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Hutchins Roundup: Unemployment insurance, fintech lending, and more

What’s the latest thinking in fiscal and monetary policy? The Hutchins Roundup keeps you informed of the latest research, charts, and speeches. Want…

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By Lorena Hernandez Barcena, Eric Milstein, Nasiha Salwati, David Wessel

What’s the latest thinking in fiscal and monetary policy? The Hutchins Roundup keeps you informed of the latest research, charts, and speeches. Want to receive the Hutchins Roundup as an email? Sign up here to get it in your inbox every Thursday.

Cuts to state unemployment benefits boost job growth and depress wages

Comparing jobs at the same firms across states, Gordon Dahl of the University of California, San Diego, and Matthew M. Knepper of the University of Georgia find that reductions in state unemployment insurance (UI) generosity result in faster job growth but slower wage growth. The authors find that following a 50% decline in North Carolina’s UI generosity in 2013, multi-state firms experienced 2.4% faster job growth and paid 7.2% lower starting wages at their establishments in North Carolina than at their establishments in other states. Using data from online job postings, the authors also find that the North Carolina establishments offered 5.5% lower wages for the same job compared to other-state counterparts. The authors find similar results of smaller magnitude for establishments across six additional states that had modest cuts to state UI benefits compared to North Carolina. The findings imply that reductions in UI benefits reduce worker bargaining power by making it more costly to remain unemployed. As such, the employment and fiscal benefits of less generous UI programs must be considered alongside lower wage growth driven by “current job seekers settling for worse jobs or the same jobs at lower pay”, the authors conclude.

Comparing big tech and conventional lending

Small and medium-sized businesses are more likely to use “big tech” lenders to satisfy short-term liquidity needs than to obtain longer-term financing, find Lei Liu of the Chinese Academy of Social Sciences and co-authors. The authors compare syndicated loans extended by MyBank, a subsidiary of Chinese internet giant Alibaba, to conventional loans issued by a partnering retail bank. Relative to the retail bank, the authors find that the big tech lender serves more first-time borrowers, younger borrowers, and borrowers with limited access to credit. The authors also find that the big tech loans have smaller principal amounts, higher interest rates, faster speeds of repayment, higher delinquency rates, and lower rates of collateralization than the conventional loans. The authors argue that these distinctions between big tech and conventional loans are not driven by differences in the credit risk of borrowers, as they find similar trends in the pool of borrowers with access to both services. They conclude that “big tech” lending — a growing market in the U.S. and globally — has the potential to extend credit to borrowers underserved by traditional banks.

Mothers consume less calories when children age out of WIC

The federal Special Supplemental Nutrition Program for Women, Infants, and Children (known as WIC) provides food to low-income pregnant, postpartum, and breastfeeding women and their children up to age five. Marianne Bitler of the University of California at Davis and co-authors use the National Health and Nutrition Examination Study to evaluate what happens to families’ nutrition when a participating child turns five. The authors find that aging out of the program has no effect on the caloric or nutritional intake of the children. However, women aged 20 to 50 who live with the children (presumably their mothers or caretakers) see a large increase in food insecurity and decrease their caloric intake by nearly one-half. This suggests that mothers are reducing their own consumption to protect their children from food insecurity, the authors conclude.

Chart of the Week: Mortgage rates rising sharply

 

Quote of the week:

“Consumer and business sentiment are quite negative. In the most recent Michigan Survey, consumer sentiment fell to its lowest level on record. In addition, the percentage of small business owners who expect better conditions over the next six months dropped to the lowest level in that survey’s history in May. Both surveys show inflation driving this pessimism. Typically, sentiment this low is associated with a weakening in consumer spending and business investment,” says Thomas Barkin, President of the Richmond Fed.

“At the same time, fiscal support from the pandemic is waning, and… inflation is moving the Fed to increase rates. Higher rates tend to slow the economy by increasing borrowing costs and disincentivizing spending and investment. Historically, eight of the last 11 Fed tightening cycles have been followed by some sort of a recession. That change in policy may well be making markets skittish. That’s understandable: The Fed hasn’t moved this quickly in over 20 years. And forecasters are predicting that our current rate increase cycle will go higher than its predecessor’s relatively low 2.4 percent 2019 peak. Now, the stock market is not the economy. But if markets were to crater, that could slow the economy by leading individuals and firms to pull back their spending and investment.”

 

The Brookings Institution is financed through the support of a diverse array of foundations, corporations, governments, individuals, as well as an endowment. A list of donors can be found in our annual reports published online here. The findings, interpretations, and conclusions in this report are solely those of its author(s) and are not influenced by any donation.

 

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Economics

Expert on Bath & Body Works: ‘an easy double the next three years’

Bath & Body Works Inc (NYSE: BBWI) might have been painful for the shareholders this year, but the road ahead will likely be a rewarding one, says…

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Bath & Body Works Inc (NYSE: BBWI) might have been painful for the shareholders this year, but the road ahead will likely be a rewarding one, says the Senior Vice President and Portfolio Manager at Westwood Group.

BBWI separated from Victoria’s Secret

The retail chain separated from Victoria’s Secret in 2021, which, as per Lauren Hill, clears the way for a 100% increase in the stock price in the coming years. On CNBC’s “Closing Bell: Overtime”, she said:

[Bath & Body Works] has really strong pricing power. They have 85% of their supply chain in the United States and with the Victoria’s Secret brand now gone, I think it’s a wonderful buy; an easy double the next three years.

