Holiday Shopping Starting...Now?

As of today, we are three months away from Christmas, and if you have not already thought about holiday shopping, you may want to start. Due to COVID-19, the holiday buying season is likely to be an avalanche of e-commerce shopping and deliveries, promotions being run early by merchants, and crowd controls on Black Friday. Some stores, such as Walmart and Target, have already vowed to stay closed on Thanksgiving.

The biggest concern for the holiday season is undoubtedly online sales, where IBM is projecting sales at non-store retailers to continue to accelerate, growing by 35-percent from November to December. For comparison, from March to July the growth was 24-percent. Here are the highlights of how retailers and shipping companies are responding to the expectation in increased online shopping:

• Major shipping companies, like FedEx and UPS, have begun to slap fees on package shipping for huge mailers like Amazon and Target, sometimes up to $3 or $4. FedEx also has limited several companies on the number of items they can ship from certain locations. 

• Some retailers plan to offer 15-percent discounts to customers who fulfill in the stores. This year will also see the highest use of alternative delivery options: BOPIS (buy online, pick up in-store), curbside pick-up, package lockers, etc. 

• Delivery companies are beginning to hire for the holiday season now. Amazon has announced they are bringing on 100,000 and adding to its new transportation capacity in anticipation of high holiday demand. FedEx plans to hire 70,000 workers this year, which is a 27-percent increase from last year. UPS has already hired 39,000 employees in Q2 because of having already experienced holiday levels of demand. 

• Lastly, retailers have begun to announce when their holiday sales will be starting, many, announcing November 8 to be the official date. Amazon, additionally, moved their annual Prime Day up to October, while hinting deals may begin weeks ahead of the day itself. 

With COVID-19, the looming election, and the strain people are feeling on their finances, do you think retailers should lower their expectations for holiday shopping demand? Do you think that holiday shopping will help the economy recover? Will it only be a temporary recovery?

https://www.usatoday.com/story/tech/reviewedcom/2020/09/15/holiday-shopping-changing-due-covid-19-heres-what-you-need-know/5801631002/

https://www.axios.com/coronavirus-shopping-season-57f2077a-7686-43a9-8908-6be6d2fabdcd.html

COVID-19 Impact On College Towns

    Cities all across the world have been impacted by the COVID-19 pandemic. Small businesses have struggled to maintain a consistent income, especially in college towns. College towns such as Blacksburg (Virginia Tech) have taken massive blows due to the lack of tailgating and bars being closed. Blacksburg is a town that relies on the business of student, families of students, and alumni, not receiving much income from townies and surrounding citizens. Many thought that the arrival of students back on campus would give the economy a much needed boost and push us in the right direction. For college towns like Blacksburg that was not the case, as student bodies across the country are held with many restrictions on what they can do while on campus. Small businesses and restaurants in Blacksburg have experienced no real change in income the past month.

    Small businesses and restaurants aren't the only operations in towns getting impacted. According to the Wall Street Journal, "Tom Norman, general manager of the Courtyard by Marriott in Blacksburg, said his and other hotels lost most of their bookings after the virus began to erase many of the reasons that bring visitors to Blacksburg." In my opinion, sports and other attractive events need to be brought back to colleges in order to bump the economy and help save the college towns financially.

https://www.wsj.com/articles/college-town-economies-suffer-as-students-avoid-bars-football-tailgating-11600686000?mod=hp_lead_pos10

Coronavirus: Hit to Global Economy 'will be less than expected' in 2020

In June of 2020, The Organization for Economic Cooperation and Development predicted a decline of 6% though now they predict a decline of 4%. Therefore, the United Kingdom should no longer have the deepest contraction among the major G20 economies. Britain is expected to have a declined contraction and Italy, India, and South Africa are predicted to have larger contractions than the United Kingdom. Regarding 2021, “… support needs to be continued next year and governments should avoid premature budgetary tightening at a time when economies are still fragile” Consumer spending has began to rebound and hopefully it will continue to do so. “For the global economy, the agency's chief economist said that the loss of economic activity due to the pandemic by the end of 2021 would be equivalent to the combined annual gross domestic product of France and Germany”.

Article Link: 

https://www.bbc.com/news/business-54176157

Fed and the inflation debate

 The Fed recently released their newest economic forecast. In it they said how they do not see inflation reaching 2% again until 2023. They plan to keep interest rates at zero at least until 2023. Also in their outlook they have unemployment not reaching 4% until 2023 also. Their forecast had some market watchers hesitant. With lower rates there are fears the dollar will become weaker. They are also worried about how long it will take for inflation to reach the Feds 2% target. However the Fed responded with how they were more concerned with deflation instead of inflation. The Fed can control inflation a lot easier than they can control deflation. I think a lot of people want to see unemployment decrease a lot faster than 2023 but only time will tell how accurate the Feds forecast is.

