Economics in the News – June 5-11, 2023
Economics impacts our lives every day. Below are some of the top storylines from this past week related to economics.
o Soccer’s greatest star and arguably the greatest player in the sport’s history Lionel Messi announced his intention to play in Major League Soccer (MLS). Messi announced in a video recording on his social media channels that he intends to sign a contract to play with Inter Miami FC. He reportedly turned down a $400 million per year offer to play in Saudi Arabia. While Messi’s contract is not yet official, his reported deal was facilitated by MLS and includes a share of revenue from the MLS Season Pass offered as part of Apple TV’s media rights deal to broadcast games. It also offers a profit-sharing deal with Adidas that’ll earn him a portion of any increase in profits from the MLS.
His arrival will be a transformative signing for a league that is among the fastest growing in the sport. It comes with the United States preparing to host the 2026 FIFA World Cup, along with Canada and Mexico, and the league blossoming into the sixth-largest league in the world in terms of attendance. The financial boom is already being felt with ticket prices for Inter Miami FC games ballooning in MLS cities throughout the country. [The Los Angeles Times]
o The professional golf feud between the PGA TOUR, DP World Tour and LIV Golf is seemingly over. The three professional golf tours stunned players, the greater golf community, politicians and the general public in abruptly announcing a merger deal that creates a global operation that will feature the best players in the world. The deal announced that a new entity would be created to merge the commercial assets of the PGA TOUR, DP World Tour and the Saudi Arabian Public Investment Trust, which backs LIV Golf.
With the agreement, litigation between the three parties would be dropped immediately. The PGA TOUR will maintain a majority stake while the governor of Saudi Arabia’s sovereign wealth fund joins the PGA TOUR’s board of directors and will invest in the unnamed commercial venture. Under Crown Prince Mohammed bin Salman, Saudi Arabia’s wealth fund has made it a point to seek out investments where it could shake up existing industries as he attempts to shift focus away from the kingdom’s questionable human rights record. [Associated Press]
o Millions of those living on the West Coast are feeling the impact of the tech downturn. Unemployment is rising, wages are falling, state budgets are tight, and the region has seen slow job growth. The three West Coast states are among the highest unemployment rates in the country. According to the Labor Department, California’s April unemployment rate of 4.5 percent was second highest, while Washington is tied for third at 4.3 percent and Oregon is at 4.0 percent.
Average wages have plunged in areas with a high concentration of tech companies, which has had ripple effects on other local businesses and industries, such as finance, manufacturing and retail. As a result, fewer white-collar workers mean less work for low-income workers, such as janitors. The downturn is having its impact on state budgets as well, causing hard budgetary decisions for state leaders. [The Wall Street Journal]
o General Motors has come to an agreement to adopt Tesla technology to charge its vehicles. The announcement comes on the heels of a similar statement that was made recently by Ford. The agreement means that owners of Ford and GM electric vehicles will be able to use Tesla chargers, which have a reputation for reliability. Tesla operates the most extensive charging network in the United States and with the two deals with Ford and GM, their network will likely becomes the industry standard for electric vehicles.
However, it raises concerns that Tesla could overwhelm competitors and squash companies looking to build similar networks in the charging business. Ford and GM become dependent on their greatest competitor in the electric vehicle market. The move poses risks for Tesla in creating increased congestion and alienating their car owners who could become increasingly irritated at wait times for charging vehicles that are built by other manufacturers. [The New York Times]
o Temperatures in Canada have been unseasonably high this year, leading to a wildfire season that is on track to be the most destructive in the country’s history. Smoke from burning the Canadian forests created air quality emergencies throughout the US Northeast. Workers were sent home from their jobs, performances and sporting events were postponed, and public schools canceled outdoor activities. The disruptions are becoming more normalized because of climate change while taking their economic toll.
Air pollution kills more than three million people per year on a global scale, according to the World Health Organization. The costs are reflected in increased hospitalizations, missed work and school days, and lower productivity. Smoke from forest fires, factory output, and car exhaust cost the economy $800 billion per year across the United States. According to the National Bureau of Economic Research, workers lose 0.1 percent of their quarterly earnings due to a single day of smoke exposure or about $125 billion per year of all labor income. [CBS News]