Month: April 2024

The Biden administration was notified just minutes before the major Israeli airstrikes on the Iranian Embassy complex in Damascus on Monday, US and Israeli officials have told Axios; however, the Israeli side wasn’t asking for a greenlight, the report emphasizes. 

The US on Tuesday directly communicated to Iran that it “had no involvement” or advanced knowledge of the strike on the embassy annex which killed top Iranian commanders, including Brig. Gen. Mohammad Reza Zahedi, who reportedly oversaw IRGC Quds Force operations in Syria and Lebanon.

Crucially, Zahedi’s death marks the highest ranking Iranian official killed since the 2020 US assassination of Qassem Soleimani by drone strike outside the Baghdad airport. In the aftermath of the attack on the embassy annex the death toll had risen to eleven. Iranian state television has since said that included among these were 6 Syrian citizens killed.

A National Security Council (NSC) spokesperson has been cited by Axios as underscoring that the United States “had no involvement in the [Israeli] strike and we did not know about it ahead of time.”

Iranian state TV described that the attack “was carried out by F-35 fighter jets” which fired six missiles at the building, leaving it flattened. It housed the embassy’s consular section as well as the residence of ambassador Hossein Akbari, who apparently wasn’t there at the time and thus was unharmed.

Iran and Hezbollah have vowed revenge and that this will be “punished” while Russia has also expressed outraged, as we reported earlier. Saudi Arabia’s foreign ministry on Tuesday expressed “the Kingdom’s categorical rejection of targeting diplomatic facilities for any justification, and under any pretext.”

A strike against an embassy which is supposed to be ‘protected’ by international diplomatic norms upheld by the Vienna Convention on Diplomatic Relations is unprecedented and so marks a massive escalation by Israel. 

There are simply no examples in all of recent history of a sovereign nation’s military intentionally targeting the embassy and diplomatic facilities of another sovereign country. The one exceptional historical instance is NATO bombing the Chinese embassy in Belgrade in 1999, which killed 3 Chinese journalists, but which the US said was inadvertent, resulting in then President Clinton issuing a formal apology to the Chinese government.

As for the Israeli explanation, it has not officially owned up to the attack, but a military spokesperson has called the embassy annex which was hit a “military building of Quds forces” – in reference to the IRGC’s foreign wing.

“According to our intelligence, this is no consulate and this is no embassy,” Israel Defense Forces spokesperson Rear Adm. Daniel Hagari has said in a statement. “I repeat, this is no consulate and this is no embassy. This is a military building of Quds forces disguised as a civilian building in Damascus.”

Israel is trying to provoke a war with Iran to get the US directly involved https://t.co/VdV3rQUPm6

— Dave DeCamp (@DecampDave) April 1, 2024

A Tuesday Bloomberg note comments on the shock geopolitical event’s impact on oil:

In commodities, crude futures pierced $85 for the first time since October, the latest milestone in a market that has rallied against a backdrop of OPEC+ cuts, strong demand and heightened geopolitical risk. WTI added as much as 1.8% in New York, while the global Brent benchmark neared $89 a barrel, after Iran vowed revenge on Israel after blaming it for a deadly air strike on its embassy in Syria — a rare direct confrontation in the adversaries’ escalating proxy conflict over the war in Gaza. Israel “will be punished. We will make them regret their crime,” Iran’s Supreme Leader, Ayatollah Ali Khamenei, said on Tuesday, according to the state-run Islamic Republic News Agency.

Peter Tchir of Academy Securities reviews the fast-moving events of the last several days running up to the embassy strike: 

• This recent strike follows Israeli airstrikes last Friday in Aleppo which killed over 40 people, including 36 Syrian soldiers and six Hezbollah fighters (including a local Hezbollah field commander).
• As Israel steps up its strikes against Hezbollah and IRGC targets in the region, Israeli representatives met with senior officials from the U.S. today to discuss potential alternatives to a ground operation in Rafah.
• Last week, a previously scheduled meeting was cancelled by Israeli Prime Minister Netanyahu after the U.S. opted not to veto a United Nations Security Council resolution calling for a ceasefire/release of hostages in Gaza.
• On Sunday, Netanyahu stated that “there is no victory without entering Rafah and there is no victory without eliminating the Hamas battalions there.”
• Finally, earlier today, it was also reported that the Biden administration is close to approving an $18 billion sale of F-15 fighters to Israel, which would be the largest sale of military equipment to Israel since the war in Gaza began.

