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“The Market Is Starting To Fail”: Buyers Balk At Russian Oil Purchases Despite Record Discounts, Sanction Carve Outs

"The Market Is Starting To Fail": Buyers Balk At Russian Oil Purchases Despite Record Discounts, Sanction Carve Outs

While in their unprecedented…

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"The Market Is Starting To Fail": Buyers Balk At Russian Oil Purchases Despite Record Discounts, Sanction Carve Outs

While in their unprecedented broadside of sanctions on Russia, the U.S. and Western allies went out of their way to spare Russian energy shipments and keep economies humming and voters warm, the oil market has gone on strike anyway. Acting as if energy were already in the crosshairs of Western sanctions officials, refiners have balked at buying Russian oil and banks are refusing to finance shipments of Russian commodities, the WSJ reports citing traders, oil executives and bankers.

This self-imposed embargo which has effectively halted a majority of Russian oil shipments, threatens to drive up energy prices globally by removing a gusher of oil from a market that was tight even before the Russian invasion of Ukraine. Meanwhile, Russia, waging war and in need of revenue with its financial system in turmoil, is taking extreme steps to convince companies to buy its most precious commodity.

We previously reported that owners of oil tankers had already started to avoid Russian ports because of both the military invasion of Ukraine and apprehension that sanctions for oil could also come soon, and as a result rates for oil tankers on Russian crude routes had exploded as much as nine-fold in the past few days.

But now, amid growing fears they will fall afoul of complex restrictions in different jurisdictions, refiners and banks are balking at purchasing any Russian oil at all, traders and others involved in the market say. Market players also fear that measures that target oil exports directly could land as fighting in Ukraine intensifies.

“This is going to make it very complex to trade with Russia,” Sarah Hunt, a partner at law firm HFW who works with commodities traders, said of the sanctions laid out as of Monday. “These sanctions against Russia will have an incredible effect on global trade and on trade finance.”

Brent-crude futures, the benchmark in international energy markets, rose nearly 8% Tuesday to above $105 a barrel. But in a sign that demand for Russian oil has evaporated, prices for the country’s flagship Urals crude moved in the opposite direction.

On Tuesday, traders offered Urals brent at a record discount of around $15 a barrel below the price of Brent - with the discount at one point hitting as much as $18.60 - and even then not finding buyers. A drop in the price of Espo, a grade of Russian crude popular in Asia, suggests refiners in Japan and South Korea are hitting pause on purchases alongside those in Europe and the U.S.

“The market is starting to fail,” a trader at a major commodities trading house told the WSJ, which is a problem because with Russia exporting roughly 5 mmb/d, the oil market - already extremely tight - could find itself in a historic supply shortage in just a few days, and will need massive demand destruction, read much, much higher oil prices, to stabilize as Goldman wrote over the weekend.

Oil trading giants including Vitol and Trafigura hold Russian oil bought under long-term deals. But according to the WSJ, they were unable to sell Tuesday, people familiar with their operations said.

In Europe, Swedish refiner Preem and Finland’s Neste Oyj said they have stopped Russian oil purchases and mostly replaced them with Northern European oil purchases. Texas-based Valero Energy also suspended all future purchases of Russian oil.

And while for now, Russia is exporting about as much oil as it was on the eve of Thursday’s invasion, those flows, based on sales made before the war, will slow drastically in the coming weeks once cargoes have been delivered, traders and analysts said.

The importance of Russia’s energy industry—exporter of about 7.5% of the world’s oil—to the global economy led Western governments to carve oil and gas out of their sanctions. In cutting some but not all banks from the financial system’s messaging infrastructure, Swift, the U.S. and others left avenues for traders to pay for oil and gas.

An oil refinery in Omsk, Russia. The country’s energy industry is a major player in the world market

As a result of these sanctions, and fears that a full-blown embargo on Russian oil output will soon follow, energy buyers have balked at the prospect of using the existing "loophole" worried that in just a few days they may be stuck with billions in Russian oil they can't sell. As a result the entire Russian oil supply chain is collapsing.

