Economics in the News – July 31 – Aug. 6, 2023
Economics impacts our lives every day. Below are some of the top storylines from this past week related to economics.
o The latest round of conference realignment sent college sports fans into a frenzy, as five members of the PAC-12 Conference bolted to new leagues, beginning with the 2024-25 academic year. Oregon and Washington accepted bids into the Big 10 Conference. Meanwhile, Arizona, Arizona State and Utah accepted bids into the Big 12 Conference, joining Colorado – who accepted a bid into the Big 12 the week prior. The latest round of conference realignment leaves the PAC-12 Conference with four members – California, Oregon State, Stanford, and Washington State -- beyond the upcoming academic year.
The moves came after the PAC-12 Conference was unable to secure a new media rights deal despite more than a year of negotiations. The Big 10 Conference has a new media rights deal that kicks in with the 2023-24 season that is worth approximately $7.5 billion over a six-year period. Meanwhile, the SEC, which will expand to 16 teams in 2024-25, signed a new 10-year, $3 billion television deal that begins next fall. The two new media rights deals widen the revenue gap between the two richest conferences – the SEC and Big 10 – and everyone else. [The Wall Street Journal]
o Manufacturing facilities across Asia are struggling to entice younger workers, meaning that many inexpensive goods that Westerners buy could become more expensive in the future. With the advent of social media, young people are better educated than their parents are, while they are having fewer children. Instead of manufacturing, many are opting to a rapidly growing services sector that offers less-grueling work as store clerks in malls and receptionists at hotels. In response, Asian factories have had to increase wages for workers and adopt costly strategies to retain workers, such as improving the cafeteria or building a facility for workers’ children. While in the past, companies would have moved operations to less expensive destinations, that is becoming increasingly difficult with political instability, or lack of infrastructure and trained workforces.
China and other Asian manufacturing hubs became powerhouses in the 1990s, helping poor farmers into manufacturers, building products such as refrigerators, sofas, shoes, toys and clothes. Factory wages in Vietnam have more than doubled since 2011 -- to $320 a month – marking three times the rate of increase in the United States, according to the United Nations International Labor Organization. Meanwhile, in China, factory wages have increased 122 percent from 2012 to 2022. [The Wall Street Journal]
o “Barbie” director Greta Gerwig became the first woman with sole directing credit for a $1 billion movie. She joins 28 other directors who have accomplished the feat, as “Barbie” has surpassed the $1 billion mark in global ticket sales, according to Warner Bros.
Jeff Goldstein, Warner Bros. president, said that the 17 days since its release marks the fastest that any Warner movie has reached the $1 billion mark. “Harry Potter and the Deathly Hallows: Part 2” held the previous record, reaching the $1 billion plateau in 19 days. “Barbie” was the No. 1 movie in the United States for the third weekend in a row, collecting a total of $459.3 million among its domestic audience. [The New York Times]
o Fitch Ratings agency has downgraded the long-term credit rating of the United States. The long-term rating was moved to AA+ from its top mark of AAA. The rating was downgraded because of the nation’s high and growing debt burden and penchant for brinkmanship over America’s authority to borrow money.
The downgrade is the second in America’s history and comes nearly two months after the United States closely avoided defaulting on its debt. Despite the last-second agreement by Congressional leaders in May to suspend the nation’s debt ceiling, federal government faces a fall shutdown as lawmakers bicker over how, where and what the funds should be spent. The nonstop debating was a major factor in Fitch’s downgrade decision. Fitch is one of three credit ratings firms, along with Moody’s and S&P Global Ratings. The first US credit rating downgrade came in 2011 from S&P amid a debt-limit standoff. [The New York Times]
o Gas prices are once again rising across the United States. The national average last Thursday, August 3, was $3.82 per gallon marking a rise of 29 cents over a month, according to AAA. Experts at AAA say that such a jump is unusual and is especially interesting because “fewer people are fueling up” this summer compared to years past.
A few factors that are causing the increase in gas prices include the impact of this summer’s extreme heat on oil refineries. With a capacity of 10 million barrels per day on the US Gulf Coast, many of those refineries are operating below normal capacity which has resulted in hundreds of thousands of barrels each day. A second cause are a reduction in global supply production, notably in Saudi Arabia, where they extended its unilateral reduction of one million barrels per day through the end of September. [Associated Press]