Construction Employment Hot Spots
The Houston, Texas area added 25,600 construction jobs between October 2017 and October 2018, more than any other metro area in the US, according to an industry report. Phoenix, Arizona, Dallas, Texas and Orlando, Florida rounded out the top four with 16,700, 13,100 and 11,700 construction job additions respectively. Construction employment grew between October 2017 and October 2018 in 78% of the 358 metro areas tracked by the Associated General Contractors of America.
Housing Affordability Crisis
Nearly three out of four American households believe that the nation is suffering a housing affordability crisis, and a majority of respondents reported that affordability was a problem at their local and state level as well, according to a new nationwide survey conducted on behalf of the National Association of Home Builders (NAHB). More than 2,200 adults were surveyed in late November. The poll revealed that 73% of respondents believe housing affordability is a problem in the US, with 68% believing it’s a problem in their state and 54% saying it is a concern in their neighborhood. More than half of all respondents believed affordability was a problem in all areas, including rural, suburban and urban, with the greatest problem being perceived to be in urban neighborhoods. And 58% believed they would have a problem finding a home they could afford in their city or county. In terms of strategies to help with affordability, 55% believe cities and counties should lower development and construction fees builders must pay. The poll is also consistent with the latest findings from NAHB’s Housing Trends Report for the third quarter of 2018, which found that 79% of buyers say they can afford to purchase fewer than half of the homes available in their local markets. Regulatory requirements account for about 25% of the cost of construction of a single-family home.
Voice-Activated Device Market Penetration Growing Rapidly
Amazon’s Alexa could be between a $18 billion and $19 billion business by 2021, according to a new report from RBC Capital Markets. That estimate places revenue more than 45% higher than the estimate made in 2017. That means the voice assistant in Amazon’s smart speakers could generate about 5% of Amazon’s total revenue. The estimate includes $9.2 billion in device sales, $9.4 billion in incremental voice-driven ecommerce sales and platform revenue. Analysts estimate there are already more than 100 million Alexa-enabled devices functioning now. The firm’s annual Alexa survey found that 41% of respondents have at least one voice-activated device, up from 21.5% in December 2017.
Voice Commerce in Infancy
In a December 2018 survey of 1,036 US internet users conducted by Bizrate Insights, 58% of respondents had not used and were not interested in using a using a smart speaker like Amazon Echo to make a purchase. EMarketer reports there were 17.2 million US smart speaker voice buyers in 2018, making up 28.2% of US smart speaker users.
Who Do Shoppers Trust?
Last minute shoppers now increasingly trust only physical stores or Amazon to get them their orders on time. The weekend right before Christmas is almost as big a shopping time as the Black Friday weekend; so much so Saturday has been dubbed “Panic Saturday.” Shoppers surveyed by retail platform Teikametrics said that they would either go to a store (56%) or turn to Amazon (40%) for last-minute gifts. Only 5% said they would trust a retailer other than Amazon to deliver their gifts in time. The New York Times reported that Amazon’s share of shopping fell below 20% on Thanksgiving, but it shot up to 50% as the number of shopping days before Christmas fell. In 2017 Amazon’s busiest day was December 18; it was December 10 for other retailers. One of the techniques Amazon uses to get people to trust them is to give out free Prime trials well before the holiday crunch.
Amazon Go Goes Smaller and Larger
Amazon is reportedly testing a mini-Amazon Go store that is just 450 square feet at a location in one of their Seattle offices. The typical Amazon Go is between 1,800 and 2,000 square feet. The test store isn’t open to the public, just to Amazon employees and guests. Analysts speculate that the tiny shop could also be serving as a prototype for Amazon’s entry into a very lucrative market, airport stores. Reuters cited emails to several airport operators in the US from Amazon, requesting meetings and referencing Amazon Go. According to the Wall Street Journal, Amazon is also testing a larger-format Amazon Go at a location in Seattle that is set up to look a lot like a traditional retailer, similar to Whole Foods, acquired by Amazon last year. However, Amazon has previously said they have no plans to add technology to Whole Foods. Amazon’s cashierless concept may have been behind the new Sam’s Club Now format planned for Dallas next October. That store is reputed to be 32,000 square feet.