Which is not to say there are no buyers left: as prices for Russian crude tanked last week, companies in India vacuumed up around seven million barrels of Urals oil, but even there companies are taking steps to limit sanctions risk according to the WSJ.

On Monday, Indian Oil Corp. sent a letter to crude traders stating it would buy Russian oil only if delivery was included, according to a person familiar with the matter and a document seen by The Wall Street Journal. In the document, the Indian refining giant said it would no longer buy two grades of Russian oil, as well as a blend of Kazakh oil, if it had to take responsibility for transporting the oil. This was because some shipping companies are hesitant to load Russian crude.

Russia is responding fast to shore up demand for its oil, a vital source of dollars now the country’s foreign-currency reserves have been frozen by the U.S. and allies.

Companies including state-aligned giant Rosneft have pivoted from offering oil on a so-called FOB basis, in which buyers fix their own vessel and finance and insure the shipment, traders and oil executives say. Instead, they are offering oil on what is known in industry jargon as a CFR basis.

Under this model, Rosneft would use vessels from government-owned Sovcomflot’s fleet and deliver oil to the buyer’s door in return for cash, which means the buyer doesn’t have to worry about transportation, trade finance or insurance.

But buyers are rejecting the proposal, an oil-industry executive and a Middle East oil trader said.

In addition to India, China has also scooped up more Russian Urals, which normally are mostly sold on European markets. Two large tankers, including one chartered by China Petroleum & Chemical, or Sinopec, are en route to the Chinese ports of Ningbo and Zhanjiang and are scheduled to arrive in late March, said Kevin Wright, lead oil analyst at market-intelligence firm Kpler. A Sinopec spokesperson didn’t immediately respond to requests for comment.

Still, traders said China - which today we learned has bought more Iranian oil now than it did before the US sanctions - hasn’t vacuumed up cheap barrels in the way it did when global oil prices crashed at the start of the pandemic, perhaps because Beijing is treading a careful diplomatic line over the war, abstaining on a United Nations vote on condemning the invasion last week. That said, it's probably only a matter of price before China decides to buy up as much Russian oil as it can.

One challenge facing Rosneft and other producers: Governments including the U.K. and Canada are banning Russian oil tankers. On Monday, one such vessel was forced to cancel an arrival to Scotland after the U.K. instituted its ban. Meanwhile, as noted earlier, many Western shipping companies have grown wary of sailing in the Black Sea to the south of Ukraine, and are contending with a jump in insurance rates for operating near a war zone.

Another emerging complication comes from the banks that grease the wheels of international commerce, and which are refusing to finance Russian commodity deals. Lenders including ING, Société Générale and Credit Suisse and even some Chinese banks aren’t issuing letters of credit, a form of trade finance, for oil and other natural resources from Russia.

“The major problem is now on payment terms,” said Igho Sanomi, founder of energy trading company Taleveras. “That has become very difficult.”

The bottom line is that while Russia's economy will likely be crippled and soon, once this final dollar lifeline stops, the removal of millions of barrels of oil from the market will lead to an exponential surge in oil prices until we hit the infamous "demand destruction" trigger - the price beyond which there is no more demand... and a global stagflation beckons.

In short, this is one giant game of chicken between Russia and the west, where the former is suffering tremendous pain this very moment, and where the latter is still cruising thanks to a buffer of relatively cheap oil which however will run out shortly and once it does, prices will go vertical triggering an even bigger oil crisis than what the US experienced in the mid-1970s.