Last month, the Columbus-headquartered company reported results for its fiscal first quarter that topped Wall Street expectations.

Bath & Body Works is a reopening play

The stock currently trades at a PE multiple of 6.64. Hill is convinced Bath & Body works is a reopening name and will perform so much better as the world continues to pull out of the pandemic. She noted:

Customers have missed buying their scented products in store and as their social occasion calendars fill up, they are getting back out there and buying more gifts, including Bath & Body Works products.

Hill also dubbed BBWI a great pick amidst the ongoing inflationary pressures because of its reasonably priced products. Shares are down more than 50% versus the start of 2022.

The post Expert on Bath & Body Works: ‘an easy double the next three years’ appeared first on Invezz.

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Economics

Majority Of C-Suite Execs Thinking Of Quitting, 40% Overwhelmed At Work: Deloitte Survey

Majority Of C-Suite Execs Thinking Of Quitting, 40% Overwhelmed At Work: Deloitte Survey

Authored by Naveen Anthrapully via The Epoch Times,

A…

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Majority Of C-Suite Execs Thinking Of Quitting, 40% Overwhelmed At Work: Deloitte Survey

Authored by Naveen Anthrapully via The Epoch Times,

A majority of C-suite executives are considering leaving their jobs, according to a Deloitte survey of 2,100 employees and C-level executives from the United States, Canada, the UK, and Australia.

Almost 70 percent of executives admitted that they are seriously thinking of quitting their jobs for a better opportunity that supports their well-being, according to the survey report published on June 22. Over three-quarters of executives said that the COVID-19 pandemic had negatively affected their well-being.

Roughly one in three employees and C-suite executives admitted to constantly struggling with poor mental health and fatigue. While 41 percent of executives “always” or “often” felt stressed, 40 percent were overwhelmed, 36 percent were exhausted, 30 percent felt lonely, and 26 percent were depressed.

“Most employees (83 percent) and executives (74 percent) say they’re facing obstacles when it comes to achieving their well-being goals—and these are largely tied to their job,” the report says. “In fact, the top two hurdles that people cited were a heavy workload or stressful job (30 percent), and not having enough time because of long work hours (27 percent).”

While 70 percent of C-suite execs admitted to considering quitting, this number was at only 57 percent among other employees. The report speculated that a reason for such a wide gap might be the fact that top-level executives are often in a “stronger financial position,” due to which they can afford to seek new career opportunities.

Interestingly, while only 56 percent of employees think their company executives care about their well-being, a much higher 91 percent of C-suite administrators were of the opinion that their employees believe their leaders took care of them. The report called this a “notable gap.”

Resignation Rates

The Deloitte report comes amid a debate about resignation rates in the U.S. workforce. Over 4.4 million Americans quit their jobs in April, with job openings hitting 11.9 million, according to the U.S. Department of Labor. In the period from January 2021 to February 2022, almost 57 million Americans left their jobs.

Though some are terming it the “Great Resignation,” giving it a negative connotation, the implication is not entirely true since most of those who quit jobs did so for other opportunities. In the same 14 months, almost 89 million people were hired. There are almost two jobs open for every unemployed person in the United States, according to MarketWatch.

In an Economic Letter from the Federal Reserve Bank of San Francisco published in April, economics professor Bart Hobijn points out that high waves of resignations were common during rapid economic recoveries in the postwar period prior to 2000.

“The quits waves in manufacturing in 1948, 1951, 1953, 1966, 1969, and 1973 are of the same order of magnitude as the current wave,” he wrote. “All of these waves coincide with periods when payroll employment grew very fast, both in the manufacturing sector and the total nonfarm sector.”

Tyler Durden Sat, 06/25/2022 - 20:30

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Spread & Containment

Optimism Slowly Returns To The Tourism Sector

Optimism Slowly Returns To The Tourism Sector

Coming off the worst year in tourism history, 2021 wasn’t much of an improvement, as travel…

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Optimism Slowly Returns To The Tourism Sector

Coming off the worst year in tourism history, 2021 wasn't much of an improvement, as travel remained subdued in the face of the persistent threat posed by Covid-19.

According to the United Nations World Tourism Organization (UNWTO), export revenues from tourism (including passenger transport receipts) remained more than $1 trillion below pre-pandemic levels in 2021, marking the second trillion-dollar loss for the tourism industry in as many years.

As Statista's Felix Richter details below, while the brief rebound in the summer months of 2020 had fueled hopes of a quick recovery for the tourism sector, those hopes were dashed with each subsequent wave of the pandemic.

And despite a record-breaking global vaccine rollout, travel experts struggled to stay optimistic in 2021, as governments kept many restrictions in place in their effort to curb the spread of new, potentially more dangerous variants of the coronavirus.

Halfway through 2022, optimism has returned to the industry, however, as travel demand is ticking up in many regions.

You will find more infographics at Statista

According to UNWTO's latest Tourism Barometer, industry experts are now considerably more confident than they were at the beginning of the year, with 48 percent of expert panel participants expecting a full recovery of the tourism sector in 2023, up from just 32 percent in January. 44 percent of surveyed industry insiders still think it'll take until 2024 or longer for tourism to return to pre-pandemic levels, another notable improvement from 64 percent in January.

Tyler Durden Sat, 06/25/2022 - 21:00

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