Business
Why stubborn inflation is especially painful for California consumers
A small uptick in the nationwide inflation rate last month was an unwelcome glitch for many consumers and for Washington policymakers, but it may be a more serious development for most of California.
The December increase, at 3.4% over the price level a year earlier, could make it harder for the Federal Reserve to begin cutting interest rates in spring, as many analysts have predicted. It was also bad political news for President Biden, who has presided over a sharp drop in inflation but has yet to get credit for it among voters.
But even the small uptick in inflation will have more notable consequences in California because price levels for goods and services, including energy and housing, are already so much higher than almost anywhere else in the country.
Apart from Hawaii, many studies rank California as first or second among the states with the highest cost of living, between 35% and 45% above the national average.
What that means as a practical matter is that a household in Los Angeles with $100,000 income could maintain the same standard of living while earning $69,000 in Dallas and $65,000 in Las Vegas, according to Bankrate.com.
The high cost of living is a prime factor in the ongoing exodus of many Californians, and also may help explain the relatively lackluster mood of people in the state. Consumer confidence in the U.S. has picked up, but California remains below the national average and significantly trails other big states including Texas, Florida, New York and Pennsylvania, according to the Conference Board.
Excluding the 2020 pandemic year, Californians’ consumer sentiment hadn’t been so down for a December since 2014. The Conference Board surveys both people’s current condition and their expectations, and California consumers have a very low appraisal of what the next six months will bring, just as the country as a whole.
“They feel quite beaten up. Part of it is inflation,” said David Tinsley, a senior economist at the Bank of America Institute.
Thursday’s inflation report from the Bureau of Labor Statistics showed that the consumer price index in December increased 0.3% from November, higher than analysts had expected. The increase damped some investors’ hopes for an imminent interest rate cut, which would ease borrowing costs for businesses and households, potentially strengthening the overall economic outlook.
BLS data showed consumer prices in the Los Angeles area in December rose 3.5% from a year earlier, a bit higher than the national average for all urban consumers. The year-over-year inflation rate for the Bay Area in December was 2.6%.
Inflation in the U.S. had been coming down fairly quickly since peaking at 9.1% in June 2022 as key pandemic-induced effects that contributed to the price surge abated. Those included supply chain disruptions and a jump in stay-at-home-spending that outran inventory.
Inflation for staple goods such as groceries and clothing is now running below the Fed’s preferred overall inflation target of 2% — and some things including appliances and electronics are seeing outright declines in prices. Eggs, for example, cost 23% less than a year ago, but prices are still higher than in 2019 and could rise again.
A new bout of avian flu has hurt California poultry farms and is “just adding to the uncertainty about supply and therefore prices,” said Ricky Volpe, an agribusiness professor at Cal Poly San Luis Obispo.
In recent months airline fares and prices for hotel rooms and rental cars also have come down, signs that consumers may be pulling back after a flurry of catch-up travel and other spending as the economy reopened from COVID. Flagging demand may also have prompted some big companies to back off price hikes that originated with attempts to recoup profits lost during the pandemic.
Still, economists said services inflation may remain stubborn. The cost of shelter was up 6.2% in December from a year ago. Hospital services increased 5.5%. And transportation services rose 7.1%, thanks to soaring auto insurance premiums, which analysts say is due partly to more vehicles on the road and increased car thefts.
California consumers may be feeling relatively less relief because prices for housing, energy and services such as entertainment, dining out and personal care tend to be so much higher than in most other places.
Gasoline prices, for example, have fallen by about $2 a gallon on average across the country as well as in California since their peak in June 2022, according to the American Automobile Assn., but the disparity remains painfully obvious for consumers.
As of Thursday, regular gas cost $3.08 a gallon nationally but $4.62 in California.
High as gas prices are, the single biggest factor in the widening gap in cost of living between California and most other states is housing. Whereas consumers’ costs for food and health services in California are just slightly more than in most other states, housing costs were about double the national average, based on data from the Council for Community & Economic Research.
According to Zillow, the median rent for housing of all kinds in California was $2,750, about 38%, or $1,700, more than for the nation. The median sale price for an existing single-family house in the U.S. in November was $392,100, according to the National Assn. of Realtors. For California: $822,000.
Average rents and home purchase prices across the country have been trending slightly down in recent months, but the difference in what one can buy or rent in California versus elsewhere has been hard for many people to ignore.