Tyler Durden Tue, 03/01/2022 - 16:40

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YTD 2022 saw dramatic slowdown in global IPO activity from a record year in 2021

YTD 2022 saw dramatic slowdown in global IPO activity from a record year in 2021
PR Newswire
LONDON, June 29, 2022

Global IPO volumes fell 46%, with proceeds down by 58% 1H year-over-year With global activity almost halved in YTD 2022, the Americas…

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YTD 2022 saw dramatic slowdown in global IPO activity from a record year in 2021

PR Newswire

  • Global IPO volumes fell 46%, with proceeds down by 58% 1H year-over-year
  • With global activity almost halved in YTD 2022, the Americas market recorded the biggest decline
  • Middle East and India were some of the rare bright spots amidst a bearish market

LONDON, June 29, 2022 /PRNewswire/ -- IPO momentum continued to slow from Q1 into Q2, resulting in a considerable decline in both deal numbers and proceeds. Heightened volatility caused by geopolitical tensions and macroeconomic factors, declining valuation and poor post-IPO share price performance led to the postponement of many IPOs during the quarter. The dramatic slowdown in IPO activity in YTD 2022 after a record year in 2021 was experienced across most major markets.

For Q2 2022, the global IPO market saw 305 deals raising US$40.6b in proceeds, a decrease of 54% and 65%, respectively, year-over-year (YOY). YTD 2022, there were a total of 630 IPOs raising US$95.4b in proceeds, reflecting decreases of 46% and 58%, respectively, YOY.

The 10 largest IPOs by proceeds raised US$40b, with energy dominating three of the top four deals, replacing the technology sector as the top IPO fund raiser. The technology sector continued to lead by number, but the average IPO deal size came down from US$293m to US$137m, whereas energy has overtaken to lead by proceeds with average deal size increasing from US$191m to US$680m YOY.

Special purpose acquisition company (SPAC) IPOs are significantly down in line with traditional IPO activity despite new markets joining. The SPAC market has been challenged this year as a result of broader market conditions, regulatory uncertainty and increased redemptions. A record number of existing SPACs are actively seeking targets with the majority of them facing potential expiration in the next year. However, market performance and regulatory clarity will likely drive future deal flow.

In line with the sharp decline in global IPO activity, there was a sizable fall in cross-border activity affected by geopolitical pressures and government policies on overseas listings. These and other findings were published in the EY Global IPO Trends Q2 2022.

Overall regional performance: investors are refocusing on fundamentals

The Americas region completed 41 deals in Q2 2022, raising US$2.5b in proceeds, a decline of 73% in the number of deals and a 95% fall in proceeds YOY. The Asia-Pacific region recorded 181 IPOs, raising US$23.3b in proceeds in Q2, a decline YOY of 37% for volume and 42% in proceeds. EMEIA market IPO activity in Q2 2022 reported 83 deals and raised US$14.8b in proceeds, a YOY decline of 62% and 44%, respectively.

Given the tightened market liquidity and significant decline in stock prices of many new economy companies that went public during the last two years, investors are becoming more selective and are refocusing on the companies' fundamentals instead of just "growth" stories and projections, e.g., sustainable profits and free cash flows.

Paul Go, EY Global IPO Leader, says:

"Any initial momentum carried from a record IPO year of 2021 was quickly lost in the face of increasing market volatility from rising geopolitical tensions, unfavorable macroeconomic factors, weakening stock market/valuation and disappointing post-IPO performance, which further deterred IPO investor sentiment. With tightening market liquidity, investors have become more selective and are refocusing on companies that demonstrate resilient business models and profitable growth, while embedding ESG [environmental, social and governance] as part of their core business values."

Americas saw notable slowdown in IPO activity

Overall, IPO activity in the Americas region saw the sharpest decline (among all regions) in Q2 2022 compared with Q2 2021, with deals down 73% (41 IPOs) and proceeds falling by 95% (US$2.5b). However, compared with Q1 2022, both number of deals and proceeds are up (14% and 6%, respectively).

In the US, an overwhelming majority of 2021 IPOs are trading below offer price, and average performance is trailing broader market declines, influencing investor appetite to participate in new transactions. Despite the much-reduced level of global cross-border IPO activity YTD 2022, the US remains the top cross-border destination.