Article Link

Restaurants Struggling to Survive as Cold Weather Impacts Outdoor Dining Options

     Restaurants all across the country are struggling to survive as state and local governments restrict indoor dining.  In many large cities across the country, indoor dining is restricted to 25% or 50% capacity and in the nation's largest city, NYC restaurants remain completely closed to indoor patrons at least through the end of this month.  Many owners have been able to cover their overhead and keep their businesses alive through a combination of carry out service and outdoor dining options.  Creative restaurant owners have created sidewalk and even parking lot options for customers as a way to increase sales.

    As cold weather approaches, the outdoor dining lifeline could be on life support, creating even more hardships for an industry that is struggling.  Business owners will face failure if they are unable to cover mortgage and utility payments.  And the restaurant industry employs hundreds of thousands of workers including host staff, wait staff, kitchen staff and many more across the supply chain.  New York City alone has more than 10,000 restaurants.

    Heat lamps and fire pits may extend well into the fall but customers will eventually be driven indoors by the cold weather.  In the meantime, the Independent Restaurant Coalition is lobbying for a $120 billion grant to help these struggling businesses.  Another round of coronavirus stimulus may help with additional Paycheck Protection Loans and a number of crowd funded social media campaigns seek to help the industry as well.  However, if the state governments and restaurant owners don't find a way to open safely, it is likely that many of these businesses will close for good and the employees who rely on them for their livelihood will have far fewer jobs to compete for in 2021 and beyond.

https://www.cnbc.com/2020/09/09/cold-weather-brings-new-fears-for-struggling-restaurant-owners.html

  

The Travis Scott Meal

Jacques Berman Webster II, better known to many as Travis Scott, is an American rapper whose popularity has exploded over the past five years. On April 23^rd, 2020, Travis Scott previously held a virtual concert on the game “Fortnite” as well as releasing digital and physical merchandise. Recently, Travis Scott used his popularity once again to his advantage by partnering with McDonald's to release his own "Cactus Jack" meal. The meal consists of a Quarter Pounder with cheese, bacon, and lettuce, medium fries with barbecue dipping sauce and a Sprite. Altogether, it costs $6 and is available to the American public until October 4^th. Likewise to the meal, Travis Scott also released a large wave of “Cactus Jack x McDonald’s” merchandise that his fans are more than willing to purchase. Whilst to many this promotion is uninteresting, the meal broke records on all social media platforms. Amazingly, the promotion was so popular that many restaurants across the United States are running out of key ingredients for the combo. Regardless of your opinion on the rapper, he knows how to identify his target group and understands the magnitude of collaborating with large-scale companies.

 

Long Road to Maximum Employment

 Last year unemployment reached a record low of 3.5% . The Fed Chairman Jerome Powell has said that it may be a long time before we hit that low again. The Fed has been doing a lot in the way of trying to mitigate the recession that we find ourselves in. Powell says that the Fed is limited in what it can do, and suggests that if we want to see that level of low unemployment again, the government has to pull the rest of the slack.

Also last year, we saw a growth in the labor force participation rate, which was mainly due to more women entering the labor force. The impact of COVID has lowered the LFPR, but we have seen that rate begin to return to normal. The return to normal has disproportionately affected women, as they are more likely to not to quit work if they have trouble accessing childcare. This will be especially true this school year as younger kids need someone to watch them so they are not home alone.

https://www.reuters.com/article/usa-fed-employment/update-1-feds-powell-sees-a-long-road-to-maximum-employment-idUSL1N2GE14Y

Impact of Coronavirus on China's Economy

All of us know that the pandemic had taken its initial stages from China. So, we know that this country was primarily the reason for the Corona Virus, hence other countries had to take extreme precautionary measures in order to provide safety to its citizens. Most countries did this by avoiding any imports from China, in order to increase minimal contact with the country. All of us know that China is the foremost exporter of many types of goods especially technology, hence for China, this was a huge setback since most of the country’s economy depended on its exports. Since there was a decrease in exports, the country had to decrease its imports as well in order to make sure that there was no trade deficit or negative trade balance. Chinese consumers import a lot of foreign technology as well since this is a huge section of the Chinese eCommerce market. But since imports had to decrease, the income of Chinese people had to stop in that section as well causing a decrease in consumer spending therefore a decrease in consumer spending had decreased consumer confidence which in turn decreased the economy of China.

