ECONOMY Fed can’t tame inflation without ‘significantly’ more hikes that will cause a recession, paper says (for Feb.)

 https://www.cnbc.com/2023/02/24/the-fed-cant-tame-inflation-without-more-hikes-paper-says.html

The fed is not able to lower the inflation rate without raising the interest rates. While everyone thinks that inflation rates will begin to go down, the fed is not able to lower the inflation without the raising. Since the inflation rate has not been this high in over 41 years, the fed has been implementing high interest rate bursts to help what the inflation. As opposed to the past where the government would watch and see how the inflation affects everything, the fed said they are trying to jump on it quick and avoid long term issues. I think this is the best idea as of now. Even though it is hard times as of now, it is better to get over the hard times now and try to get it back down to a reasonable interest rate. 

NCAA March Madness expected to have $6.5 million economic impact on Milwaukee

 In the upcoming month of march madness, Milwaukee is supposed to hold about 18,000 college fans from all over the world. The event is expected to have a $6.5 million economic impact on the area, according to VISIT MilWhen the NCAA Men’s Basketball Tournament rolls into central Indiana in a few weeks, venues will be allowed to have up to 25% capacity, including a limited number of fans. It will be a huge economic boost to central Indiana hotels and restaurants. The high inflow of non-residents to the city will likely increase spending on area hotels, resturants, retail vendors, and rental car companies, in addition to public transportation and parking services. Higher inflow spending in the city means higher tac revenues for the local government, which is a positive for service boosting for local residents. Higher spending will also increase demand for labor, boosting employment opportunities and wages in the labor force. Higher employment and wages are expected as well because the workers spending their income on goods and services. 

Future of business owners in East Palestine

East Palestine is made up of a lot of small business in which the owners live in the community. Several business owners were surveyed and all talked about how they felt about the train crash. These people were owners of a greenhouse and hot dog shop, an insurance company owner, a man who started an escape room and a woman who sells rubber bracelets. Many of these owners already getting feedback from people that they’re not coming to there business for fear of what’s happening. They are all concerned about the future and the stigma that will hang over East Palestine for a long time.

Business believe they need a tremendous marketing campaign. The village is looking for a new village manager. That person has to be somebody who’s on top of marketing, who understands business, who understands how to get out of the situation they are name. Business owners in East Palestine, Ohio, have hit out at rail operator Norfolk Southern over the company's response to one of its trains derailing in the town on February 3. Plenty of companies have "lost a lot of business" due to the derailment, one business owner added: "I'm just concerned about the aftermath, what's going to happen months or years down the road. The real estate in East Palestine has hit rock bottom. Nobody's buying in this town, and you can't sell anything since the accident.

Do you think business will be able to bounce back from this environmental disaster?

Money Doesn’t Make America’s Economy Go Around

Some people believe that the amount of money in circulation is what primarily determines the US economy. They hold that decreasing the money supply will stop inflation, which was brought on by the Federal Reserve's recent increase in the money supply. This viewpoint, however, is inaccurate and oversimplified.

One factor that has an impact on the economy is the money supply, but there is little correlation between it and actual economic results. The willingness of both individuals and financial institutions to borrow money is crucial. Money's velocity, or how quickly it moves around, is influenced by the actions of numerous financial intermediaries and their clients

In 2008, the Fed changed its monetary policy, further complicating the relationship between bank reserves and the cost of credit. Because of this, even though the money supply increased significantly during the Fed's quantitative easing programs, inflation didn't spike.

Various factors, such as changes in demand, fiscal stimulus, and low interest rates, contribute to inflation. While quantitative easing helped to boost the economy, its influence on inflation has been overstated. The impact of quantitative tightening on inflation will also be minimal, and short-term interest rates play a bigger role in determining people's propensity to borrow and spend money.