In Canada, following a record-breaking 2021, one listing on the Toronto Stock Exchange in May 2022 broke the drought in IPO activity. Market turmoil and uncertainties had shut down the TSX's main market listings in 2022, but there are companies in the pipeline that will be able to take advantage of the opportunity once the markets reopen.

Brazil's IPO market slowed to a crawl at the start of 2022 as dozens of companies scrapped or postponed deals. This is the first time that Brazil experienced a dearth of IPOs in the first half of the year since 2016. Market volatility is expected to continue as high inflation persists and interest rates climb to double digits.

Rachel Gerring, EY Americas IPO Leader, says:

"IPO activity across the Americas remains muted amid macroeconomic headwinds that continue to impact performance and valuation. These headwinds have led to a 'wait-and-see' approach. When markets begin to recover and confidence steadies, the types of companies that will kickstart the IPO market will likely be profitable, cash flow-oriented and with meaningful scale. Once the IPO market reopens, companies that move quickly will be able to take advantage of the most opportune moment."

Asia-Pacific IPO market was weakened in 2022

The Asia-Pacific area finished the quarter with a 42% decline in proceeds and 37% decline in deals YOY. However, Asia-Pacific markets performed relatively better benefiting from the two largest global IPOs YTD. The region saw 181 IPOs raising US$23.3b in proceeds during Q2, and 367 IPOs raising US$66.0b in proceeds YTD 2022. In terms of sector activity YTD, materials led the way with 78 IPOs, closely followed by industrials with 77 IPOs. YTD, the Shenzhen Stock Exchange had the highest number of deals with 82, constituting 13% of global IPOs. Meanwhile, the Shanghai Stock Exchange had the highest proceeds with US$32.8b, making up 34% of global IPOs YTD.

YTD 2022, Greater China saw a YOY decline of 36% in deals (191) and a 16% fall in proceeds (US$51.2b). A convergence of factors (COVID-19 restrictions, geopolitical unrest, weakened stock market, economic uncertainty and rising interest rates) had a negative impact on IPO activity in Hong Kong. With COVID-19 restrictions in Shanghai and Beijing lifting, along with the State Council's 33 stabilization policies and measures, China's economy is expected to rebound significantly in Q3 2022 and boost investor sentiment.

Japan saw 37 IPOs raise US$0.5b in total proceeds YTD, down 84% in proceeds and 31% in deals, YOY. Deteriorating investor sentiment is primarily driven by geopolitical conflicts, rising energy prices and depreciation of the Japanese yen. Tokyo Stock Exchange has been restructured into three new market segments – Prime, Standard, and Growth – to boost investor sentiment and gain global market share.

YOY, Australia and New Zealand IPO activity witnessed a modest YTD decline in number of IPOs (3%). However, the decline in proceeds was substantial (76%). It can be attributed to several big IPOs being deferred to 2022 Q3/Q4. While fundraising activities have slowed down mostly due to poor investor sentiment, there have been some M&A activities, including demerger and IPO transactions for carved-out businesses.

Ringo Choi, EY Asia-Pacific IPO Leader, says:

"A multitude of factors, from COVID-19 restrictions and war in Europe to rising inflation rates and US/China tensions, have weakened Asia-Pacific's IPO market in the first half of 2022. But a series of positive economic developments and new government policies in China should result in renewed optimism and a revival in IPO activity across the Asia-Pacific region for the remainder of the year."

EMEIA's IPO market continues to be affected by market volatility

In Q2, EMEIA remains the second largest IPO market after Asia-Pacific and saw 83 IPOs (a decline of 62% YOY) and proceeds raised were US$14.8b (a 44% decline YOY). YTD, there were 186 IPOs with US$24.4b in proceeds.

In the second quarter of 2022, deal numbers in Europe were 43 with proceeds of US$1.5b raised. Europe accounted for 15% of global IPO deals and 4% of proceeds in YTD 2022. Two European exchanges were among the top 12 exchanges by proceeds and one of them by number of deals.

