U.S. median in 10 of the last 27 years. Meanwhile, rents have reached such heights that rent burdens in many communities across the state are among the nation’s highest. Countless headlines in recent years have described California as facing a housing shortage and an affordability crisis as construction has lagged demand. This is not a new theme, just the latest chapter in California’s housing story. One need only look back to the early 2000s to find the same storylines: • The state’s need for housing far outstrips the current pace of building; • The state needs more affordable and workforce housing; • Even middle and upper middle income households face affordability challenges. Without attempting to sound trite, it all boils down to supply and demand. On the demand side, the much-anticipated arrival of Millennials on the housing scene, coupled with recent job and income growth and low interest rates, are all driving demand for housing, both owner-occupied and rental. On the supply side, existing home sales have fallen below expectations, given the strength of the economy, while new single-family and multi-family construction has been relatively weak since the recession. Demand-side solutions to the problem include easier underwriting standards (though not as slack as in the 2000s), reduced down payments, and special finance programs for would-be buyers, along with rent subsidies for qualified households. But in the absence of increased supply, these programs result in more would-be buyers/renters competing for scarce housing.
No, the situation ultimately must be addressed by increasing supply, a tall order indeed. But until California does so, in earnest, growth of the statewide economy will be constrained. That is not to say that California won’t grow. It will. The state and its regions should experience continued growth in economic activity and jobs throughout 2017 and into 2018. Most of the job gains will occur in Health Care, Leisure and Hospitality, and Construction. But California will fall short of its potential until it crafts long-term supply-oriented solutions to the chronic problem of high housing costs and low housing affordability. Michael Wynn Song is the Vice President of Community Relations at Glovis America, Inc. Glovis imports and processes Hyundais and Kias that come through the Port of Hueneme. He also manages all of the Korean car inventory stored at airports and other locations in western Ventura County. In addition to all he does for Glovis, he will be the Chair of the Board of Directors for the Oxnard Chamber in 2018. Joining Michael in the line-up of officers will be: Chair Elect, Stacy Miller of Stacy Miller Public Affairs Immediate Past Chair, Amy Fonzo of California Resources Corporation Vice Chair/Treasurer, Andrew Kiefer of CBIZ MHM, LLC Vice Chair, Jesse Lamas Calvillo of AGQ Labs Vice Chair, Celina Zacarias of California State University Channel Islands The officers of the Chamber make up the Executive Committee, which monitors the operations and budget of the organization very closely. The Executive Committee also acts on behalf of the Board when they are not scheduled to meet. Cal/OSHA has issued guidance for employers and workers on working safely in conditions with heavy smoke caused by the wildfires.
Smoke from wildfires contains chemicals, gases, and fine particles that can harm health. The greatest hazard comes from breathing fine particles, which can reduce lung function, worsen asthma and other existing heart and lung conditions, and cause coughing, wheezing, and difficulty breathing. Employers with operations exposed to wildfire smoke must consider taking appropriate measures as part of their Injury and Illness Prevention Program under Title 8 section 3203 of the California Code of Regulations and as required under section 5141 (Control of Harmful Exposure to Employees). Those measures include:
Additional information is available on the Cal/OSHA website. The California Employment Development Department (EDD) provides a variety of services to individuals and businesses impacted by disasters in California. These range from assistance for those who may have lost a job due to the disaster, to employers who are forced to shut down operations.
Click here for information. In light of various emergencies and disasters throughout the state, the California Chamber of Commerce is educating employers about a few things they should know about paying employees, leaves of absences and planning ahead in emergencies.
