Economics in the News – Dec. 25-31, 2023
Economics impacts our lives every day. Below are some of the top storylines from this past week related to economics.
o Global inflation rates are slowing faster than expected. Economists are expecting 2024 to bring inflation back to normal levels for the first time since the aftermath of the COVID-19 pandemic. Experts project that the United States, Europe and several emerging markets should be at or near the inflation targets of most central banks by the end of the year.
Global inflation rates soared in 2021 as prices of goods soared due to disrupted global production and shipping in addition to strong demand due to fiscal and monetary stimulus. Inflation hit multi-decade highs in 2022 following Russia’s invasion of Ukraine, especially in the eurozone which saw a peak of 10.1 percent inflation rate in October 2022 after a cutoff of Russian gas. [The Wall Street Journal]
o More Americans who would traditionally be homeowners are becoming long-term renters, including many with no plans to purchase a home. High-interest rates and soaring home prices have made mortgages unpalatable for many. For decades, renting was seen as a stepping stone for the upper and middle class before they decided to purchase a home. And a home was considered a key asset that would appreciate, eventually allowing its owner to fund their retirement. According to Euromonitor analysis, about 64 percent of people are homeowners in the United States compared with about 89 percent of people in China and 72 percent in Brazil.
In 2022, nearly 107 million people were living in rental housing which is a 15 percent increase from 2007, according to the nonprofit organization National Multifamily Housing Council. New subdivisions of single-family homes for rent are being built from coast-to-coast, allowing renters to make extensive modifications to their spaces. There are currently 553 build-to-rent developments across the United States. Their average occupancy rates are currently 97 percent, ahead of the industry average of 95 percent. [The Wall Street Journal]
o Recent attacks on the Red Sea are likely to cause higher prices for consumers, as cargo ships have been forced to take longer routes to avoid dangerous areas. Iran-backed Houthi rebels in Yemen struck cargo ships with drones and missiles in retaliation for Israel’s actions in the Gaza war. The actions caused shipping giants to reroute shipments around the Cape of Good Hope in South Africa, decisions that are costly for shippers and consumers.
Experts are projecting higher costs for goods shipped from Asia to the East Coast of the United States. Around 12 percent of global trade typically passes through the Red Sea and Suez Canal, according to the US Naval Institute. The rerouting of traffic could cause congestion in some areas such as the Panama Canal and could impact the busiest period for shippers, from March to May when shipping companies frequently sign annual contracts. [The Washington Post]
o Minimum wage workers in 22 states have earned a pay raise to begin 2024. The pay increases will impact an estimated 9.9 million workers which add up to an estimated additional pay of $6.95 billion, according to the Economic Policy Institute (EPI). In addition, 38 cities and counties raised their minimum wage above the state minimum.
With the bump in pay in 22 states, 20 states will maintain the federal minimum wage of $7.25 per hour. While the federal minimum wage has not changed since 2009, the cost of living has skyrocketed, bringing heated debate among politicians. According to the EPI, of the 17.6 million workers earning less than $15 per hour, nearly half live in the 20 states that continue to stick with the federal minimum wage. Meanwhile, according to the Bureau of Labor Statistics consumer price index, a dollar in 2023 can buy roughly 70 percent of what it could buy in 2009. [NPR]
o Data shows that a shift in the workweek could reshape business during 2024. Flexa, a flexible jobs board, analyzed more than 9,000 ads, 2.7 million searches and 27,880 global worker preferences from Jan. to Nov. 2023. Searches for a four-day week jobs experienced a 68 percent surge in interest since Feb. 2023 while some countries, such as Britain, have completed a trial of a four-day workweek with a 92 percent success rate.
Employers are also embracing the idea of a four-day workweek. In the fourth quarter of 2023, there was a 400 percent increase in jobs offering a four-day workweek, 4.5-day workweek or a nine-day fortnight compared to a year earlier. Studies show that since the pandemic, workers care more about jobs offering mental health support. Throughout 2023, sick leave was at a record high with mental health being cited as the main reason for needing to take time off work. [FORTUNE]
