Higher Rock Education - Economics Blog

Tuesday, October 18, 2022

Economics in the News – Oct. 10-16, 2022

Economics impacts our lives every day. Below are some of the top storylines from this past week related to economics. 

o   Inflation keeps pushing the costs higher and higher for the 44 million households renting a home or apartment. Three types of renters make up the economic spectrum. First, are the renters who aspire to one day buy a home but are impacted by rising home prices and increased mortgage rates. Second, low-income households make up most of the 11 million households that spend more than half their income on rent. In between, the middle class is losing ground, but not enough to qualify for much assistance.  

Activists are supporting permanent policies to cap rent increases. Unlike homeowners, renters are mostly left unprotected from rapidly rising prices. Nationally, rents are 20 percent higher than they were in early 2020. The attention that the COVID-19 pandemic brought to the housing crisis is poised to be a lasting remnant of the pandemic economy. [The New York Times

o   With mortgage rates pushing 7 percent, many Americans who spent years saving enough money to buy a house are now waiting until mortgage rates or home prices fall. The typical homebuyer who took out a mortgage in July made a $62,500 down payment, up 13.6 percent from a year earlier and nearly double the down payment from 2019. 

Fannie Mae forecasts that mortgage lenders will complete 49 percent fewer loans for single-family housing in 2022, than 2021. Financial planners warn that those waiting could be doing so for years, as year-over-year home prices are still rising as home price growth has slowed. [The Wall Street Journal]

o   As many Americans used pandemic relief aid to pay down their debt, some are falling back into their pitfalls in using debt in order to keep up with higher costs. According to the Federal Reserve Bank of New York, credit card debt is rising at its fastest rate in more than 20 years. Americans now owe $887 billion on their credit cards, a 13 percent rise from last year. Americans hold an average outstanding balance of $5,270 on their credit cards, according to CreditCards.com and TransUnion. 

While economists say that there is little risk in the pileup of unpaid credit cards, it will be burdensome for families. Especially as many analysts are projecting the United States economy to fall into a recession. Experts say that a heavier debt load could increase personal bankruptcy filings that could depress consumer spending. [The Washington Post]

o   Those handing out candy this Halloween can expect to pay more. According to the Bureau of Labor Statistics, Halloween candy is expected to cost 13.1 percent more than last year. The consumer price index (CPI) has recorded marks the largest jump in candy prices. For comparison, it took nine years – from 1997 to 2006 -- for candy prices to climb 13 percent. 

According to the National Retail Federation, Americans are expected to spend a collective $3.1 billion on Halloween candy this year. All varieties of sweets cost more this year, as supply chain disruptions and a poor beet sugar production year have contributed to a 17 percent rise in sugar since last September. Flour prices are 24 percent higher, driving up the cost of baked goods such as cookies, cupcakes and cakes. [NPR]

o   Company cultures have been tested throughout the COVID-19 pandemic. When the pandemic first started, companies faced pressures of sharing, creating and changing their culture to cater to employees working from home. But, according to a study from McKinsey & Co., only 30 percent of companies figured out how to effectively change their culture. 

Company culture can be defined as a collective view of how to behave, what norms are followed and what rights, rituals, language, and behavior are accepted. Most successful companies tend to lean into their own values and cultures instead of keeping up with what other companies are doing. The pandemic changed the cultural aura and how views of the company culture are received. [TIME]


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