Those feelings can also drive movement. Studies by the Census Bureau show that by far the No. 1 reason people move is related to housing, with many wanting a better or cheaper place, or their own home.
“They’re not buying those consumer goods where there is deflation. They’re seeing the increase in the cost of rents and that’s what they’re feeling,” said Joseph Brusuelas, chief economist at RSM US, the accounting firm.
Most economists expect inflation to head downward this year closer to 2.5%, albeit with bumps along the way. Whether people will feel commensurately better about the economy is another matter.
“Consumers tend to anchor their view on the economy around a select number of prices,” Brusuelas said, noting that in Southern California that’s gasoline and housing. “In an area where real estate development is badly constrained, you’re going to have a very different perception of the economy and relative standards of living.”
Business
Read Nick Bilton’s Letter to Scott Pelley
Dear Mr. Pelley:
I meant what I said in my letter last week to the 60 Minutes team: joining 60 Minutes is the honor of my career and I am grateful to be working alongside the people who have contributed to the most important television journalism brand this country has ever produced. While I’m new to 60 Minutes, I’ve devoted my career to investigative journalism and storytelling. I started this job excited to collaborate and to benefit from the wisdom and experience of the 60 Minutes veterans, with you among them. For that reason, one of the first things I did in my new role was call you to talk and invite you to dinner. It is a profound disappointment that you rejected that overture and chose ambush instead. Yesterday, you hijacked my first meeting with staff to disparage me, my qualifications, and my intentions with remarkable incivility and contempt. I welcome a diversity of viewpoints and respectful debate among the team, but this was nothing of the sort. Yesterday’s performative display of hostility enacted in front of the staff instead of in a civil, private conversation-demonstrated that you have no interest in contributing to the future success of the show, or approaching my new tenure with a mind open to collaboration and progress. I am here to deliver first-in-class news programming, not to make headlines about newsroom drama. I am eager to work alongside those who share this goal.
Despite yesterday’s misconduct, I had hoped that in sitting down with you today we could find a path forward together. You made clear that you are not interested in such a path.
Your antipathy to the future of the show has come through loud and clear. And I have heard you. I therefore write on behalf of CBS News, Inc. (“CBS”) to inform you that your employment with CBS is terminated for cause effective immediately. Enclosed is your formal termination letter.
Sincerely,
Nick Bilton
Executive Producer, 60 Minutes
Business
Aspiration co-founder sentenced to 14 years for fraud
The co-founder of Aspiration, Joseph Sanberg, was sentenced to 14 years in prison on Monday after defrauding investors and lenders of over $248 million.
The startup, an eco-friendly digital banking company boasting fossil fuel-free investments, carbon offsets for gas purchases, and a debit card with cash-back benefits for shopping at clean companies, was founded by Sanberg and Andrei Cherny. Cherny left the company in 2022 and has not been charged.
Sanberg, an Orange County native, pleaded guilty to wire fraud in October after being arrested in March last year. Aspiration subsequently filed for bankruptcy and liquidated all of its assets by July.
Sanberg and venture capitalist Ibrahim AlHusseini, who also faces charges, together forged a series of bank statements in order to obtain loans. From 2020 to 2021, the pair forged AlHusseini’s bank statements to show millions of dollars in assets in order to obtain millions of dollars from lenders.
Additionally, they forged a letter from their audit committee stating that $250 million in funds were available, when in reality Aspiration had less than $1 million. The amount of loans defrauded exceeded $248 million.
In 2021, Sanberg artificially inflated Aspiration’s 2021 revenue by $44 million by recruiting 27 fake customers to sign letters of intent pledging tens of thousands of dollars per month for tree planting services. Sanberg himself funded the contracts and used the inflated revenue numbers to obtain more loans.
The charges sparked an NBA investigation into salary cap allegations due to Aspiration’s connections with Clippers owner Steve Ballmer.
Ballmer personally invested $60 million in Aspiration, all of which was lost. He is now the target of a civil lawsuit alleging his participation in the scheme. Ballmer denies the allegations.
The team announced a $300-million sponsorship deal with Aspiration, and Clippers player Kawhi Leonard signed a four-year, $28-million marketing contract with the company, which reportedly performed no duties. The issue has raised concerns about how players are circumventing the NBA’s salary cap.
The team lost the $300-million sponsorship deal and an additional $20 million paid for carbon offset purchases.