China also has the most amount of labor working for its different type of companies and factories estimated to be around 806 million out of the 1.4 billion population. There was estimated 85,279 cases in China which means that most of the labor working, had to go home and rest, causing a decrease in production hence decrease in the GDP. By the time China recovered, it had lost 4,634 people to the virus and even though 80,477 of them had recovered, the country had already decreased a lot of its economy. Not only this, but the factories had to close down for a long period of time as well in order to decrease the spread of the virus which in turn caused productivity to go down to zero. China is the world’s leader in manufacturing and producing almost half of the world’s steel therefore shutting these factories down would cause a huge impact on its economy.

Prior to the pandemic, Bi Chao made an investment that he thought would ensure a comfortable living by spending $28,000 into buying hundreds of exotic animals. He planned to breed them on his farm in order to profit from it by selling these animals to restaurants and other food places in order for people to have a dining experience on weird and wonderful wildlife. When the pandemic did took place, it caused not only the closing down of restaurants, but it also caused the Chinese government to ban the rearing and sale of exotic animals resulting in a huge loss for Bi Chao and other investors who bought animals for their businesses.

What other impacts of the pandemic caused China’s economy to deteriorate? And how do you think China could have fought against these impacts during the pandemic?

Citation: Campbell, C. (2020, April 21). Impact of Coronavirus on China's Economy Only Just Beginning. Retrieved September 21, 2020, from https://time.com/5824599/china-coronavirus-covid19-economy/

The National Debt Dilemma

    The rising national debt is raising alarms. The COVID spending is on top of ballooning debt from previous years. We were totaling nearly $17 trillion in 2019 which will for sure be more difficult to improve. The debt growth was supposed to be on track to nearly double by 2029 which is close to the size of the entire United States economy. This was before we knew of the massive pandemic spending which could now put the country in more danger since it will most likely be happening sooner than expected. “Reducing it will require politically difficult decisions to curb entitlement spending, raise taxes, or both.” There is debate over what is going to happen in the future with the large debts. Some experts worry that the debts could drag the economy or precipitate a fiscal crisis. When we reach some debt limit, growth will slow and investors will lose confidence and be unwilling to finance U.S. borrowing. This results in larger deficits, a debt spiral, which could lead to significant spending cuts or increased taxes. While others think that we still have decades to address the issue. This is mainly because some economists think that entitlement spending and health-care costs are not growing as fast as predicted and the costs of financing our debt now is at its lowest since the 1970s. Which view do you think is right?

McBride, James, et al. “The National Debt Dilemma.” Council on Foreign Relations, Council on    Foreign Relations, 9 Sept. 2020, www.cfr.org/backgrounder/national-debt-dilemma. 

Bloomberg New Economy: China is Winning the Trade War With Trump

    President Trump has been battling the Global Trade War since shortly after he took office. Since then, it seems that China has continued to outplay and outsmart Trump in every move. Lately, Trumps goal is to ban TikTok and WeChat. This disagreement between Trump and China is all in an effort to get China to play by the global trading rules. To put things into perspective, since Trump took office, China's trade surplus with the US has grown by nearly 25%. On the other hand, China has barely increased imports from the US in the tit-for-tat tariff.

    These are not the only concerns. The US is reported to be the worst country for coronavirus, where the economy shrank by 9.5% in the second quarter. This compares to China, whose economy reportedly grew in the second quarter. China's economy placed higher the second quarter of 2020 than of 2019. This has caused the Chinese currency to rise, while the dollar falls.

Do you believe a reelection in November will have any immediate effect on the US economy in comparison to China?

link: https://www.bloomberg.com/news/newsletters/2020-09-19/bloomberg-new-economy-china-is-winning-the-trade-war-with-trump

Just Keep Borrowing

Article: "Putting on Weight," The Economist, 12 September 2020

This article discusses the revival of Keynesian economics and its relevance to macroeconomics today. Keynes believed that government borrowing was necessary during recessionary periods to stimulate aggregate demand. Keynes' ideas reigned as macroeconomic orthodoxy from the 1930s until the challenges of inflation, high unemployment, and poor growth in the 1970s dethroned Keynes' ideas in favor focusing on monetary policy and restraining fiscal largesse. 

But Keynes' ideas have returned, especially after COVID-19. Governments around the world are borrowing far beyond their tax revenue to stimulate the economy. The author of the article indicates two reasons for why this represents "progress." 

The first is that the devastating effects of COVID-19 simply outweigh the costs of incurring debts. Further, demand has been weak in developed nations long before the pandemic began, a trend for which "there is no consensus" explanation. The second is that interest rates have hovered around zero, a trend which was also noticeable in pre-COVID days. 

The author does, however, add some caveats to the worldwide enthusiasm for borrowing: that the "quality of deficit spending still matters" and that governments must be prepared for a change in interest rates, much as they should prepare for pandemics. 

What do you think? Why has demand been so low? What can governments to prepare for higher interest rates?