There has been ongoing speculation that Israel may be trying to provoke a war with Iran to get the US directly involved on its side. Ultimately Israeli leadership would like to solve the Hezbollah (and Iran) problem once and for all, and likely understands that it needs Washington’s full backing to to this.

Authored by Jonathan Turley,

Despite hours of argument by the counsel for Hunter Biden, U.S. District Court Judge Mark Scarsi denied his eight motions to dismiss tax charges with a stinging rebuke that the defense omits one thing from its argument: actual evidence…

Hunter Biden has been arguing that he is the victim of selective prosecution despite a documented history of receiving special treatment as the son of the President. However, he has proven a key witness against himself in swatting down defenses raised by his counsel and publishing self-incriminating facts in his book.

The filings also did not address the fact that the Justice Department not only allowed the statute of limitations to run on major crimes, but sought to finalize an obscene plea agreement with no jail time for Hunter. It only fell apart when a judge decided to ask a couple of cursory questions of the prosecutor, who admitted that he had never seen an agreement this generous for a defendant.

Special Counsel David Weiss noted in his filing that they filed new charges only after Hunter’s legal counsel refused to change the agreement and insisted that it remained fully enforceable.

One only has to look at the series of superseding indictments against Sen. Bob Menendez, D-N.J., to see how Hunter continues to receive special treatment.  Rather than the four original counts, Menendez now faces 18 counts with his wife, Nadine Arslanian Menendez, and alleged co-conspirators Wael Hana and Fred Daibes.

What is most notable is not the proliferation of counts but the lack of comparative charges in the pending case against Hunter Biden. Some of us have long raised concerns over the striking similarity in the alleged conduct in both cases, but the absence of similar charges against the president’s son.

Judge Scarsi made fast work of the Biden filings as entirely insufficient to dismiss these charges. Abby Lowell and the defense team seem to be doubling down on the same claims despite the uniform rejection by courts.

The judge noted:

“As the Court stated at the hearing, Defendant filed his motion without any evidence. The motion is remarkable in that it fails to include a single declaration, exhibit, or request for judicial notice. Instead, Defendant cites portions of various Internet news sources, social media posts, and legal blogs. These citations, however, are not evidence.”

Lowell disagreed with the court’s order and pledged “to vigorously pursue Mr. Biden’s challenges to the abnormal way the Special Counsel handled this investigation and charged the case.”

In truth, the “abnormal” treatment of Hunter was giving him advance notice of attempts to interview him and to search of Biden property. It was allowing the statute of limitations to run despite having an agreement on the table to keep potential felonies alive. It was trying to secure a plea agreement that even the prosecutor admitted in court was like nothing he had ever seen in his career.

The court even makes reference to Schrödinger’s cat, a paradox suggested by physicist Erwin Schrödinger in 1935 that a cat in a thought experiment could be viewed simultaneously as both alive and dead:

“The Court understands that its decision rests on an interpretation of the agreement neither party advocated—that the Diversion Agreement is a binding contract but performance of its terms is not yet required. The Court, therefore, invites the parties to stipulate to further pretrial motion practice to the extent there are additional disputes that arise from the Court’s Schrödinger’s cat-esque construction of Defendant’s immunity under the Diversion Agreement.”

The court also rejected the repeated unsuccessful claim by Hunter that the plea agreement is enforceable. The court found that the agreement fell apart before preconditions were met. It is null and void.

“Having found that the Diversion Agreement is a contract that binds the parties but that the parties made the Probation Officer’s signature a condition precedent to its performance, the Court turns to Defendant’s theory of immunity: that the United States’ obligation to refrain from prosecuting Defendant under section II(15) of the Diversion Agreement is currently in force. It is not. The immunity provision is not one exempted from the term of the contract under the survival clause.”