During YTD 2022, India was the only region to witness a YOY rise in IPO activity, both by number of deals (18%) and proceeds (19%), with 32 IPOs in Q2 2022 comprising one of the largest ever IPOs in India that raised US$2.7b.

MENA IPO activity continues to look promising after a strong start to the year, despite uncertainties that are affecting the global IPO outlook. While there was a decline in terms of number of deals (54%), and with seven IPOs in Q2, several mega IPOs (IPOs with proceeds equal to or greater than US$1b) in the region led to a YOY increase of 382% in proceeds during YTD 2022, with 31 IPOs raising US$14.5b in proceeds. The region witnessed four of the top 10 global IPOs YTD.

In the UK, the slower pace of IPO activity was due to a dip in investor confidence from Q4 2021 that carried into 2022. YTD 2022 saw 13 IPOs (with 4 IPOs in Q2) with total proceeds of US$149m, a YOY decline of 71% by volume and 99% fall by proceeds. However, the UK markets regulator has set out plans to simplify listing on the London Stock Exchange to attract more fast-growing tech groups and start-ups in the face of increased competition from the US and the EU.

Dr. Martin Steinbach, EY EMEIA IPO Leader, says:

"Tough times and unusual uncertainties kept market volatility at elevated levels and led to subdued IPO activity. We are seeing investors being more selective and a shift to IPO stories related to energy transition and ESG."

Q3 2022 outlook: uncertainties and volatility are likely to remain

There were many mega IPOs postponed in the first half of 2022, which represent a healthy pipeline of deals that are likely to come to the market when the current uncertainties and volatility subside. However, strong headwinds from the current uncertainties and market volatility are likely to remain. These include geopolitical strains, macroeconomic factors, weak capital market performance and the impact from the lingering pandemic on global travel and related sectors.

The technology sector is likely to continue as the leading sector in terms of the number of deals coming to the market. However, with greater focus on renewable sources of energy in the face of increasing oil prices, the energy sector is expected to continue to lead by proceeds from bigger deals.

ESG will continue to be a sector-agnostic key theme for investors and IPO candidates. As global climate change and energy supply constraints intensify, companies that have embedded ESG into their core business values and operations should attract more investors and higher valuation.

Notes to editors

About EY

EY exists to build a better working world, helping to create long-term value for clients, people and society and build trust in the capital markets.

Enabled by data and technology, diverse EY teams in over 150 countries provide trust through assurance and help clients grow, transform and operate.

Working across assurance, consulting, law, strategy, tax and transactions, EY teams ask better questions to find new answers for the complex issues facing our world today. 

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. Information about how EY collects and uses personal data and a description of the rights individuals have under data protection legislation are available via ey.com/privacy. EY member firms do not practice law where prohibited by local laws. For more information about our organization, please visit ey.com. 

This news release has been issued by EYGM Limited, a member of the global EY organization that also does not provide any services to clients. 

About EY Private

As Advisors to the ambitious™, EY Private professionals possess the experience and passion to support private businesses and their owners in unlocking the full potential of their ambitions. EY Private teams offer distinct insights born from the long EY history of working with business owners and entrepreneurs. These teams support the full spectrum of private enterprises including private capital managers and investors and the portfolio businesses they fund, business owners, family businesses, family offices and entrepreneurs. Visit ey.com/private

About EY Initial Public Offering Services

Going public is a transformative milestone in an organization's journey. As the industry-leading advisor in initial public offering (IPO) services, EY teams advise ambitious organizations around the world and helps equip them for IPO success. EY teams serve as trusted business advisors guiding companies from start to completion, strategically positioning businesses to achieve their goals over short windows of opportunity and preparing companies for their next chapter in the public eye. ey.com/ipo

About the data

The data presented here is available on ey.com/ipo/trends. Q2 2022 (i.e., January-June) is based on completed IPOs from 1 January 2022 to 21 June and expected IPOs by the end of June 2022. Data as of close of business 21 June UK time. All data contained in this document is sourced from Dealogic, CB Insights, Crunchbase, SPAC Insider and EY analysis unless otherwise noted. SPAC IPOs are excluded in all data included in this report, except where indicated. 