Business
Monterey Park takes landmark vote on banning data centers
Residents in the city of Monterey Park will be the first in the nation to vote on a permanent ban on data centers Tuesday.
If approved, Measure NDC would prohibit data centers within the city limits and could only be overturned by another vote.
Yard signs saying “No Data Center” in English and Chinese with images of dragons line sidewalks in the San Gabriel Valley city.
As a wave of data center opposition sweeps the country, numerous towns and counties across the U.S. have instituted temporary moratoria and other restrictions on the facilities. But only a handful have instituted indefinite bans, and just four other towns have sent related matters to the ballot.
Supporters are hoping the vote will set a precedent for the rest of the region, where residents are fighting proposals in Vernon and City of Industry.
“This is about as permanent a ban as we can get,” said Steven Kung, co-founder of the group No Data Center Monterey Park. “Winning Measure NDC would send a huge message to the rest of the San Gabriel Valley about how residents don’t want data centers.”
The ballot measure emerged from the fight against a 247,000-square-foot center proposed in 2024 by the Australian-owned investment firm HMC StratCap for a residential area in Monterey Park.
The facility would have sat less than 500 feet away from the nearest home and used three times the electricity of the 60,000-person, predominantly Asian American city.
While the developer touted the potential for jobs and tax revenue, residents expressed concerns about noise and air pollution, rising electricity rates and a potential to lower property values.
The company pulled its plans in late March following public outcry and a March 4 city council vote to extend a temporary data center moratorium and place a ban on Tuesday’s ballot.
In a letter to the city council, HMC StratCap said it would pursue a different use for the land and would not engage in a ballot measure fight.
The city council later banned data centers indefinitely, the first in California to do so, said Mayor Elizabeth Yang. But she’s still been out campaigning for the measure with all four other council members.
“If a council puts in an ordinance, a future council can reverse it too,” said Yang. “With the ballot measure, unbanning it is a lot harder because you need the entire city to vote on it.”
The measure proposes the ban “to protect air quality, drinking water resources, and public health” and “prevent impacts to electricity and water rates.”
While California places third in the country for existing data centers with about 300 facilities, it hasn’t been a hot spot in the recent AI-driven data center boom. High electricity rates, expensive land and regulatory hurdles mean that fewer, and smaller, facilities are currently planned than in Virginia, Texas, Georgia, Illinois or Arizona.
“Most of California’s data centers are small by today’s standards,” said Shaolei Ren, an engineering professor at UC Riverside who studies how to reduce the environmental impacts of data centers. “Ten years ago, they would be medium-sized, but the power demand for new AI data centers has increased a lot.”
The average operating data center demands 45 megawatts, according to the Washington Post, while the average planned one would draw 430 MW. The one proposed for Monterey Park would have required about 50 MW at peak demand.
As proposals crop up in SoCal, they’re met with fierce opposition. Montebello, El Monte and Baldwin Park have all enacted temporary moratoria, and Alhambra recently banned data centers as part of a zoning code update. City of Industry, Vernon, City of Commerce and Santa Fe Springs are moving in the other direction, trying to court developers and streamline data center approvals. Community groups are fighting that.
Outside the San Gabriel Valley, residents of Coachella and Imperial County are showing up in droves to protest local proposals.
Matthew Shaw, a volunteer with the Coalition for Responsible Data Center Development, who recently published a report on opposition to AI data centers, said a vote to ban them in Monterey Park “would lead to copycats, partially because so many groups are just opposed to any data center development at all.”
While there is no formal opposition to Measure NDC, some building trades like Ironworker Local 433 supported the Monterey Park data center when it was still live before city council. Those in the data center industry are lamenting the state of public opinion.
“These are multi-billion-dollar assets that are built by multi-trillion-dollar companies. These things will get done,” said Mehdi Paryavi, chairman of the International Data Center Authority. “My biggest problem is that our industry does not invest enough in community engagement.”
Paryavi said towns that seek to limit data centers are missing out on thousands of jobs generated by data center construction, operations and customers, as well as faster artificial intelligence speeds and better performance.
Kung said local community organizers are “looking at the empirical evidence” and seeing a ban as a win.
“We’ve never seen a city that embraces a data center and is like, ‘Look how our quality of life has increased, look how all the revenue has gone into citywide improvements,’” he said. “That just doesn’t exist.”
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