Scarsi has scheduled a status conference for May 29.

Here is the opinion: Hunter Biden Ruling

The official narrative is breaking bad.

‘Soft’ survey data is literally collapsing as ‘hard’ data improves gradually…

Source: Bloomberg

…and more worryingly, inflation signals are flashing red once again…

Source: Bloomberg

Having started the year massively more dovish than The Fed’s ‘Dot Plot’ (almost 7 cuts vs The Fed’s 3 cuts), recent resurgence in inflation signals and continued strong growth signals offer The Fed a smaller and smaller ‘narrative window’ to start (and continue) a rate-cutting cycle. The market is now once again pricing in less rate-cuts than The Fed’s latest plot for this year and is notably less dovish through 2026…

Source: Bloomberg

“I thought it would be hard for the market to challenge the Fed on the hawkish side, but apparently it is willing to do so, in the face of some evidence,” said Benoit Gerard, a rates strategist at Natixis in Paris.

As the market is now pricing in just 65bps of rate-cuts in 2024 (remember in January it was pricing in almost 170bps of cuts)…

Source: Bloomberg

The shift is also casting doubt on bets that the first rate cut will land in June. The probability of a quarter-point reduction in June briefly dropped below 50% on Monday.

Source: Bloomberg

“While June is not off the table, market conviction for a first Fed cut by then is fading,” ING strategists including Benjamin Schroeder wrote in a note.

“In the coming weeks we can expect some Fed speakers to remain vocal about June cuts, but in the end the data will be the deciding factor.”

As WSJ’s ‘Fed whisperer’ Nick Timiraos noted on X, “The sell-side bank and Fed forecaster consensus is now aligned in expecting the first rate cut in June, with the previous outliers recently junking their recession calls.“

“The uniformity here oversells the degree of conviction around a June cut. These have moved a lot in 2024.”

But, The Fed may have another problem.

Something is afoot in the funding markets as the SOFR spread has now been rising for 5 straight days (it should have reverted post-quarter-end) and Fed Fund volumes have slumped…

Source: Bloomberg

And finally, of course, for now, stocks don’t care about the massively hawkish shift in market expectations for Fed action…

Source: Bloomberg

How long (and wide) than this divergence hold?

Authored by Stephen Katte via The Epoch Times,

Tech giant Google has agreed to settle with plaintiffs who alleged that the company invaded users’ privacy by tracking online activities even when they were using Chrome browser’s private incognito mode.

Five plaintiffs filed a class action lawsuit in 2020. The lawsuit covered millions of users and sought $5 billion in damages, a minimum of $5,000 per affected person. The lawsuit alleged Google misled users into believing that by using incognito mode while browsing the Internet, the tech firm wasn’t tracking their activities through third-party cookies, which help track user activity.

Google has always disputed the claims. It argued that the Incognito splash screen and terms and conditions make it clear privacy settings have limits and that users were made aware.

Google and the lawsuit plaintiffs submitted a notice in the U.S. District Court of the Northern District of California last year, agreeing to a deal that would “resolve the claims,” pending court approval. At the time, the details were not revealed.

However, a fresh legal filing from April 1 revealed that under the proposed settlement terms, Google will “delete and/or remediate billions of data records that reflect class members’ private browsing activities.” The data deletion will apply to users outside the United States as well.

The tech company will also update its disclosures about what it collects in private browsing. This process started in January, shortly after the two sides announced plans to settle the case. Google updated its disclosures to clarify that it still tracked user data even when users opted to search privately or using its Incognito setting.

The same month, the tech firm announced a trial feature that would automatically block third-party cookies. The block was already in place for Incognito users shortly after the lawsuit was filed in 2020, and under the terms of the settlement, it will remain in place for five years.

“The result is that Google will collect less data from users’ private browsing sessions, and that Google will make less money from the data,” the plaintiffs’ lawyers said.

While Google supports final approval of the settlement, it strongly disagrees with the plaintiffs’ “legal and factual characterizations.” The tech giant will not be paying any financial damages in this case.

