Economics in the News – May 15 - 21, 2023

Economics impacts our lives every day. Below are some of last week’s top storylines that relate to economics.

• Many Americans have decided that the best car to own is their existing car because it is paid for. Higher prices and the recent escalation of interest rates have pushed the cost of a new or used car beyond the means of many Americans. They are holding on to their vehicles longer. The average age of a passenger car that’s on the road is 12.5 years, according to S&P Global Mobility.

Since the pandemic, the price of a new car has jumped 24%, and higher interest rates have pushed the average payment on a new car loan to $729. Used car prices are up 40%, and the average payment is $529. The buy vs. repair equation has changed because manufacturers have built cars that last longer, so major repairs are needed less frequently. (AP News)

• Green Bay, Wisconsin, is the best place to live in the United States, according to The U.S. News & World Report. Green Bay is affordable and offers a better quality of life than most other American cities. The median home price is $247,092, and its 107,000 residents boast of being the home of the Green Bay Packers, one of the most successful NFL teams. It also offers a thriving entertainment area and many outdoor activities.

Six of the top 10 cities are in the South. Huntsville, AL, and Raleigh / Durham, NC, ranked two and three, respectively. (CBS News) 

• America has been through a shutdown but never has defaulted on its debt. During shutdowns, essential federal services remain open, but nonessential services close. We have endured shutdowns when many federal workers are sent home. National Parks and the Smithsonian would close. There could be travel delays if there are reductions in the TSA workforce. 

Defaulting would be more serious. Since the government has never defaulted on its debt, the consequences are unknown, but economists warn there could be a severe economic downturn. Who should the government pay when the money runs out? Should it be those who have loaned money to the US government? If not, the government’s creditworthiness would be impacted for generations, meaning the interest rate would be higher, adding even more to the federal deficit. The government may choose to delay paying military personnel and Social Security recipients. (AP News)

• Many immigration experts had expected daily border crossings to surge to 30,000. They were surprised that the number of border crossings fell to less than 4,000 in the first week following the expiration of Title 42, a law that permitted border patrol to return migrants to Mexico without a hearing. Since its expiration, migrants are entitled under US law to a hearing, but they must first request asylum in a third country. The CBP One app enables asylum seekers to request a hearing while in Mexico. 

The Mexican and Guatemalan governments have deployed troupes and law enforcement to assist. Border agents released apprehended migrants under Title 42. Many of them attempted to enter the US several times. Since Title 42’s expiration, migrants may have been dissuaded by the tougher consequences of being caught, including a 5-year banishment and jail time. (CBS News)

• Thirty years ago, robots began to replace assembly-line workers. Today, artificial Intelligence (AI) is replacing many white-collar jobs. Businesses hired middle managers before and during the early stages of the pandemic. Today, middle managers have been one of the largest groups to be laid off. According to Employ America, the number of unemployed white-collar workers increased by 150,000 in the 12 months preceding March 2023. One reason is AI perform frequently completes their tasks more efficiently. 

Job openings continue to exceed the number of available workers. Wages have increased significantly – but not for many middle managers. Finance has been particularly hard-hit, where wages for new hires fell more than 15% in the past year. Most openings are in customer services, such as restaurant workers, retail clerks, and drivers, rather than middle managers. (The Wall Street Journal)