Economics in the News – Aug. 29 – Sept. 4, 2022
Economics impacts our lives every day. Below are some of the top storylines from this past week related to economics.
o Global inflation eased in July to 0.3 percent on a monthly basis, down from a 0.7 percent average over the first six months of the year. China has been a key driver to easing price pressures after growth slowed to a two-year low in the second quarter. The world’s second-largest economy grew at a 0.4 percent clip in the second quarter compared to a year earlier. Lockdowns stemming from COVID-19 and a Chinese real estate market collapse have slowed growth.
With Chinese manufacturers struggling to sell, they are facing greater pressure to cut prices abroad. Price gains for US imports from China slowed, including manufactured goods like computers and electronics. [The Wall Street Journal]
o California Governor Gavin Newsom has signed a bill that will establish minimum pay and regulate safety conditions among the state’s fast-food industry. The bill will establish a 10-member council of representatives to oversee labor practices in The Golden State.
The council can raise minimum wage across the state according to inflation. Next year, it can raise the minimum to as high as $22 per hour versus the current minimum wage of $15.50 per hour. Fast-food companies resist the change, arguing that higher wages would raise costs that restaurants would have to pass on to consumers. Meanwhile, labor groups argue that the bill is necessary to improve working conditions. [The New York Times]
o President Joe Biden’s plan to forgive student loans has many economists divided. President Biden announced forgiveness up to $10,000 in student loans for individuals earning $125,000 or less and an additional $10,000 for low-income recipients who received the Pell Grant in college. Changes to loan repayment structure were also proposed in order to reduce monthly costs and eliminate interest accumulation.
Conservative and liberal economists have differed on the plan. Conservative economists claim that the plan would exasperate worries over inflation and become a burden to many taxpayers. Liberal economists defended student loan relief as a lifeline for graduates who have burdened by the rising costs of higher education. [The New York Times]
o This summer’s drought has taken its toll on crops. Experts from American Farm Bureau Federation suggest that yields of key crops, such as fruits, vegetables, cotton and grains, could be down as much as one-third from last year. Drought has impacted 40 percent of the country for the past 101 weeks, but the 40 percent that has been impacted has shifted over time.
Corn is expected to produce its lowest yield since 2012. Farmers in California are faced with difficult decisions to give up on their strawberries, tomatoes, lettuce and melons, so they can use the water for almonds, grapes and olives. Experts warn that the poor crop yields are more than a one-year problem, with climate change altering weather patterns in agriculturally important parts of the country. [The Washington Post]
o Britain has a new leader. Liz Truss was elected as the new prime minister of Britain, defeating former Treasury chief Rishi Sunak. Truss is expected to be appointed into her new role on Tuesday, Sept. 6 by Queen Elizabeth II in a ceremony that will take place at the queen’s Balmoral estate in Scotland.
Among Truss’ first priorities are the economy that many experts are predicting is heading into a recession. Inflation is above 10 percent in the UK for the first time since the 1980s and the Bank of England has forecast that it will reach a 42-year high of 13.3 percent in October. Her other top priority is to address the ongoing cost-of-living crisis that has plagued many families across the UK, largely driven by soaring energy bills that are expected to increase by 80 percent for the average household starting next month. [Associated Press]