“We are pleased to settle this lawsuit, which we always believed was meritless,” Google spokesman Jorge Castaneda said in a media statement.

“We are happy to delete old technical data that was never associated with an individual and was never used for any form of personalization.”

The settlement deal is still pending, waiting for final court approval. The case was scheduled for Feb. 5, 2024.

U.S. District Judge Yvonne Gonzalez Rogers put the trial date on hold last Thursday as requested by the two parties, who wanted to stay the litigation “in its entirety” and vacate the trial date so they could “focus their efforts entirely on finalizing the settlement.”

Google tried to dismiss the case last year. Judge Rogers rejected the bid, saying she could not agree with Google’s argument that users consented to the company collecting information on their browsing activity while using Incognito mode.

After steep declines in US job openings accelerated in the last few months of 2023, prompting economists to pat themselves on the back for predicting a soft landing and validating their expectations for Fed rate cuts, only to see the trend reverse dramatically in the last month of 2023 when job openings unexpectedly surged back over 9 million in, only to reverse in January of 2024, moments ago the BLS came out with the latest Job Openings data (which as a reminder always lags the BLS by a month) and which showed that in February there was… virtually no change: that’s right, after several very volatile months, the BLS reported that in February the number of job openings were flat at 8.756 million, practically unchanged from the (downward revised) 8.748 million in January, and right on top of the 8.730 million expected.

According to the DOL, in February, job openings increased in finance and insurance (+126,000); state and local government, excluding education (+91,000); and arts, entertainment, and recreation (+51,000); job openings decreased in information (-85,000) and in federal government (-21,000).

And speaking of revisions, just like in the payrolls report, here too the BLS appears to be tasked with making a great, if erroneous, first impression then quietly revising it lower, and sure enough, 12 of the past 14 months have seen job openings revised lower, just like everything else in Biden’s economy.

Accurate or not, the unchanged number of job openings coupled with the recent jump in unemployed workers meant that in February, the number of job openings was 2.298 million more than the number of unemployed workers (which the BLS reported was 6.458 million), down significantly from last month’s 2.624 million.

Said otherwise, in January the number of job openings to unemployed dropped to 1.36, a sharp slide from the January print of 1.43, and matching the lowest level since August 2021 and almost back to pre-covid levels of 1.3.

What was more interesting than the snoozer of a headline job openings print – which we are certain will be revised lower again next month as has been the case with everything under the Biden admin – was the number of quits: here we find that the number of people quitting their jobs, an indicator closely associated with labor market strength as it shows workers are confident they can find a better wage elsewhere – rose for the second month in a row, to 3.484 million up from an upward revised 3.446 million (vs 3.385 million reported initially).

And another interesting twist is that amid the stagnant level of job openings, not only did the number of quits increase, but so did the number of hires, which rose to 5.818 million – the highest since October 2023 – from 5.698 million despite a 44K drop in durable goods manufacturing hiring.

Finally, no matter what the “data” shows, let’s not forget that it is all just estimated, and it is safe to say that the real number of job openings remains still far lower since half of it – or some 70% to be specific – is guesswork. As the BLS itself admits, while the response rate to most of its various labor (and other) surveys has collapsed in recent years, nothing is as bad as the JOLTS report where the actual response rate remains near a record low 33%

In other words, more than two thirds, or 70% of the final number of job openings, is estimated!

And at a time when it is critical for Biden to still maintain the illusion that at least the labor market remains strong when everything else in Biden’s economy is crashing and burning, we’ll let readers decide if the admin’s Labor Department is plugging the estimate gap with numbers that are stronger or weaker (we already know that they always get revised lower next month).

Authored by Matthew Lysak via The Epoch Times,

Eleven days after a court-ordered settlement required the U.S. Food and Drug Administration (FDA) to remove all social media and directives regarding ivermectin, a webpage and its most infamous post remains online, advising people against the use of the popular drug.

After years of controversy over using ivermectin to fight COVID-19, the FDA agreed to remove its social media posts urging people to stop using the drug, according to a settlement filed with federal court in southern Texas dated March 21.