Paying Employees Even in an emergency, employers must be mindful of obligations under state employment laws and consider pay issues for exempt and nonexempt employees related to office closures. Employers must pay exempt employees a full weekly salary for any week in which any work is performed. If the business is closed for the whole week, however, employers don’t need to pay exempt employees. In emergencies, special pay rules apply for nonexempt employees. If your business shuts down for any of the following reasons, you must only pay nonexempt employees for the hours they worked prior to being sent home:
Of course, employers are always free to pay employees or let them use vacation or other personal time. Many employers may choose to provide some paid time during emergency situations. Just remember to be consistent! Leaves of Absence for Emergency Personnel Some of your employees may serve as volunteers for local fire departments or other emergency response entities. All employers must provide leaves of absence for employees who are required to perform emergency duty. Employers are not required to compensate the employee during this time off. Leave for Health Issues Employees may be entitled to time off to deal with health issues that occur as a result of the disaster. For instance, employees may use their California mandatory paid sick leave for the care or treatment of a health condition for themselves or a family member, as defined by the law. They also may be eligible for time off for family or medical leave for themselves or to care for family members with any serious health conditions under the federal Family Medical Leave Act (FMLA) or the California Family Rights Act (CFRA). The FMLA and the CFRA cover employers with 50 or more employees and provide a maximum of 12 weeks of unpaid leave in a 12-month period. Employers may have obligations to reasonably accommodate an employee under the federal Americans with Disabilities Act (ADA) and the state Fair Employment and Housing Act (FEHA). Should an employee suffer a physical or mental injury because of a natural disaster, they may be entitled to protections under these laws. School or Childcare Leave Employers with 25 or more employees working at the same location may need to provide unpaid time off to employees whose children’s school or child care is closed due to a natural disaster, such as a fire, earthquake or flood. For emergency situations, the time must not exceed 40 hours per year. Protecting Workers Employers must remember their obligations to provide a safe workplace. Cal/OSHA is advising employers to take special precautions to protect workers from hazards from wildfire smoke. Cal/OSHA has posted materials that provide guidance for employers and workers on working safely in conditions with heavy smoke caused by the wildfires. Planning Ahead The single, most important thing employers can do is create an Emergency Action Plan (EAP) and communicate that plan to employees. Employers should inform employees that the plan exists and what steps the plan outlines. As an employer, you have an obligation to create and maintain a safe workplace for your employees. All California employers are required to have an EAP designating the actions that must be taken to protect employees from fire and other emergencies. California employers must also have a Fire Prevention Plan (FPP) that details the fire hazards your employees may face and how to handle a fire should the situation arise. When employees are initially assigned to a job or transferred to a new position, the employer should review parts of the EAP and FPP employees must know so they can protect themselves in the event of an emergency. Employers should retrain employees if they change the EAP or FPP and should periodically conduct emergency training and drills. When considering emergency situations, employers should plan how they will handle and communicate office closings and determine who will make the final decision on whether to close. Determine also if alternative workplaces are available, whether certain employees can work from home or whether to shut down all work during the emergency. I hope you can enjoy the holidays and the remainder of 2017. Savor the peace and quiet while you can, because 2018 promises to be a very noisy year. We will start off the year with what likely will be a special election for Oxnard voters to decide if they want to recall the mayor and three councilmembers. Assuming the Ventura County Elections Division deems enough valid signatures were collected to trigger a special election, there will be four incumbents running campaigns to keep their jobs. There will also be a number of hopeful candidates vying to replace them. I have visions of the beautiful city of Oxnard being covered with campaign signs! Almost simultaneously there will be campaigns leading up to the June primary election. (State legislation was passed in 2017 to move the primary election to March, but that doesn’t take effect until 2019.) More campaign signs! Fortunately, Oxnard will not be dealing with a supervisorial election in 2018, but the east portion of the County certainly will. We can look forward to our summer and fall being filled with campaign rhetoric, promises, mud-slinging, and – yes – signs! When Allan Zaremberg, President and CEO of the California Chamber of Commerce, was in Oxnard on December 1, he had some interesting observations about the state and federal elections in 2018. Since Jerry Brown is termed out, there will be a lot of interest in the governor’s race. But where that interest comes from could impact federal House and Senate races. Since California adopted the top-two primary, our ballots have contained many more names of Democrats. It’s no surprise since California is a blue state. Mr. Zaremberg explained that if there are multiple Republicans in the governor’s race going into the primary, it is likely that they will