Second quarter IPO activity

Month/Quarter

Number of IPOs

Proceeds (US$b)

April 2020

54

$4.8

May 2020

44

$8.5

June 2020

101

$28.7

Q2 2020

199

$42.0

April 2021

204

$34.1

May 2021

175

$31.2

June 2021

280

$50.4

Q2 2021

659

$115.7

April 2022

109

$21.6

May 2022

83

$8.1

June 2022

113

$10.9

Q2 2022

305

$40.6

Source: EY, Dealogic

Appendix: Global IPOs by sector – 2022 YTD refers to priced IPOs from 1 January to 21 June 2022 and expected IPOs by the end of June.

Sectors - YTD

Number of
IPOs

Percentage of
global IPOs

Proceeds
(US$b)

Percentage of global
capital raised

Consumer products

37

5.9 %

$         1,221

1.3 %

Consumer staples

36

5.7 %

$         2,925

3.1 %

Energy

41

6.5 %

$       27,876

29.2 %

Financials

20

3.2 %

$         4,766

5.0 %

Health and life sciences

80

12.7 %

$         7,949

8.3 %

Industrials

109

17.3 %

$       12,051

12.6 %

Materials

116

18.4 %

$         8,487

8.9 %

Media and entertainment

12

1.9 %

$            444

0.5 %

Real estate

29

4.6 %

$         1,649

1.7 %

Retail

19

3.0 %

$         2,670

2.8 %

Technology

120

19.0 %

$       16,387

17.2 %

Telecommunications

11

1.8 %

$         8,975

9.4 %

Global total

630

100 %

$       95,400

100 %

Source: EY, Dealogic 

Figures may not total 100% due to rounding.

Lauren Mosery
EY Global Media Relations
+1 732 977 2063
lauren.mosery@ey.com

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Economics

What Is the Great Resignation? Definition, Causes & Impact

What Is the Great Resignation (AKA the Big Quit)? The Great Resignation—also commonly called the Big Quit or the Great Reshuffle—is an ongoing phenomenon…

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Employees have been leaving their jobs in search of better prospects at a higher rate than usual since the drop in the quit rate during the early stages of the COVID-19 pandemic. 

chayanuphol via Shutterstock; Canva

What Is the Great Resignation (AKA the Big Quit)?

The Great Resignation—also commonly called the Big Quit or the Great Reshuffle—is an ongoing phenomenon involving employees voluntarily leaving their jobs in unprecedented numbers. According to most, this phenomenon officially began around late 2020 or early 2021, after the quit rate (the number of monthly resignations divided by total employment) dropped sharply during the early stages of the COVID-19 pandemic due to a shortage of work as a result of large-scale shutdowns.

Once vaccines were rolled out and restrictions were loosened, many companies resumed business, and the number of job openings increased. At the same time, the quit rate nearly doubled from around 1.6% in early 2020 to about 3% by late 2021.

According to most pundits, this uptrend marked the start of the Big Quit, but the quit rate, which started being measured in 2000, tells a different story. A graph of the data shows a slow but steady uptrend since 2009 that is only interrupted by the work shortage caused by 2020’s shutdowns and resulting layoffs. When looked at from this perspective, the great resignation is a 10+ year-old phenomenon that has been gaining momentum for years.

Had it not been for the job shortage during the early stages of the COVID-19 pandemic, the quit rate may have simply continued to rise at a steady pace. 

Bureau of Labor and Statistics via St. Louis FRED

What Conditions Led to 2021’s Great Resignation?