The agency has already removed a page that said: “Should I take ivermectin to prevent or treat COVID-19? No.”

However, its Aug. 21, 2021, post on X (formerly Twitter)—in which the FDA wrote:

“You are not a horse. You are not a cow. Seriously y’all. Stop it”—continues to remain live on the social media platform.

At the time of publication, the post had been reposted more than 67,000 times.

Further, a page on the agency’s website titled “Why You Should Not Use Ivermectin to Treat or Prevent COVID-19” also remains live, in which the agency states that the “FDA has not authorized or approved ivermectin for use in preventing or treating COVID-19 in humans or animals.” The page also says no data exist showing ivermectin to be effective against COVID-19, despite studies that show the drug to be effective against the disease.

Dr. Mary Talley Bowden, a practitioner in Texas and founder of the Coalition of Health Freedom, told The Epoch Times that she believes the agency is delaying the inevitable to avoid further public ridicule.

“My guess is they’re hoping all the negative publicity over the case will die down, and they can quietly remove them without as many people noticing,” said Dr. Bowden, who was among a group of doctors who initially filed a lawsuit against the FDA.

“We have three years of false propaganda to overcome regarding ivermectin,” she added.

According to the terms outlined in the settlement, the agency has 21 days to “delete and not republish” web pages and several media posts, including an April 26, 2022, social media post that reads: “Hold your horses y’all. Ivermectin may be trending, but it still isn’t authorized or approved to treat COVID-19.”

In exchange for removing the posts and webpages, doctors who sued the agency are dismissing their claims, the filing states.

An FDA spokesperson was not immediately available for comment but had previously told The Epoch Times in an email that the agency “has chosen to resolve this lawsuit rather than continuing to litigate over statements that are between two and nearly four years old.”

Ivermectin has been around for decades but became the center of controversy in 2020 after medical opinion became divided over its effectiveness as a treatment for COVID-19. In the aftermath, many pharmacists refused to fill prescriptions for the medication.

By 2023, the issue had made its way into a courtroom in a case brought by Dr. Bowden and other medical professionals when, on Aug. 8, a lawyer representing the FDA confirmed that doctors were free to prescribe ivermectin to treat COVID-19.

“FDA explicitly recognizes that doctors do have the authority to prescribe ivermectin to treat COVID,” Ashley Cheung Honold, a Department of Justice lawyer representing the FDA, told the U.S. Court of Appeals for the 5th Circuit.

Despite statements from the FDA affirming that right to doctors, many pharmacists nationwide continue to refuse to fill prescriptions for ivermectin issued to patients for the treatment of COVID-19, according to Dr. Bowden.

In most cases, according to Dr. Bowden, individual pharmacists aren’t to blame and often only carry out orders from corporate leadership. However, she claims to have also seen examples where pharmacists prevented her patients from getting their medication because of their own “personal agenda.”

Further, the longer the FDA posts remain up, the more difficult it is for physicians to ensure that patients receive the care needed, according to Dr. Bowden, who added that a pharmacist refused to fill an ivermectin prescription she had written last week.

“I’ve treated over 6,000 COVID patients using a combination of medications, including ivermectin,” said Dr. Bowden. “All of my patients who received early treatment are alive and well.

“The sooner they remove the posts, the better, but we have a lot of work to do to reeducate the public,” she added.

The FDA has until April 11 to delete the remaining posts, according to the settlement.

Having plunged by the most since COVID lockdowns in January, analysts expected a small rebound in February data released this morning. Analysts were right as headline factory orders rose 1.4% MoM (vs +1.0% exp) but this was from a downwardly revised 3.8% MoM loss in January (from -3.6%). That lifted the YoY rise in factory orders to +1.0%…

Source: Bloomberg

On a core (ex-transports) basis, orders also beat expectations, rising 1.1% MoM (vs +0.5% MoM exp) from an upwardly revised 0.6% MoM loss in January. That MoM gain inched the YoY orders back into the green (+0.17%)…

Source: Bloomberg

The Military-Industrial complex struggled in February (poor things) as Defense spending dropped 12.7% MoM (while non-defense rebounded from its biggest MoM drop since COVID lockdowns)…

Source: Bloomberg

Mining and Refining orders rose notably in February while shipbuilding orders tumbled most since June 2023…

Source: Bloomberg

Final factory orders were revised slightly lower over the month with capital goods shipments ex-air –  a key input for the government’s GDP calculation – tumbled 0.6% MoM (the worst since Feb 2021)…

Source: Bloomberg

That’s a troubling signal for future production and and limits the scope for a persistent upswing in capex.

