Economics in the News – Aug. 8-14, 2022

Economics impacts our lives every day. Below are some of the top storylines from this past week related to economics.

o   The unemployment rate fell to a 50-year low in July, but gig work continues to thrive despite its lack of security. Rideshare companies Uber and Lyft have seen a steady rebound in their number of gig workers since the start of the COVID-19 pandemic. Gig work has steadily climbed since 2018 to the point that a Pew research survey from 2021 concluded that nine percent of adults had a portion of their income come in the gig economy. Most people prefer the security that a job provides, so typically gig work increases in downturns when unemployment increases. Why is the gig economy growing?

Many independent contractors working in the gig economy are seeking to supplement the pay from their primary jobs as rent and food prices increase. Others use gig work as a springboard to greater opportunities or as ways to work while studying in school. While the number of workers in the gig economy has been steadily rising, it’s not clear to economists what will happen to the gig economy in the event of a recession. [The New York Times]

o   The Colorado River is the primary water supply for 40 million people across seven states – Arizona, California, Colorado, Nevada, New Mexico, Utah, and Wyoming -- and part of Mexico. But stemmed from climate change, river levels have been inadequately supplied by less snowmelt and more evaporation due to higher temperatures.

Cities and farms are bracing for cuts to the water supply, as officials are planning for unprecedented reductions if the states are unable to agree upon a way to use at least 15 percent less water by next year. Seventy percent of the water from the river goes toward irrigation for the agriculture industry that provides 90 percent of the United States’ winter vegetables. [Associated Press]

o   The United States currently has 124,000 public chargers for electric vehicles (EV), most of which take several hours to re-charge an EV. It’s estimated by McKinsey and Co. that as many as 1.2 million chargers will be needed in the future as demand for electric vehicles continues to accelerate.  The Inflation Reduction Act that was recently passed by Congress offers incentives for installing electric vehicle chargers, but challenges in the supply and convincing property owners to invest remain.

Experts contend that building out the charging network is pivotal to convince the broader population to buy EV’s. Manufacturers have dealt with supply chain shortages for computer chips, complicating plans to build. But many gas station owners are reluctant to invest in charging stations due to their lack of return on investment. The latest bill would provide tax credits as an incentive for businesses to build electric chargers. [The Wall Street Journal]

o   Costs for food commodities and fuel have dropped from their peak since the immediate aftermath of Russia’s invasion of Ukraine, offering poor countries some relief. Prices for commodities such as wheat, oil and fertilizer have stabilized and are back to their pre-war levels because exports of grain and oil have exceeded expectations.

However, it will take longer for commodity prices to matriculate down to their local community, meaning that it could take 10 to 12 months before poorer countries feel the full impact. The World Food Program estimates that 345 million people in 82 countries are in danger of dying because of insufficient food – more than double pre-pandemic levels. [The Washington Post]

o   Expect higher prices to ship gifts via the United States Postal Service (USPS) this upcoming holiday season. If approved by the Postal Regulatory Commission, higher prices will go into effect starting Oct. 2 and will last until Jan. 22, 2023. Packages shipped via Priority Mail Express and Priority Mail could increase anywhere from $0.25 to $6.

The USPS says that the price increases are needed to stay competitive with other shippers and to help cover anticipated extra costs throughout the holiday season. The USPS issued similar holiday price hikes last year. [NPR]