Economics in the News – April 3-9, 2023
Economics impacts our lives every day. Below are some of the top storylines from this past week related to economics.
o Many large companies have had to layoff a portion of their workforce this year. Companies such as Salesforce, Dow and Amazon have made a round of layoffs in recent weeks, while other companies such as Boeing and business-software company Okta announced plans to lay off workers earlier this year. How do companies make such decisions about who stays versus who is laid off?
In the current economic climate, decisions can take considerable time to make with workers remaining in short supply. Seniority once guided layoffs for many US businesses, with junior employees being the first to go. In today’s world, decisions are more apt to make decisions based on the skills of a worker, rather than tenure. Performance history also plays a role, especially recent performance data, while many other companies consider a workers potential to adapt and find another job. The task of deciding who should be eliminated is often made by the divisional leaders or department heads. [The Wall Street Journal]
o Construction spending relating to manufacturing reached a record high $108 billion in 2022, according to data from the Census Bureau. New factories are being built across the United States with much of the growth coming in high-tech fields of electric vehicle batteries and semiconductors. Other products that have traditionally been manufactured in lower-cost countries are returning to their home shores. With an 800,000 shortage of workers, according to the National Association of Manufacturers, experts are concerned that the trend is only short term.
Companies have been motivated after pandemic-driven shortages and delays disrupted global supply chains. Much of the buildup aims to shorten time and distance for a product by the time it is manufactured and when it is sold. Government initiatives are also playing a role, with President Joe Biden’s administration committing millions of dollars to have companies produce products in the US. [The Wall Street Journal]
o Norway has become Europe’s leading supplier of natural gas, with revenues from oil and gas contributing more than $125 billion to Norway’s economy – an estimated $100 billion more than 2021. Norway increased its natural gas exports last year after Russia decreased theirs after its invasion of Ukraine. With the increase in exports, Norway has been instrumental in helping Europeans heat their homes and generate electricity.
Energy represents a large portion of the economy for Norway – a country with a population of 5.5 million people – accounting for one-third of its economic output. Experts question the sustainability of Norway’s exports due a lack of additional capacity to increase output. Pressures are also high for Norway to reduce its greenhouse gas emissions, transitioning to a cleaner form of energy. Many experts suspect that the transition to cleaner energy will not generate enough well-paid jobs to sustain the six percent labor force working in oil and gas. [The New York Times]
o Mobile home parks have become a target for wealthy investor groups since 2015, but a recent resident-led trend have parks operating as co-ops as a way to preserve their community. Park residents often own their homes but rent the land that it sits on.
Attracted by the reliable cash flow and high returns from raising rents, investment banks, hedge fund managers and other wealthy investors have purchased nearly one-third of mobile home parks in the last eight years.
The cooperative model allows residents to preserve their communities and gives them a greater voice in managing the park. Another perk is that it stabilizes the cost of living in the park for residents in the long run, instead of facing fast rising rent increases. Of the more than 300 resident-owned communities, none have defaulted or closed while only one community decided to sell back to the county housing authority that it originally purchased from. [Associated Press]
o The Internal Revenue Service (IRS) released its detailed plans on how it plans to use the $80 billion earmarked in the Inflation Reduction Act. The agency plans to improve operations, invest in new technology, hire additional customer service representatives and pledging to audit more high-wealth taxpayers. The plan allocates the funding through 2031.
Among the potential improvements for taxpayers, include more efficient customer service and exploring opportunities to create a government-operated electronic free-file tax return system. The money will also be used to hire new employees, as at least 50,000 IRS agents are expected to retire over the next five years. [Associated Press]