During the COVID-19 pandemic, so-called “essential workers” (e.g., those who worked at grocery and retail stores, hospitals, and restaurants) found themselves under-compensated and overworked by their employers, many of whom didn’t seem eager to reward the significant risks they were taking with anything more than shallow praise for keeping essential services available to the public.

Essential workers were commonly lauded as heroes, but few received the hazard pay one would expect to accompany such work. Because of this, many frontline workers felt like expendable cogs in an uncaring machine, and as more jobs became available in late 2020 and early 2021, workers left the retail, restaurant, grocery, and hospitality industries in record numbers.

During the COVID-19 shutdowns, many companies whose businesses weren’t based around manufacturing or customer service shifted toward remote work for office-type employees, and the office-based workforce realized that this could become the norm. Why spend money and time commuting to an office when the same work could be done at home? In many cases, remote work also meant that money could be saved on child and pet care.

As vaccines became widely available and shutdowns subsided in late 2020 and early 2021, an abundance of job openings meant workers had more options, and due to the high cost of living and the lifestyle changes brought about by the pandemic, many weren’t satisfied with jobs that didn’t offer living wages or flexible work environments.

Money from unemployment and federal stimulus payments also meant that some workers had enough cash on hand to search more thoroughly for positions that met their requirements rather than accepting less-than-ideal work in order to survive after quitting.

These and other factors contributed to low unemployment and high labor demand, which made for an environment that favors workers’ ability to resign and seek new prospects.

What Reasons Did Workers Give for Quitting Their Jobs?

According to surveys created by the Pew Research Center, “low pay (63%), no opportunities for advancement (63%), and feeling disrespected at work (57%)” were the top three reasons respondents cited for leaving their jobs during this particular wave of resignations. The study also showed that younger adults and those with lower incomes quit at higher rates than older adults and those with higher incomes.

What Did People Do After Resigning?

So, where did all these people go after resigning from their jobs? The answer is unsurprising—they got other jobs. According to the Bureau of Labor and Statistics, the quit rate and swap rate had a correlation of close to 100 percent. Workers weren’t resigning just to resign; they were resigning in order to leverage their labor and land themselves jobs with better pay, better benefits, and more flexibility.

With unemployment low and labor demand high, companies had to compete with one another for job seekers by providing incentives. According to the New York Times, “When workers switched jobs, they often increased their pay. Wages grew nearly 10 percent in leisure and hospitality [from May 2021 to May 2022] and more than 7 percent in retail,” two of the industries most heavily hit by the Big Quit.

In some cases, non-resigning workers were also able to leverage this shift in the labor market by demanding better pay and more flexible conditions. For many office workers, this often meant the ability to start (or keep) working remotely.

Do Workers Have More Bargaining Power Than They Did Before 2020?

In general, the conditions that existed during the Great Reshuffle shifted a degree of bargaining power from employers to workers. But will it stay that way? In general, the more demand there is for labor, and the lower the unemployment rate, the more bargaining power workers (and job seekers) have.

Interestingly, this shifting power dynamic seemed to bring about a resurgence in the labor movement, as a wave of unionization efforts followed the Great Resignation. These efforts were not, in most cases, welcomed by large employers, many of whom—such as Amazon and Starbucks—invested considerable capital into union-busting efforts and other (sometimes illegal) forms of retaliation. Nevertheless, unionization efforts continued. By May of 2022, 100 Starbucks stores had voted in favor of unionization.

Concurrently, many workers expressed their mutual solidarity in online communities. A subreddit called r/antiwork grew by over 900,000 members in 2021 and drew the ire of Fox News, a network that tends to be associated with right-wing, anti-labor-movement politics. Within the r/antiwork community, workers not only shared stories about low pay, horrible working conditions, and villainous bosses—they also shared legal information about workers’ rights and the unionization process.

Members encouraged each other to be transparent with their coworkers about pay and reminded one another that the prohibition of discussions of pay in the workplace by bosses and managers is against the law. The community continues to grow, and as of mid-2022, it had over 2 million members.