Source: https://www.bloomberg.com/opinion/articles/2023-02-28/money-supply-doesn-t-explain-us-inflation

Hikelandia Inflation

An article from the Economist tracks monetary policy in where they call "Hikelandia", which is Brazil, Chile, Hungary, New Zealand, Norway, Peru, Poland and South Korea. In these countries, central banks have started raising interest rates before and more forcefully than America’s Federal Reserve. They found that there was very little evidence that this lowered inflation rates. Core inflation hit a high of 10% while output is shrinking. Core inflation in Brazil is actually falling, but in Hungary, core inflation rose from 19% to 25% in a five month period. They are estimating that that the prices of more than one-fifth of Hikelandia’s inflation basket are rising by 15% or more.

https://www.economist.com/finance-and-economics/2023/02/02/super-tight-policy-is-still-struggling-to-control-inflation

 

MLB average salary rose 14.8% to record $4.22M last season.

    This season, the MLB's average salary per player increased by 14.8%, it is now at an all-time high of $4.22 million dollars. This is the largest jump in salary since a 17.7% increase in 2000 to $1.61 million. The average had dropped in each of the previous four seasons before 2022, sparking player anger that was expressed by the union during a 99-day lockout that ended last March. Payrolls, which are a more complete reflection on spending, rose 12.6% to $4.56 billion from $4.05 billion. The Mets have boosted their payroll to a projected $370 million, well past the previous record of $297.9 million of the 2015 Los Angeles Dodgers. Some owners are arguing for significant change to lessen payroll disparity when the current labor contract expires after the 2026 season. The MLB has assigned another group this month to examine the economics of the league. MLB had $10.8 billion in revenue last year.

    Union head Tony Clark said, "A salary cap is the ultimate restriction on player value and player salary. We believe in a market system. The market system has served our players, our teams and our game very well." Clark suggested some teams maintain low payrolls as strategy rather than because of lack of revenue. He also goes on to say, 'Can or won't is a valid question to ask when teams in an industry that has grown are still in a world where their payrolls are half of what they may have been 10 or 15 years ago." The level of excitement brought from this past offseason of trades, and signings should only help increase the league earnings, so that is expected to jump as well.

Link: MLB average salary rose 14.8% to record $4.22M last season (ksby.com)

U.S. Economy - America Is Trying to Electrify

As demand for renewable energy increases and people try to transition to more sustainable energy sources, electricians, an essential part of the transition process, are in short supply. The new climate law is expected to increase demand for car chargers and heat pumps, putting several hundred billion dollars worth of incentives into the economy designed to accelerate the energy transition. 

The lack of available electricians is most severe in the Northeast and California, where demand for green energy products is highest, and many electricians have retired during the pandemic. As a result, the average annual electrician salary rose from $50,000 to $60,000, with some electricians raising prices and wages due to labor shortages. Industry analysts say it will be challenging to meet that demand. The current total of over 700,000 electricians is expected to grow only 7% over the next decade, slightly faster than the nationwide average of 5%. 

To help address the shortage of workers, the government is trying to introduce tax credits and incentives for apprentices. Also, product makers are trying to make simpler electrical products that won't require an electrician to install, reducing the demand for electricians. Current owners of Electrical Services groups emphasize the need to train apprentices since their work requires training and specific knowledge. 

Source: https://www.wsj.com/articles/america-is-trying-to-electrify-there-arent-enough-electricians-4260d05b?mod=economy_lead_story 

What war has done to European Economy

 European officials anticipated that 2023 would mark the return of the "old continent" to its previous norm of acceptable growth and inflation below 2%. The economy of Europe is undoubtedly slowing down. However, the new normal is much less appealing than economists had anticipated.

On the plus side, since prices surged last summer, gas is currently less expensive than it was before the conflict. Partly as a result of the abnormally warm weather, governments were not forced to ration energy as had been initially feared. After reaching a record 10.6% in October, headline inflation is now declining.

Neither has industry collapsed due to gasoline prices, as conspiracy theorists prophesied. Since the start of the war, energy-intensive factories in Germany have suffered a reduction in output of a fifth as imports have replaced domestic production. By the end of the year, however, overall production had decreased by barely 3%, in accordance with the pre-pandemic norm. The most recent ifo survey reveals that manufacturers are still confident about the future.

