Economics in the News – Jan. 1-7, 2024
Economics impacts our lives every day. Below are some of the top storylines from this past week related to economics.
o One of the most scrutinized airplanes in history is once again being dissected - the Boeing 737 Max. An Alaska Airlines flight from Portland, Ore., to Ontario, Calif., had a fuselage blow out in midair and exposed passengers to the howling wind. While the airplane was able to land safely and no passengers were physically injured, the incident provoked immediate safety examinations ordered by the Federal Aviation Administration of 171 Max 9 airplanes that are operated by American carriers. A mid-cabin door plug used to fill the space where an emergency exit would be if the plane had more seating capacity has drawn the attention of inspectors.
Alaska Airlines has 65 of the Max 9 airplanes and canceled 163 flights into Sunday due to the mandatory grounding and inspections. United Airlines owns the most Max 9 planes of any US-based carrier, with the 79 planes causing roughly 180 flight cancelations. Just last month, Boeing advised airlines to inspect more than 1,300 delivered Max planes for a loose bolt in the rudder-control system. Another version of the Max, the Max 8, was involved in two crashes that killed hundreds of people in 2018 and 2019, resulting in a worldwide grounding of the aircraft. [The New York Times]
o More than two dozen ships have been attacked in the Red Sea since November, forcing shipping companies to make difficult decisions on how to get cargo vessels safely to their destinations. Companies are weighing whether they should send their vessels through the Red Sea and risk attacks by the Houthi militia in Yemen while bearing the cost of higher insurance premiums, or if they should send ships on a route that is 4,000 miles longer adding 10 days in each direction while burning additional fuel.
Analysts expect both options to raise costs for customers through higher prices on the goods they purchase. So far, the problems in the Red Sea have not severely disrupted global supply chains to the same extent as the COVID-19 pandemic, but many experts believe that it will cause similar chaos. The attacks by the Houthi militia have continued despite a US-led force being assembled to prevent them. Companies are already bracing for the delay in the arrival of products. In addition, China’s factories are typically idle for several weeks during the Lunar New Year, so the container shipping industry typically handles an annual surge of exports before that shutdown. [The New York Times]
o The number of startups launched has increased dramatically since the onset of the COVID-19 pandemic. And many entrepreneurs are looking beyond tech-heavy Silicon Valley to begin their new company. An estimated 1.6 million new businesses were formed in 2023, an increase of 38 percent from the year before the pandemic and the most since tracking began in 2005. While the first phase of the startup phase can be attributed to the pandemic and people left with ample time on their hands seeking new opportunities. Startups began increasing in number 2021, after a slowdown from the initial phase.
Historically, startups have accounted for one-fifth of new jobs and have been key drivers for productivity growth. Many of the new businesses are in locations that are not historically known for supporting startups. For instance, in Georgia applications for new businesses through November saw a 53.4 percent increase from the first 10 months of 2019, compared to a 38 percent climb nationwide. Other non-traditional areas such as Mobile, Ala., and New Orleans are also significantly higher. It’s too early to tell what’s driving the wave. [The Wall Street Journal]
o Automakers have stopped improving fuel efficiency gains in gas-powered cars. Companies such as Honda, Subaru, Mazda, Volkswagen, BMW, and General Motors are selling less efficient cars than they did five years ago. The trend seems puzzling considering the incentives to raise fuel efficiency standards.
But a major cause for the reasoning is the allure of large SUVs and pickup trucks to American families – and the profitability of those vehicles for automakers. The seven-year stretch of consistent, low gas prices from 2015 to 2022 brought back the desire for gas guzzlers among Americans, after a surge in demand for more fuel-efficient cars in the early and mid-2000s. As a response to the demand for larger vehicles, manufacturers have shifted their focus away from sedans to larger, and more profitable, SUVs and pickups. Last year, most of the vehicles sold in the United States were SUVs, making up 52 percent of the new car market. Although SUVs have improved in fuel efficiency over the years, a further improvement in fuel SUVs among larger vehicles is likely over until automakers electrify cars and trucks. [The Washington Post]
o Animal shelters are overwhelmed with unwanted dogs. Stray dogs taken in by shelters has risen six percent from 2022 for the period between November to January and are up 22 percent since 2021. Some animal shelters, who have reached their capacity, have been forced to start turning animals away. Older dogs have long been at risk of losing their homes, but shelters have seen a dramatic rise in the number of puppies and younger dogs.
According to pet healthcare company IDEXX Laboratories, the US pet population surged six percent in 2020 and four percent in 2021. That compares to a historic growth rate around one percent annually. Family budgets have been strained from the cumulative rising costs of basic needs such as groceries and rent. The cost of owning a pet has surged since 2000, where the average pet owner is spending more than $350 for food, $300 for boarding, and $325 for vet visits. Landlords have also been enforcing pet policies since the pandemic-era pet restrictions have been lifted. [Bloomberg]