split the party vote and two Democrats will be on the November ballot. If that is the case, Republicans could lose interest in the November, which would affect the Congressional races, ultimately providing gains to the Democrats. Interesting… November 2018 seems so far in the future right now, but there will be non-stop activity leading up to it. I can almost hear the sigh of relief when November 6 passes and the world becomes quite again. We can count on a very busy and very noisy political season in 2018 with lots of those dreaded campaign signs!!!! This is the final article in a series of five addressing new employment-related laws for 2018. Today we take a look at workplace safety and workers’ compensation. SB 258 establishes the Cleaning Product Right to Know Act. It requires manufacturers of designated cleaning products to disclose the chemicals in those products and create product safety data sheets. Designated cleaning products include general cleaning, air care, automotive, or polish or floor maintenance products used primarily for janitorial, industrial or domestic cleaning purposes. SB 258 affects employers that have these designated cleaning products in their workplaces. Under the existing Hazard Communications Program (which requires all employers to communicate workplace hazards to employees, particularly when employees handle or may be exposed to hazardous substances during normal work or foreseeable emergencies) standard, employers are required to maintain and make readily accessible safety data sheets providing information about hazardous substances. SB 258 will require employers to also obtain information from manufacturers about the cleaning products covered under this Act and make those safety data sheets available. As for workers’ compensation, several bills were signed into law in 2018: AB 44 requires employers to provide a nurse case manager to employees injured during the course of employment by an act of domestic terrorism. Employer-appointed nurse case managers will act as advocates to help injured workers obtain medically necessary medical treatments. This bill will also require an employer to provide a notice to claimants that will be developed by the Division of Workers’ Compensation. These provisions are applicable only if the governor declares a state of emergency in connection with an act of domestic terrorism. The Division of Workers’ Compensation will adopt regulations to implement this new law, including regulations on the scope and timing of the employer’s obligation to provide a nurse case manager and the contents of the notice that employers must provide to claimants. SB 189, which is effective July 1, 2018, clarifies when owners, officers of businesses, members of boards of directors, general partners in a partnership and managing members of LLCs may be excluded from workers’ compensation laws. This bill revisits AB 2883 from 2016, the structure of which was challenging to stakeholders. SB 189 also includes provisions allowing the ability to grandfather in prior waivers. AB 1422 extends the automatic stay on liens filed by medical providers who are charged with criminal fraud. AB 1422 cleans up issues that resulted from the enactment of SB 1160 in 2016. SB 489 extends the billing deadline for providers of emergency treatment services from 30 days to 180 days. The California Chamber of Commerce is urging businesses to participate in the upcoming workshops to discuss draft regulations for the new state-run retirement savings program, Secure Choice.
Workshops are scheduled for December 5 at the State Personnel Board, located at 801 Capitol Mall, Room 150 in Sacramento, and December 7 at the Ronald Reagan State Building, Auditorium, 300 South Spring Street in Los Angeles from 10 a.m.–noon. Individuals who cannot attend the hearings in person may provide comments by phone at (888) 278-0296, participant code: 6531748. Signed by Governor Edmund G. Brown Jr. in 2016, SB 1234 (de León; D-Los Angeles; Chapter 804), along with the original SB 1234 (de León; D-Los Angeles; Chapter 734) and SB 923 (de León; D-Los Angeles; Chapter 737) in 2012, creates a framework for the California Secure Choice Retirement Savings Investment Program. The program is a state-run retirement savings plan for private employees that includes automatic enrollment with an opt-out provision for an estimated 6.3 million California workers whose employers do not currently offer an eligible retirement savings program. Private employers with five or more employees will be required to automatically enroll their employees into and make payroll deductions for their Secure Choice retirement accounts, unless the employee opts out. Employers that do not offer a retirement plan or do not auto-enroll their employees into Secure Choice would be subject to a penalty; otherwise the program is intended to impose no risk or liability to the employer or to the state. It is intended that employers’ responsibility is simply as a pass-through; to deduct and submit contributions from employee wages. The program will be funded by an automatic 3% to 5% payroll deduction; specific default contribution will be determined by the Secure Choice Investment Board. There is no contribution made by the employer into the retirement account. According to the State Treasurer’s Office, late 2019 is likely to be the earliest that large employers that do not offer a retirement plan to their employees will be required to provide access to Secure Choice. The requirement will be phased in over a three-year period. Any information to the contrary is wrong. Please contact the Treasurer’s Office if you are told something different so they can correct the source by emailing securechoice@sto.ca.gov. CalChamber will continue to actively engage in rulemaking, closely monitor the activities of the Secure Choice Investment Board, and provide input as appropriate regarding program design and employer risk. |