The giant job market in Europe can increase inflation. Pay demands are rising as a result of high costs and labor shortages, which are anticipated to get worse as baby boomers retire and fewer young people join the workforce. After only increasing by 3.3% in 2022 and 2.1% in 2021, salaries in the Netherlands increased by 4.8% in January compared to a year earlier. The unions in Germany's public sector are threatening additional strikes. 

In the year to January, the consumer price index increased by 7% without accounting for food and energy. According to the PMI poll, expenses are rising rapidly for services in particular, which could result in more price hikes. The European Central Bank is thus forced to maintain its high-interest rates. Markets anticipate a summertime increase from 2.5% to 3.7%. So, funding for businesses and people is likely to become more expensive, which would hurt investment. According to the bank's lending survey, credit criteria are already becoming stricter.

https://www.economist.com/finance-and-economics/2023/02/23/what-war-has-done-to-europes-economy

Jobs during "rollin recessions"

 "Rolling recession" is the term being popularly used for the U.S. economic slowdown since early 2022. It also means that easier employment will be available in some industries. Although not being in an official recession, some sectors will feel like they are in a contraction. Economists say that the labor market remains tight compared to pre-pandemic levels, but has seen gradual decreases and will continue to do so for the upcoming months. 

It will be easier to find jobs in government administration, education, and consumer services. Industries like tech, entertainment, information and media, professional services, retail, and financial services will have moderately tighter markets. Extremely tight labor markets include accommodation, oil and gas, hospice and health care. 

No slowdown is expected in "recession proof" industries: government, utilities, education and consumer services. Even though the labor market demonstrates strength and overall healthiness, economists still believe in an approximating recession; with no significant impact on labor markets.

https://www.cnbc.com/2023/02/12/heres-where-the-jobs-will-be-during-the-rolling-recessions.html

Europe Has Weathered an Energy Crisis, For Now

 Europe has maneuvered their way through an energy crisis over the last year since the start of the Russian-Ukraine dilemma. For now, a reliance on Russian energy that seemed more like a chokehold a year ago has significantly loosened. Russian gas supplies to Europe have been drastically reduced, and the region seems to be weathering recent bans on most Russian oil without a hiccup. Where do most EU countries rely on their oil and gas now?

Luckily, European nations have made quick decisions on their energy supplies since their former supplier in Russia was hit with many sanctions from the UN. Russia is a large energy (Oil and Natural Gas) supplier. Now, Europe is battling their energy shortages by importing from Qatar, Norway, and the Texas shale oil fields (source rock). 

Representatives have spoke out on behalf of the great EU nations explaining that they may not be out of the woods just yet. Ultimately, as a global society and the overall history of human beings on Earth, we have stumbled upon nothing short of "magic" to a earlier human. We are depleting our ancient energy supplies 10 million times faster than it was sequestered from the time ancient sunlight put in on our planet. Does this pose the question more broad than just the the EU, that are civilizations have become too reliant on this "magical" energy otherwise known as coal, oil, and natural gas? How much is left on Earth (peak oil), and will our renewable energy sources be able to prop up a global economy reliant on constant (infinite growth)? 

Europe has seen only a glimpse into the future...will energy crisis's become common in the near to short-term future?  

XFL looking for a Comeback

 The XFL is looking to make a big comeback in 2023 after having to be bought back to be revived for the second time in only the last three years. 

The first initial purchase of the XFL was done by Vince McMahon, where he was looking to do a massive rebuild with the franchise before getting completely shut down by the covid lockdown in 2020. After have being bought later in the same year of 2020 by Dwyane Johnson, Dany Garcia, and Gerry Cardinale for 15 million dollars, the football league decided to launch its return during this month of February on the 18th.

Without having to be held back by covid, the league is looking to prosper from having no restrictions to attendance and being able to benefit from TV partners who will be paying to broadcast games from the season. The estimated earnings for the XFL in the 2023 season are predicted to be at roughly around 5.2 million dollars. The average price for a ticket to an XFL game is sitting at 51 dollars with the cheapest being 20 and the most expensive being season tickets at 95 dollars, with the average attendance of a game being 10,000 fans. With hopes of having a successful season in 2023 and gaining additional support from sponsors and businesses, the XFL could be looking to opening up an expansion for more teams across the United States.