Retail pundits have been speculating about what retail shopping will look like twenty years from now, as digital commerce, artificial intelligence and other trends shape the way consumers prefer to shop. Some suggest that by 2040 many retailers will have closed most of their physical stores, moving their business online and offering deals consumers cannot refuse. Others believe that what will change is the type of products stores stock. As home delivery becomes the norm, there will be no need to go to the store to buy common goods like paper towels and laundry detergent. But people will still want to go out and see and touch the products that bring them joy and happiness, such as jewelry, furniture, clothing and cars. Some experts estimate that this category accounts for about 15% of purchases and believe the other 85% will be resigned to cyberspace. One example cited was Tesla, which for five years has been selling cars from a boutique-sized indoor shop or outdoor pop-up tent just big enough to showcase three vehicles in a high-traffic shopping area. The space is staffed by two salespeople who demonstrate the car you are thinking about on your phone or iPad and offer you the opportunity to order the new car of your dreams on the spot. Other analysts point out that online giants such as Amazon are embracing the physical retail space and opening brick-and-mortar stores, generally in upscale areas. They also note that discounters and dollar stores are thriving. Rather than stores disappearing, they believe that stores will continue to evolve to provide shoppers with both the experiences and the products they are looking for.
Banks, Retailers and the Fed
A quiet war is going on over who will control a modernized system that would connect all US banks and credit unions and build a backbone for real-time payments in the US. Many retailers including Target, Walmart and Amazon and tech leaders including Apple, Google, PayPal, Square, Strip and Intuit, support the Federal Reserve taking a central role. Big banks are opposed, saying that they are already operating their own real-time system through The Clearing House, the payments company that they co-own. That system, known as RTP, has yet to be adopted by smaller financial institutions. Small banks say that unless the Fed builds a settlement system, they will be at the mercy of the big banks, which will have the power to set prices. Amazon’s comments to the Feds say that existing credit and debit card payment systems are expensive and that a settlement system from the Fed would help ensure there is a long-term alternative that offers reasonable and controlled card payment fees.
Economic Forecasts for 2019
There is general agreement that both US and global growth will slow in 2019, but still remain healthy. Goldman Sachs sees US economic growth slowing substantially next year, due to the fading effects of tax cuts and the Fed rate hikes. They believe growth will slow to about 1.75% by the end of 2019. The Conference Board thinks the economy will gradually slow during 2019 but does not expect GDP growth to drop below 2%. The slowdown in the global economy, rising interest rates, weakening corporate profits and rising wages will all conspire to depress growth, but those factors are not expected to seriously dampen consumer spending, which is the main driver of America’s economy. In 2018, US growth was well above trend at 2.9%, with the acceleration almost entirely due to a large dose of fiscal stimulus, including tax cuts and spending increases, put in place at the beginning of the year. The impact of this stimulus will still be felt in 2019, but with diminishing potency as the year progresses. As a result, many analysts expect growth of 2.6%, less than in 2018, but still above trend. Global growth is expected to edge down from 3.2% in 2018 to 3.0% in 2019 and keep decelerating over the next few years. If trade conflicts remain high or escalate, a contraction in world trade could slow the world economy even more. At the same time, the sell-off in equity and commodity markets, on top of the gradual removal of stimulus by some central banks, means that financial conditions worldwide are tightening. Combined with heightened political uncertainty, these risks point to a greater probability of a global recession in the next few years.
Target’s New Tech Startup Accelerator
Target is replacing its current retail tech accelerator operated by Boulder, Colorado-based Techstars with a new program it will operate in partnership with German food retail and wholesale giant Metro AG. The new accelerator is “certified” by Techstars, but not run by the organization. A Target spokesperson said that the new program will increase the diversification and globalization of their accelerator program. Metro has operations in 35 countries and more than 150,000 employees. Many corporate giants have launched startup accelerators in recent years as ways to encourage breakthrough innovations outside the confines and restrictions of corporate culture.
Is Amazon Developing a Home Robot?
Amazon has embarked on a major hiring push for a device shrouded in secrecy, with the company’s website displaying more than 100 job openings in Seattle and California for the new project. The project is so secret that interviewees will not be told what they are working on until their first day on the job. Amazon is looking for experts in mechanical engineering and robotics and software developers to work on a “completely new best in class consumer product.” Further qualifications include developers experienced in creating applications that respond to voice or gestures, building apps for smartphones and designing games that will create the most engaging play experience. They’re also looking for mechanical and robotics experts who have experience working with international factories for mass production, and experts in computer vison and academic psychology. Amazon-watchers are speculating that the secret project is a robot for the home.
Amazon has patented a package delivery system that allows for products to be safely dropped from a drone. The patent application describes an airbag covering the package that the drone could inflate before dropping it to a customer’s backyard or patio. Amazon envisions using the package airbag technology on a variety of products, including a bag of groceries or a bouquet of flowers. The drone would first scan the drop zone for pets, people or other living things. Amazon’s growing number of drone-related patents are a good indication of how heavily invested Amazon is in bringing the technology to the real world.
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