Finally, it’s that same old issue again… downward revisions!! In the last 21 months, US factory orders have been downwardly revised 17 times…

Source: Bloomberg

Bidenomics – make it up as you go along – continues.

As discussed in our morning wrap, US equity futures are dipping lower as bond yields in the US continue to move higher as crude continues to surge and is up another 2% on growing fears of middle-eastern escalation after a senior Iranian commander was killed by an Israeli airstrike in Syria yesterday, with Iran immediately vowing revenge, and as Ukraine once again struck oil infrastructure targets deep inside Russia, overnight hitting Russia’s 3rd largest refinery, ~800 miles from the front lines.

As OilPrice details, Ukrainian drones hit the primary refining unit of Russia’s third-largest refinery southeast of Moscow more than 800 miles from the front line, Reuters reported on Tuesday. Ukraine keeps striking Russian oil assets despite the Biden admin’s unequivocal demands for a hard stop, suggesting that diplomatic fallout is now imminent.

The Taneco refinery of Russian company Tatneft in Tatarstan, an industrialized region southeast of Moscow, was attacked by Ukrainian drones in the latest such attack from Ukraine on Russian refining infrastructure.

The refinery has a capacity to process 340,000 barrels per day (bpd) of crude. Its primary refining unit, with a capacity to process about 155,000 bpd, was hit in Tuesday’s attack, according to pictures seen by Reuters. The unit caught fire, which was swiftly extinguished, Russian media report.

They also quote Ramil Mullin, the mayor of the city of Nizhnekamsk, where the refinery is located, as saying that there have been no injured people in the attack.

“There are no injuries or serious damage,” Mullin wrote on Telegram. “The technological process of the enterprise has not been disrupted,” the mayor added.

A source with the Ukrainian intelligence in Kyiv told Reuters that Ukraine hit a major Russian oil facility in Tatarstan to reduce Russian oil revenues.

Ukraine has stepped up attacks on oil refineries in Russia in recent weeks, which have reduced Russian refining capacity, and which, reportedly, have the White House concerned about rising international prices.

The United States has repeatedly urged Ukraine to halt its drone attacks on Russian oil refineries due to Washington’s assessment that the strikes could lead to Russian retaliation and push up global oil prices, the Financial Times reported last month, citing sources familiar with the exchange.

According to Reuters estimates, the amount of Russian oil refining capacity that has been taken offline due to Ukrainian drone strikes is 14% of Russia’s total refining capacity.

Calculations show that 900,000 bpd of refining capacity have been taken offline by drone strikes, Reuters reported last week.   

Tesla shares are plunging heading into the cash open after the automaker reported Q1 deliveries and production that fell far below estimates.

For Q1 2024, Tesla produced over 433,000 vehicles and delivered 387,000. It marks the first annual Q1 delivery decline for the automaker since 2020. 

Tesla’s exact delivery number for the quarter was 386,810 vehicles, far below Bloomberg estimates of 449.080.

For the quarter, the company produced 412,376 Model 3/Y vehicles against estimates of 439,194. The company produced 20,995 “other models”. 

Tesla encountered several hurdles in the first quarter, including Houthi militia attacks that disrupted its component supply in the Red Sea, leading to a temporary halt in production at its German factory.

Additionally, environmental activists’ sabotage near the same facility further impeded operations.

As we have been noting on Zero Hedge, in China, intense competition from local EV manufacturers like BYD and Xiaomi led to reduced production at Tesla’s Shanghai plant after disappointing sales in January and February. The U.S. market at the same time gave mixed reviews to Tesla’s new Cybertruck, and discounts and incentives were less successful in boosting sales than previously.