XFL 2023: Estimated league earnings from ticket sales [update] (msn.com)

Russian Support for Ukranian War is Falling as Economic Troubles Increase

 Approximately 1 year ago, Russia started the war in Ukraine. Almost immediately, other countries bombarded them with economic sanctions to try and hurt their economy. Countries imposed trade sanctions, individual companies pulled out of Russia entirely, and a variety of other things happened.

But now, as the invasion continues, more economic hardships are being felt by citizens, and support for the war is declining quickly. Job loss, lower wages, and food troubles are only some of the difficulties being faced currently. Generally, people just do not have as much money, and they are struggling to make ends meet.

These sanctions, while initially met with some resistance, have now begun to actually take a toll. Not only economically, which would inhibit Russia's ability to produce weapons, but also impacts citizens which decreases support for the war. As the battle continues, we will continue to see how these sanctions affect the Russian population and how much longer the war can really continue.

Russian Support for Putin's War Falling Fast as Economic Fallout Bites—Poll (msn.com)

Spring Break Travel Fares Are Skyrocketing

 If planing to fly over spring break book now. "Already elevated ticket prices are going to climb as people get into the busy travel season, given that demand continues to outstrip capacity". "Hayley Berg, lead economist at travel app Hopper, told FOX Business that demand has already driven airfares on average 10% to 30% higher compared to pre-pandemic times, and it doesn't appear to be letting up either". The average price is 270 dollars per ticket, 20 percent higher than last year and 5 percent higher than pre covid averages. 

This price boost is especially effecting the most popular spring break destinations like Panama City, Mexico, and Europe. "For instance, Europe is up about 15% compared from 2022, though that's far below areas such as the Caribbean, Mexico and Central America, which are up about 60% versus last year and about 30% versus 2019". Prices are expected to continue to rise and it is estimated that by June the average price for a domestic flight will be around 350 dollars. Experts say that prices will likely continue to rise until more low-cost carriers enter the market or there is a drop in the high jet-fuel prices. If you are looking to travel be sure to try and book far ahead of your trip. 

https://www.foxbusiness.com/lifestyle/traveling-spring-break-book-now-hopper

All-Star Economic Impact Roughly $280 Million For Utah

“In terms of the magnitude of All-Star, this is our largest in our history,” Silver said. “They’re estimating the economic impact here in Salt Lake City will be roughly $280 million. That’s an all-time record.” Last season Cleveland reportedly saw an economic impact of $250 million last year, including direct net economic benefit to the city of $141 million.

The average revenue of an NBA franchise was $213.5 million in the 2020/21 season. This is a 19% drop from the season before ($264 million). This alone is exceeding what a franchise makes in a season alone.

“We have an all-time record in terms of hotel nights,” Silver said as part of his praise for the state. “We’re occupying 33,000 hotel nights in the community here, and we have more fan events than any time in history.” The real question is, what does this do for a city? The short term process of growth leads to a city that in the long term will be much larger in scale. With a larger place, that will lead to having more people, businesses are able to grow, more businesses are able to come in, and there's greater infrastructure/ 

https://kslsports.com/498827/adam-silver-praises-all-star-weekend-in-utah/ 

Rental Housing Market

As someone who is looking into renting a property, it intrigues me why apartment costs can be so high. We find that often individuals are “rent-burdened” meaning that at least 30% of their income goes toward housing. Apparently, the rental housing market has reached a historic high point. As of 2022 fourth-quarter rent-to-income ratios suggest that people are on average paying 30% of their income toward rent. This ratio only continues to go up, and fourth quarter findings are 0.2% higher than the third quarter ratio. The 30% we are seeing in 2022 is overwhelming as the 2021 numbers suggest an increase of 1.5% of income going toward rent. This can be extremely scary as individuals are looking for a place to live. Numbers such as these make people suffer through rougher living conditions to avoid the high prices many apartment complexes are charging. 

