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Thwarting Recession – Optimism Remains High for Small Businesses

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For the past 18-month, optimism among small business owners is in an all-time high, as sentiment rose from 2.3 points in May 2018 to  10.47 in November 2019, based on the survey results from the National Federation of Independent Business (NFIB). 

For owners that wish to expand their business or those that expect an improvement in their earnings, have fortunately had the second straight monthly gain for the index. These positive earnings are a far cry from the previous months of fear over the looming recession. 

Economy & Job Opportunities Continue To Grow 

With the additional 226,000 jobs last November, the survey results prove that the economy continues to have a steady growth.

According to William Dunkelberg, the chief economist at NFIB, believes that business owners have anticipated this growth. In a press release, the “historic run may defy expectations of many, but it comes as no surprise for small business owners” Dunkelberg said. He added that this might be attributed to the fact that small business owners “understand what a supportive tax and regulatory environment can do for their companies.


In addition, legislation such as the Tax Cuts and Job Act of 2017 are giving small business owners a tax break which will help give them room to expand their businesses. 

Based on the numbers, the Net 12% of all owners show higher nominal sales in the past three months- in fact, it has been the highest since May 2018. Moreover, 60% of business owners have claimed that they are making capital outlays since October. Debts are also going low as only 3% claim that they cannot meet their borrowing needs. 

Looking into the employment sector, job creation has been the highest since May. The growing competition and demand in the job market had also pushed as much as 30% of small business owners to raise their compensation. Another 26% are also preparing to have an increase in the next few months. The increase in compensation has been the highest level since December 1989. 

In addition, economists are also predicting that payroll will rise from 156,000 in October to 185,000 in November. This is positive news is a stark contrast to the concerns of a recession.

The positive earnings have also affected pricing. In fact, the decreased cost pressure, especially in labor and allowed business owners to retain their regular prices. Even the inflationary pressures have not been strong enough to create huge price hikes. Although the highest inflation goes to the retail trade and construction. 

The changes in the employment and economic sector have also influenced how they think as “owners are aggressively moving forward with their business plans, proving that when they’re given relief from the government, they put their money where their mouth is, and they invest, hire and increase wages” Dunkelburg said. 

All these good signs both in the economic and in labor have allowed small business owners to gain more profit. This also gives ordinary consumers a positive outlook on what the next year will bring. 

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BigBusiness

Aviation Aftermath Due to COVID-19 Pandemic

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The Covid-19 pandemic has changed a lot of what was considered ‘normal’ before. For example, gone are the days when you can have a fun night out with friends while drinking and partying. Another aspect that the pandemic changed is everyone’s ability to travel freely (as long as their passport, budget, and visas will allow).

With everyone expected to stay home, the airline industry strongly felt the pandemic’s effects as the majority of the flights got canceled due to travel restrictions in an attempt to contain the spread of the deadly virus. Because of this, the airline industry has been forced to lay off employees or, worst, declare bankruptcy. 

The Aftermath

Government regulations in countries such as the United States and Europe have reiterated that any canceled travel plans because of the Covid-19 pandemic should be refunded in whole to the ticket holders.

Despite this regulation, many airlines have failed to comply with as they have felt the financial brunt during the pandemic. Some airlines opted to provide travel vouchers (that can be claimed until 2022) instead. Still, government regulations were specific in their guideline to give back the refund.

Statistics show a decline of 10% in early March 2020 as the pandemic started to boom globally. By late March, statistics showed a 40% to 60% decline in the aviation industry, with more flights being canceled and fewer individuals attempting to travel, including the imposition of travel restrictions by multiple countries. By April 2020, there was an 80% decline, with flight movements restricted in all countries.

What’s Next?

Because of the aftermath of the pandemic to the aviation industry, many airlines are cutting off employees, including flight attendants. US airlines have cut down flight attendants ranging from 30% to 60% because of the low demand for flights.

Because of these, flight attendants all over the world became creative in ways to earn more money now that their current jobs are unstable because of the pandemic. For example, Susannah Carr, a flight attendant from United Airlines, mentioned she rejoined AppWag to walk dogs through making extra money now that there is a lull in her flights.

Making Ends Meet

In an interview, she mentioned that her previous paycheck was just enough to cover her monthly rent, a place she co-rents with a fellow flight attendant. Since Carr has previous experience in freelance jobs such as online translations and wedding event planner, she is now busy applying for other freelance types of jobs to make ends meet.

She acknowledges that while it is not the dream job, she hoped for right off college, the sense of urgency to make a living so she can survive the pandemic remains to be a top priority.

On the other hand, another flight attendant, Joan Marie Santos, turned to bake cupcakes and pastries during the flight lull. Her passion truly lies with baking, a hobby she only got to do in-between flights. But with the ongoing pandemic and approximately one flight per month (as opposed to her usual 15 flights per month), she started baking and selling her pastries to nearby communities to make ends meet.

With the uncertainty of the pandemic, people, not just flight attendants, have to be flexible and adaptable to the changing times. 

