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Inflation-related updates to ‘Recession Remedies: Lessons Learned from the U.S. Economic Policy Response to COVID-19’

In this analysis we offer inflation-related updates to Chapter 1 of "Recession Remedies: Lessons Learned from the U.S. Economic Policy Response to COVID-19,"…

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By Wendy Edelberg, Mitchell Barnes

In this analysis we offer inflation-related updates to Chapter 1 of “Recession Remedies: Lessons Learned from the U.S. Economic Policy Response to COVID-19,” which addressed the macroeconomic impact of the breadth of economic policy responses from March 2020 through the American Rescue Plan. On the whole, the array of policies implemented since early 2020 to support the economy were largely successful in buffering households and businesses from the worst potential economic outcomes posed by the downturn. However, the unwelcome and persistent rise in inflation that began in 2021 suggests that consumer demand boosted by fiscal support and strong household balance sheets continue to outpace the capacity of businesses and their global supply chains to expand.

The continued pickup in inflation has led to further declines in real wages in aggregate. Initially, the increase in wages outpaced the increase in prices, and real wages rose (Figure 1). Since mid-2021, however, real wages have been below their pre-pandemic level and have been even further below where they would be if they continued along their pre-pandemic trend. That shortfall was 3.3 percent relative to trend at the end of 2021 and 5.0 percent at the end of the first quarter of 2022. Leisure and hospitality and retail trade are the only two broad industry groups where wages have risen in real terms since the end of 2019, growing at annual rates of 1.4 percent and 0.6 percent, respectively.

Extraordinary price increases in the goods sector were the primary driver of inflation through much of 2021, contributing about two-thirds of the unusual runup in the Consumer Price Index (CPI) for the year. However, more recently, price increases in services have been the main driver. Inflation in core goods (which exclude food and energy commodities) seems to have peaked on a year-over-year basis in March 2022: inflation in core goods declined from 11.7 percent in March to 9.7 percent in April (Figure 2). On the other hand, prices in the service sector have accelerated in recent months. Food and energy prices have pushed headline CPI inflation well above core CPI inflation (8.2 percent and 6.1 percent, respectively, in April), in part reflecting the impact of Russia’s war in Ukraine on energy and other commodities. Energy price inflation has hovered between 25 percent and 33 percent since the middle of 2021. Prices for food increased 9 percent through April, the highest rate since 1981.

A chart illustrating year-over-year inflation by type

Fiscal support for an economy with significant unused capacity increases output and employment with little effect on inflation; but if the economy overshoots its sustainable level, additional fiscal support will feed increasingly into inflation. Going forward, the magnitude and timing of fiscal policy responses to recessions could be improved through better targeting and great reliance on automatic stabilizers.

 

 

 

 

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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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