The high prices for rent indicate that the economy does not care what social class you naturally come from. Many people find themselves to be luckier than others as the housing market has no consideration for people with lower incomes. This is a problem in the United States that is continuously found to be unsolved. Individuals who find themselves “rent-burdened” will work as hard as they can to make housing payments. These same people are living to work rather than working to live. As a college student, an issue like this can be concerning as it can be hard to have a steady income while participating in sports and classes. 

Source:

Sherman, E. (2023, February 27). The rental housing market hits an historic high point (and that's saying a lot). Forbes. Retrieved February 27, 2023, from https://www.forbes.com/sites/eriksherman/2023/02/26/the-rental-housing-market-hits-an-historic-low-point-and-thats-saying-a-lot/?sh=5c823462f58b  

 

US Recession?

    After the pandemic. economists thought the US was going to look like the roaring 20s. Though, the United States is doing economically good and economically bad. Our job growth is strong and our consumer consumption is looking positive. From looking on the outside, things seem to be looking pretty well. But our labor force is low and this whole Russia invasion has basically increased our gas prices here in the US. Gas is so expensive because energy bills are high from the war going on the other side of the earth. This is causing our inflation to be at an all time high since the 1980s.

    During times of inflation, businesses' will raise their prices to keep up with inflation, and workers will demand raises of wages to keep up with inflation. The problem is this only continues inflation. The President always takes credit for when the economy is booming. But when it is not doing good, he is the first to blame. But does he really have that much say in the economy. Sometimes the economy just works itself out on it's own. Recessions are good and bad. So what's the answer? Will Fed increase interest rates just enough so there is no recession, or will they increase it enough so there is a recession?

    To conclude, what's the direction for the US? When Ukraine and Russia are done fighting, will prices settle down? It's hard to say but it doesn't look good.

  https://hub.jhu.edu/2022/06/08/us-economy-rising-inflation-impending-recession/

Key Fed inflation measure rose 0.6% in January, more than expected

 The core PCE, the Fed’s preferred measure of inflation, increased 0.6% for the month and 4.7% for the year. Both values are higher than the 0.5% and 4.4% expectations respectively. The PCE including food and energy increased 0.6% and 5.4% for the year compared to 0.2% and 5.3& in December. 

Markets continued to fall after the report with Dow Jones Industrial Average off by about 500 points. The higher inflation also indicates interest rates will need to remain high for longer than expected. Consumer spending rose 0.4% more than the expected value of 1.8% and prices rose 1.1% when adjusted for inflation. Personal income adjusted for inflation also increased by 1.4% which was higher than the 1.2% estimate. Additionally, the personal saving rate increased to 4.7%.

These values all indicate that inflation has increased more to start 2023 than expected. This will likely cause the Fed to continue to raise interest rates into the summer. The Fed has already raised rates by 4.5% since March 2022 and will likely hike rates by an additional 0.25 percentage points at the next meeting. This is because the tighter monetary policy is yet to yield the desired decrease in consumer spending and aggregate demand. Markets will continue to be negatively impacted as long as the Fed continues to raise interest rates. 

https://www.cnbc.com/2023/02/24/key-fed-inflation-measure-rose-0point6percent-in-january-more-than-expected.html

Preparations beginning for March Madness 2023 in Birmingham

 Long story short, big events like March Madness are extremely good for both the overall and local economies. 

For the first time in 15 years, the first and seconds round of the NCAA tournament will be played in Legacy Arena in Birmingham, AL. This nationwide event brings an influx of people into the city bringing revenue in terms of: restaurants, hotels, etc. One restaurant said they are expecting a 50- to 75% growth that week and another believes that all restaurants in the area will get a 25- to 30% boost that week. 

Many cities hope to be able to host events like these because of the present growth and future expose for both the town and the businesses. 

https://www.cbs42.com/news/local/preparations-beginning-for-march-madness-2023-in-birmingham/ 

South Korea Says New FX Steps Will Boost Won's Status, Business for Firms

Earlier this month, South Korea's Vice Minister of Economy and Finance, Bang Ki-Sun, shared that South Korea has plans to loosen restrictions in its currency market to help boost the Korean Won on a more global level, ultimately providing business opportunities for the country's local financial firms. 