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Managing

Problems Continue As WeWork Downsizes Almost 20%

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WeWork is expected to lay off about 2,400 out of its 12,500 employees, almost 20% of its workforce. The office-sharing company seeks to cut costs drastically after its former CEO, Adam Neumann, failed to run the company.

The expected downsizing of employees is the most significant move SoftBank Group Corp has made. The layoff provided a $9.5 billion lifeline, and will soon own about 80 percent of WeWorks shares to refocus the company on its core business. 

After the company’s downfall under its former CEO, WeWork had become bloated as it had taken a path that branched out into all sorts of areas without no clear route of profitability. 

“Efficient Organization”

A company spokeswoman said in a statement, “As part of our renewed focus on the core WeWork business, and as we have previously shared with employees, the company is making necessary layoffs to create a more efficient organization.”

WeWork claimed that the layoffs has already transpired overseas just weeks ago and continued in the United States these coming weeks. 

A New York-based WeWork added, “This workforce reduction affects approximately 2,400 employees globally, who will receive severance, continued benefits, and other forms of assistance to aid in their career transition.”

According to an ex-employee, WeWork New York, offered six months severance pay to an employee who had been with the company for at least four years. Others who fall below only get four months of severance assistance. 

WeWorks architecture unit belongs to the groups affected by this layoff. This unit has been notable in helping WeWork’s identity by curating distinctive modern designs for their shared office spaces. The company’s technology department (coding and software team) was also affected by this downsizing. 

In this light, WeWorks claim that it is primarily a technology company, and not just a real estate firm, but is now challenged and merits a much higher evaluation due to the job losses in the technology department. 

After WeWork’s announcement, their junk bond due in 2025 fell 1.125 cents on the dollar, sending its yield back to near a record high above 16%. 

A Pile Of Problems

While the company still faces several issues, with the latest being an investigation by the New York State Attorney General, the company’s losses are continuing to pile up, swelling to $1.25 billion in the third quarter. The company is also burning cash since it has committed its reach of expansion to several areas. 

In place of the restructuring, the company is open to selling or closing existing businesses, together with its private elementary school, after this year’s term.  

Also, some WeWork employees who reside at WeLive (the company’s residential living business) will be evicted. A WeWork staff, talking on the condition of anonymity, said on Wednesday.

Making The Most Of The Situation

Apart from that, several WeWork workers have formed an alliance termed as the WeWorkers Coalition, which serves to call out severance pay and compensation for lost equity for laid-off employees. 

A WeWork software engineer, who helped start the Coalition, described that the long-awaited layoffs which were highly publicized for weeks in the media were “draining” the staff morale. 

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Featured

Not A Rainbow FIlled Year – 2019 Marks A Problematic Trend For Unicorn Companies

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Before this year ends, the co-working space company WeWork has faced a disastrous streak. After it had withdrawn its initial public offering, the company had also ousted its founder Adam Neuman as its CEO, and to top off the list, the company had experienced a massive $1.25 billion loss in its third quarter. The problem is that- WeWork is not alone,  as other Unicorn companies like Uber, Lyft, and Slack have also seen huge drops in their IPO’s lately. 

Unicorn companies are typically privately held start-ups that have a value of $1 billion or more. To raise more funding, oftentimes, these companies offer their private shares to the public in a process called Initial Public Offering (IPO). 

As its IPO was dropped, WeWork is now in the process of preparing layoffs and planning a new business strategy to realign its focus and help it get back on its feet. However, their losses do not only impact the company, but its main investor Soft Bank. With the combined losses from WeWork and its other unicorn company, Uber, the Japanese tech conglomerate has altogether lost a staggering $6.5 billion quarterly operational loss form its Vision Fund. It had even prompted its CEO, Masayoshi Son, to do drastic actions and provide damage control. 

The Problematic Trend For Unicorn Companies

2019 had not been a good year for these start-ups, whether they have had IPOs or those that have yet to go public. Take, for example, another Soft Bank investment, Slack, which had seen a 48% drop from its June IPO valuation of $23 billion to a mere $11.9 billion.

The trend continues as Uber experienced a 44% drop from its IPO valuation of $82.4 billion last May to just $45.58 billion this year. Plus, it did not help that its CEO Dara Khosrowshashi was under fire for his comment of slain journalist Jamal Khashoggi. Another ride-sharing company, Lyft has also experienced a similar suite with a 45% drop of $24.3 billion in March to just a mere $13.2 billion. 

While losses are not as big as other IPOs, another social media giant, Pinterest, has dipped 12.6% from $12.7 billion valuations to $11.1 billion, following its decision to go public in April. 

With the growing global economy, there has been great hope for tech companies. However, this year had allowed everyone to take a step back and to reset these expectations. 

If there’s an important takeaway from these unicorn companies, it might be that a couple of years can help them reel back from major losses, just like Snapchat. Once valued as the biggest tech IPO in 2017, the platform had faced years of falling stock prices and user numbers. While continuing to be unprofitable, the company is starting to recover and is now on its way up.

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