Reading List for July 31-Aug 2
There was so much relevant news this week, this list runs a bit long, but it is sure to have something you will find interesting!
- The Federal Reserve met this week and left interest rates unchanged (near zero). Dow jumps 150 points. (Forbes)
- Far and away the biggest economic news this week was the historic annualized drop of 32.9% in the second quarter. (Note: add this example to your lesson on compounding.) Did one-third of the economy disappear in the second quarter? No, this is what happens when you annualize the quarterly drop of 9.5%, but it is still the worst quarterly drop in history. The total contraction for the Great Depression (1929-1933) was 36%. (NPR) (WaPo) (The US wasn’t alone. Germany reported a drop of 10.1% for the second quarter, the worst result since 1970. (Markets Insider))
- And how did the market respond? Not that much. That may be because economists were predicting a 35% annualized contraction, so the actual number was better than expected, and the market is all about expectations. (Forbes)
- New unemployment claims rose for the second week in a row. Another 1.434 million filed for unemployment this week, and continuing claims rose this week as well by 867,000 to 17 million. (CNN)
- Consumer spending jumps again in June by 5.6% after a record 8.5% in May, but is still below pre-pandemic levels, and personal income drops again by 1.1%, following a 4.4% drop in May. (CNBC)
- As we end the month of July and the Federal unemployment supplement ends, Congress is still far apart on the next round of pandemic assistance. There is much debate over whether or not this extra $600/week is keeping people from returning to work (because they are making more than when they were working), or not. A Yale study finds “no evidence that more generous benefits disincentivized work either at the onset of the expansion or as firms looked to return to business over time.” (Bloomberg)
- This NPR story emphasizes how complicated this issue really is. While there is anecdotal evidence that some workers don’t want to come back, the flip side is that these supplemental payments make up 15% of total wages in the US and are boosting the economy (which just had a record quarterly drop) at a time when new unemployment claims are increasing (1.43 million this week).
- Politico interviews Economist Betsey Stevenson (she is also in Planet Money Summer School) about the impact of the current childcare crisis caused by the pandemic. It is not just impacting the kids. It is especially hard on working mothers. Dropping out of the work force or to an alternative income source doesn’t just cut a family’s income in the short term, it impacts the lifetime trajectory of their earnings.
- You may already be aware of Planet Money Summer School, but I just caught the fourth episode using the California draught to explain the concepts of scarcity, externalities, the tragedy of the commons, and cap and trade. Whether or not you teach economics, you might find this worth a listen. (Makes me glad I switched from almond to oat milk!)
- Savings accounts are now "gamified." Open an account with Yotta and be entered for prizes every time you deposit money. (LifeHacker) (Beats the lottery because you keep your money!)
Paying for College
- Student Loan Hero has broken down the cost of college to an amount per credit hour, overall and by type of institution.
- Deposits from admitted students for the fall semester have dropped across all lower and middle income brackets, and FAFSA fillings among low income and minority students has also dropped. (Inside Higher Education)
Investment/Pandemic Winners and Losers
- Fidelity is trying to attract and retain younger investors with its new mobile app.
The mobile app is called Fidelity Spire, and its purpose is to attract young adults to plan, save, invest and set short- and long-term financial goals, according to Fidelity’s announcement Wednesday. (Investment News)
- In the winning column this week is Kodak . Remember that yellow box of film for your camera? The company, worth less than $100 million, was awarded $765 million in non-recourse, unsecured loans from the US Government to manufacture pharmaceuticals—something it has never done. (Yahoo Finance)
- Shopify has a record 97% increase in revenues for the second quarter….again. (Yahoo Finance)
- Proctor and Gamble (Tide and cleaning products) has seen their biggest sales growth since 2006. (Business Insider)
- Most FAANGM stocks are beating earnings expectations, driving their market cap even higher. (Markets Insider) (While beating expectations, Alphabet did actual show a quarterly decline in earnings.)
- In the loser column this week: California Pizza Kitchen is added to the growing list of bankruptcies. (MarketWatch)
- In case you need more evidence that index funds are the way to go, here it is, from Servo Wealth Management, with lots of good data.
- The pandemic appears to be shortening the expected life of Social Security Trust, should nothing be done to help. Wharton professor Olivia Mitchell describes a more resilient system. Penn Today
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