Economics in the News – Jan. 8-15, 2023
Economics impacts our lives every day. Below are some of the top storylines from this past week related to economics.
o Global growth is expected to slow to 1.7 percent in 2023 – a decrease from an estimate of 3.0 percent in June – according to the latest forecast by The World Bank. Persistent high inflation, rising interest rates, lower investment, Russia’s invasion of Ukraine, and pandemic-related disruptions in China were cited as reasons for the decreased forecast.
Some economists project the United States and part of Europe to slip into a recession for in 2023. The World Bank projects an increase of 0.5% in gross domestic product (GDP) for the United States, while China is expected to see a 4.3% increase in GDP – an increase of 2.7% from last year. Emerging markets and developing countries are anticipated to grow at a 3.4% clip, while The World Bank does not expect growth in the eurozone. [The Wall Street Journal]
o French President Emmanuel Macron has plans to cut costs in his country’s pension system, including raising the legal age of retirement to 64 from 62. Macron’s plan has been met with strong resistance, including hostile labor unions and the threat of disruptive strikes and protests. State-guaranteed pensions are widely cherished as a right by the French, who have one of the lowest rates of pensioners at risk of poverty in Europe. In the French system, workers and employers pay mandatory payroll taxes used to fund retirees' pensions.
Macron and his supporters argue that France’s state-backed pension system will run an unsustainable deficit if nothing is done. He last attempted to change the pension system in 2019 with those plans resulting in street protests and one of the longest transportation strikes in France’s history. In that 2019 attempt, Macron did not intend to raise the retirement age but was looking to overhaul the pension system’s structure. [The New York Times]
o A system that offers safety information to airline pilots failed last Wednesday, causing thousands of flights across the United States to be canceled or delayed. Preliminary reports from the Federal Aviation Administration traced the outage to a damaged database file that is part of the computer system generating alerts called Notice to Air Missions (NOTAMs). Pilots and airport crew review notices that include information about poor weather, runway closures and other elements that could disrupt the flight.
According to flight-tracking website FlightAware, the disruption impacted more than 1,300 flight cancellations and 9,000 delays by early evening on the East Coast. Experts compared the disruption to the shutdown of airspace after the Sept. 11 terrorist attacks but could not recall a nationwide shutdown of the magnitude caused by a technology failure. [Associated Press]
o Did you notice the price for a dozen eggs the last time you were at the grocery store? Egg prices soared 60 percent in December from a year earlier. The average price for a dozen large grade A eggs was $4.25 in December, according to the Federal Reserve Bank of St. Louis.
In recent years, Americans have increased the number of eggs they consume because more families are using them as their main source of protein while reducing the quantity of beef and venison consumed. According to the USDA, the recent avian flu epidemic has infected nearly 58 million birds as of Jan. 6, creating the largest outbreak in American history. The supply of eggs falls because the infected birds must be slaughtered. [CBS News]
o The United States is projected to reach its debt limit on Thursday, Treasury Secretary Janet Yellen warned Congress last week. Yellen has asked Congress to raise the country’s $31.4 trillion borrowing limit in an issue that will likely trigger a political showdown in a new Congress consisting of a Republican-led House of Representatives. Democratic lawmakers have enjoyed one-party control of Washington for the past two years.
Yellen can take extraordinary measures, including divesting some payments, such as contributions to federal employees’ retirement plans, to make other essential payments. The United States has taken extraordinary measures at least 16 times since 1985, according to the Committee for a Responsible Federal Budget. Past forecasts suggest a default could move the country into a deep recession with the potential aftershocks being felt for years. [Associated Press]