Ahead of the quarter’s end, CEO Elon Musk instructed sales and service staff to demonstrate the latest version of the company’s premium driver assistance system, marketed as Full Self-Driving, which still requires driver supervision. This period saw Tesla’s stock fall 29%, marking its most significant quarterly drop since the end of 2022 and one of its steepest since its 2010 IPO.

Analyst expectations varied, with a FactSet compilation predicting around 457,000 deliveries, and estimates updated in March adjusting this figure to between 414,000 and 469,000. Independent researcher Troy Teslike had anticipated around 409,000 deliveries.

However, a company-compiled consensus shared by Tesla’s head of investor relations Martin Viecha, based on 30 analysts’ estimates, expected an average of 443,027 deliveries for the quarter.

This result shouldn’t surprise anyone.  Inflation has driven up operational costs for businesses across the US and shrunk profit margins for major food chains in the past few years.  This has led to higher menu prices (like the “$18 Big Mac”) and slowing sales for every major fast food company.  Another anchor dragging on the restaurant business in many regions was at least two years of covid stimulus coupled with rent moratoriums, creating aggressive labor shortages and raising wages in upwards of $16 per hour for brand new no-skill employees.

Small chains and mom-and-pop businesses simply can’t compete.  Larger chains raised prices but have also been forced to reduce employees and labor costs through automation, but the layoffs are just getting started. 

Enter California’s “FAST Recovery Act” passed into law in 2022 and going into effect in April of this year – The legislation requires a particular set of food chains dealing in certain kinds of products outlined in the law to raise their minimum wages (already at $16 an hour on average) to $20 an hour.  The income increase is limited to chains that have 60 or more locations in the state of California (meaning, the combined number of locations regardless of who owns them must be higher than 60)  Keep in mind that while many of these chains are associated with international corporations, they are owned and run by franchisees; they are still family run businesses.

Mass layoffs are now a guarantee with many restaurants already firing thousands of workers as well as some chains closing multiple locations because the cost of operation will be higher than the benefits. 

“Restaurants are struggling to stay above water, and Democrats just threw them an anvil,” California Assembly Republican leader James Gallagher told FOX Business. “We warned Democrats this new mandate would cost jobs. They ignored us, and here we are with the highest unemployment rate in the country poised to get even worse.”

The “digital options” that many fast food franchises are referring to are automated ordering systems as well as robot workers which are slowly but surely becoming more cost effective than human laborers.  At least one fast food location in California is testing a fully robotic restaurant with no human workers.

Layoffs will accelerate along with the normalization of the technology, and the high wages that are crushing profit margins are making the decision easy for business owners.  Some chains have reported that they will be forced to cut working crews in half; meaning, those working will be paid $4 an hour more, but they’ll have to work twice as hard per shift.  The most probable end result in the next 5 years will be the majority of chain restaurants operating with a tiny crew of humans working alongside increasing automation.   

The political left is already accusing the fast food industry in California of “retaliation” for the wage increase which was negotiated in part with restaurant workers unions involved.  This is what they asked for, and now it’s happening; for every action there is an equal and opposite reaction. 

The problem that is typical among leftists is a lack of understanding when it comes to the basics of business operations.  Profit margins can be thin and money can still be made due to sheer scale, but revenues at that level are often calculated in cents or fractions of a cent per sale.

This kind of business model is beyond the comprehension of the average socialist.  They simply see workers whose wages are not keeping pace with the high cost of living in California and assume business owners are greedy.  Instead of confronting the state government that caused higher prices through extreme regulation and taxation, they want to give that very government even more power to punish businesses that are already under pressure.

Well, get ready for more job losses and get ready for the takeover of fast food robots because these are the only options franchise restaurants have left.  They might be able to force business owners to pay $20 an hour for no-skill labor, but they can’t force those business owners to keep hiring.  

Furthermore, it’s likely that the FAST Act will trigger yet another tsunami of businesses leaving California for other states with less bureaucracy and a less demanding labor market.  Meaning, more jobs for red states and more unemployment for California.