The Korean government has been compiling a list of measures to be taken with the aim of launching them next July. By allowing qualified global financial firms to directly trade the currency through two onshore spot brokerage houses and doubling the trading hours for the Won until past midnight local time, the Won is not becoming more volatile, but more convertible. 

With South Korea overcoming a financial crisis of their own (the Korean Financial Crisis of 1997), they have marked themselves to be one of the world's top 10 economies and is now in the process of expanding on their global market and platform, starting with making their currency tradable outside of the country. 

https://www.reuters.com/markets/asia/south-korea-fx-steps-boost-global-status-business-firms-vice-fin-min-2023-02-09/

Chinas Booming EV market: Booming from Subsidies, or despite them?

 This article talks about how successful the Chinese EV market has been compared to the markets in the US and Europe. China has become the world's largest manufacturer and producer of Electric Vehicles, and this has gotten some western governments worried. In China, domestic EV sales are expected to reach about eight to ten million in 2023, an increase from the previous record sale of 6.5 million in 2022. This far exceeds the sales of nearly three million EVs in Europe and two million in the US. At a global level, 7/10 of EVs are sold in China. In the first half of 2022, EV sales accounted for 21% of total car sales in China, compared to just 18% in Europe and only 6.5% in the US. The article states that, "It is estimated that about half of all cars sold in China would be EVs by the end of 2025." Chinese EV manufacturers have outperformed global automakers, and have now started targeting international markets. In addition to producing more, EVs from China, "enjoy both affordable prices and good quality." At this point, the article starts to give reasons for why the Chinese market has outperformed the US and Europe. While many analysts will point to massive subsidies given to the EV market by the Chinese government as the recipe for their success, this article takes the contrasting view that private innovation is driving most of the progress. There is no denying that the Chinese government initially handed out massive subsidies, with $60 billion being spent between 2009 and 2017 to jumpstart the car sector and "Almost $37 billion [going] toward consumer subsidies, representing a whopping 25 percent of total EV sales over the period." However, the EV market that was created from these subsidies differs remarkably from the current Chinese EV market. As the article states, "Although EV firms mushroomed to more than three hundred, only about 15 percent of them were actually manufacturing high-quality cars," and "The majority could not reach the production stage and probably entered the market mostly to benefit from generous subsidies." Of these EV firms, "independent producers, such as BYD, Geely, Chery, Xiaopeng, and NIO, emerged as the most successful EV carmakers and not the pampered state-owned enterprises." Changes began to be made in Beijing in 2016, when they "moved away from the subsidies regime to a more market-based one in order to stimulate competition," and "direct price subsidies were phased out and the government support shifted to building charging infrastructure." In addition, Beijing introduced a new "credit-based mechanism, similar to the carbon market, which allows carmakers to sell surplus EV credits to other companies." This is largely how companies such as Tesla were able to become profitable. In addition to the new mechanism, the Chinese government has also allowed foreign producers to enter the market, such as Tesla, which has had the effect of, "push[ing] the Chinese manufacturers to design EVs with smart driving features from scratch." The point of the article seems to be to push back on the popular claims that, in order for the US to catch up to China in EV production, we need a similar increase of gov spending and subsidies. The article is quick to point out that the US, and other western worlds, have already attempted to spur EV innovation through subsidies, "Western governments’ support to EV producers in terms of loans, grants, tax rebates, and generous consumer subsidies has been as comprehensive as China’s. They even went further by setting targets for phasing out IC cars. The only difference is the scale of government funding which set China apart." The conclusion of the article states that, despite popular claims, the booming EV market in China is more due to market forces, as opposed to government intervention, and therefore it is inappropriate to propose similar government spending proposals here in the US, "It is hypocritical to blame the current splurge of subsidies to the EV sector on China. The West has driven the green global agenda, and the development of the electric car sector is not hampered by unfair competition from China but by insufficient market demand for EVs. For a vast majority of consumers (more than 90 percent in the US), electric cars remain less attractive than traditional cars, not least because of their high prices and other practical inconveniences."   

  

https://mises.org/wire/chinas-emerging-global-leadership-isnt-just-result-subsidies-entrepreneurship-still-matters