Is the Great Resignation Still Occurring?

The quit rate has fallen somewhat from its November 2021 peak, but as of late June 2022, it remains relatively high at about 2.9%. Unionization efforts are still on the rise, and workers are learning about their rights and collective power.

Given the Great Resignation’s generally upward trajectory since 2009, and the resurgence of the labor movement, it doesn’t appear as if the Big Quit is going anywhere anytime soon. According to Katherine Ross’ interview with ZipRecruiter CEO Ian Siegl, the “post-pandemic job-seeker” is here to stay. 

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Economics

Will Disney World Ever Sell Annual Passes Again?

The theme park has not sold annual passes for months, but that (briefly) changed this week.

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The theme park has not sold annual passes for months, but that (briefly) changed this week.

Annual passes have suffered during the pandemic at both Disneyland and Disney World. Walt Disney's  (DIS) - Get The Walt Disney Company Report California theme park actually cancelled its annual passholder plan early in the pandemic and replaced it with a new system, the Magic Key, many months later. Disney World suspended annual pass sales during the pandemic as well and made changes to its program (albeit less drastic ones).

This happened because covid-related rules and protocols forced the company to manage its crowds more than it ever has. Disney imposed a reservation system and capacity limits at all of its parks. A certain percentage of those reservations were set aside for passholders, but there were still days when demand exceeded supply.

That created a bad experience for passholders because what's the point of paying for unlimited access to the parks then being told you can't actually access the parks on the day you wanted to go?

This forced Disney to cut off sales of most annual passes at its Florida theme parks and all annual passes at Disneyland in California. Basically, the company still has to manage demand and that meant not allowing more people to buy annual passes than than the new capacity rules allowed.

That, as you might imagine, disappointed many fans who wanted to take part in the unlimited magic that comes with being an annual passholder. Disney has been very conscious of that and has put select passes on sale when capacities have allowed it.

The company appeared to do that for Disney World on June 28, but it turned out to be a giant mistake.

David McNew/Getty Images)

Disney World Puts Annual Passes on Sale (Whoops)

While Disneyland cancelled its annual pass program and then replaced it with something new, Disney World never did that. Instead, the Florida parks changed the names of its passes, making them more expensive, while also removing some benefits, but mostly keeping the program intact.

When Disney World resumed selling annual passes after reopening from its pandemic closure, they sold out quickly and the company stopped selling most of them. Currently, the company has suspended sales of the top-tier Incredi Pass, as well as the Sorcerer Pass, which is only offered to Disney Vacation Club members and Florida residents. It has also halted sales of the Pirate Pass, which only Florida residents can buy.

People who want these passes periodically check the Disney website because the company could bring them back without notice. That appeared to be what happened with the Sorcerer and Pirate Pass on June 28.

The passes were put on sale, but they were not actually available and Disney said that listing them being available was a mistake, WDWInfo.com reported. 

Disney is still selling its lowest-tier most-limited Pixie passes (no weekend access and many weekday blackouts) for Florida residents only. In addition, existing passholders can renew their annual passes.

Why Do Annual Passes Matter?

Before the pandemic, locals holding annual passes were an important revenue driver for Disneyland and Disney World. Back when the parks had higher capacity limits and no reservation system, locals popping in for a few hours produced incremental revenue that helped the theme parks.

Once capacity limits were put in place at the parks, Disney found that it did not have enough capacity to keep an unlimited amount of passholders happy. That forced the company to make drastic changes at Disneyland while cutting off sales at Disney World.

The reality is that the pandemic has taught Disney that it makes sense to cap crowds and essentially raise prices (although ticket prices have not increased) in order to deliver a better experience for guests. That's something the company will almost certainly continue in the post-pandemic world which makes passholders less important.

Disney will still sell passes to drive traffic to its less-visited parks in Florida on its slower days. Its likely, however, that opportunities to buy its top-tier passes will be very limited as the company continues to try to balance capacity and revenue. 

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