Place of the Week: Jackson Heights, New York City
Econ Weekly (Jan. 3, 2022)
Inside this Issue:
2022: Is the Economy Gonna be Good?
Hospital Fear: Not Enough Beds as Omicron Spreads
The Fed’s December Shift: Might Soon be Time to Give Rates a Lift
Vaccine Green: Pfizer Number One at Maximizing Pay from mRNA
America’s Shrinking Workforce: Fewer Hands to Meet Demands
Merit or Inherit? More of America’s Wealthy are Heirs to Great Fortunes
The Garden’s Fate: A Look at New Jersey’s Pension Problems
Solar Flare Nightmare: How the Sun Could Break Your Internet
A Delve Into 2012: America’s Weak Recovery from the Housing Crisis
And this Week’s Featured Place: Jackson Heights, New York City, An Immigration Sensation
Quote of the Week
“We’re not going back to the same economy we had before 2020.”
- Fed chairman Jay Powell
Market QuickLook
The Latest
Economic growth low. The job market slow. Unemployment above 8%. Household incomes dropping. Household debts a great burden. That was the situation ten years ago—January 2012. The U.S. economy had three years earlier spun off the rails, ravaged by a meltdown in housing markets that shattered the global financial system.
It’s now January 2022, and the U.S. is once again recovering from a major shock. This one looked nothing like the last: A health pandemic—starting in March 2020—that’s wreaked havoc on the economy’s supply side. As the new year begins, labor markets remain short of workers, retailers remain short of inventory and supply chains remain short of capacity. Demand, however, is extremely strong, lifting companies and job seekers alike. That said, tight supply and strong demand have also pushed prices up, worryingly so. The latest published reading on consumer prices (the PCE index for November) shows a nearly 6% y/y increase, or nearly 5% excluding food and energy. Either way, it’s well above the 2% target the central bank gods typically prefer.
The latest reading on unemployment? Just 4.2%, even after a disappointing 2.3% increase in GDP during Q3—that was way down from 6.7% in Q2. One reason for the cooling off: those supply side deficiencies, i.e., worker shortages, semiconductor shortages, shipping container shortages, housing shortages, hospital bed shortages, raw material shortages, etc. Another reason: Covid’s Delta onslaught, which stunted recoveries in sectors like travel and restaurant dining while holding back normalization of labor markets. On January 27th, the Commerce Department will give its initial estimate of GDP growth for Q4, a period mostly characterized by easing Covid effects. That is, until another variant called Omicron complicated matters in December.
As January begins, Omicron infections are widespread, with signs of milder health effects but hospitals nevertheless bracing for a possible surge in new patients. Data from various states, importantly, suggest that well over 90% of currently hospitalized Covid patients are unvaccinated—largely preventable cases, in other words, burdening the U.S. health care system with $13.8b in additional costs between June and November, according to an analysis by the Peterson Center on Health Care.
Omicron’s emergence aside, 2021 ended with an eventful Fed policy meeting, in which chair Powell adopted a more hawkish tone. While he still blames pandemic-related factors for surging prices—and still expects prices to calm by the end of this year—he also now acknowledges the problem has spread to a broader range of goods and services. Wages, he said, have thus far not been a major contributor to the elevated levels of inflation. But bottom line: He and his colleagues will accelerate an end to bond buying, implying less support to lending markets. And once that’s done by mid-March, hiking interest rates will become a likely option. Doing so, of course, would have implications for the housing market (by making mortgages more expensive). It could also extract some air from soaring asset prices. Higher rates might even induce a recession, as Fed hikes have in years past. But keep in mind: even after three 0.25% hikes by the end of 2022, as the Fed’s summary of economic projections envisions, rates would still be extremely low.
The Fed’s prospective tightening won’t do anything to repair broken supply chains, produce more semiconductors or hire more truckers and nurses. But if all goes well, its moves will help dampen demand just enough to cool prices. Demand will, to be sure, face headwinds as Americans gradually deplete the savings they amassed with help from Uncle Sam. For now though, demand shows no significant signs of softening—December holiday spending was by all accounts robust. Mark your calendars for Jan. 14th, when the Census will publish its December retail sales report. The November figures showed a modest increase from October, but keep in mind that auto sales—hit by a severe inventory shortage—account for roughly a fifth of all retail spending in America. Gas stations, where sale totals are up in part because of sharply higher prices, now account for another 9% of spending. So if you’re Walmart, Amazon, Costco, Target, etc., selling all the other stuff Americans buy, things still look rather rosy—more so than the Census retails figures might suggest.
December brought some welcome news from Congress, which passed legislation to raise the U.S. debt ceiling by $2.5 trillion. That removes at least one risk from 2022, though it might resurface in 2023. One thing Congress did not pass is President Biden’s $1.8 trillion Build Back Better plan, thwarted by West Virginia Senator Joe Manchin; he might yet agree to a smaller package. The intent, remember, is to address malfunctions in areas of the economy like childcare, eldercare, housing and environmental protection. The opposition, remember, stems from concerns about inflation, higher taxation and excessive federal spending.
Biden did sign a $768b defense bill, equivalent to about 3% of GDP. The Census showed population growing at the slowest pace ever, with a record 17 states losing… (TO CONTINUE READING, VISIT www.econweekly.biz)
Places:
Jackson Heights, New York City: If immigrants make you uncomfortable, don’t come here. In the shadows of Manhattan’s skyscrapers, in the borough of Queens, lies a remarkable neighborhood where a stunning 60% of residents were born outside of the United States. Of these, 65% are Hispanic—Ecuadorians are the largest group, followed by Dominicans, Mexicans, Colombians and Peruvians. But if you visit, you’ll hardly hear just Spanish. Another 9% of the neighborhood’s 175,000 people hail from Bangladesh. Immigrants from China and India account for an additional 8%. All told, Jackson Heights residents are said to speak 167 different languages—a true mixing of the world’s peoples if ever there was one. You won’t just hear the neighborhood’s international diversity though. You’ll see it, most visibly in the area’s shops and restaurants. Not uncommon are blocks with say, an Argentine restaurant next to a Russian sweet shop beside an Indian jeweler adjacent to a Peruvian nightclub connected to a Korean nail salon. It wasn’t always this way. Jackson Heights was developed in the early 1900s as a refuge for native-born New Yorkers looking to flee the immigrant masses of Manhattan. One neighborhood history by Hunter College professor Ines Miyares described it as “intended to be an exclusive suburban community for white, nonimmigrant Protestants within a close commute of Midtown Manhattan.” The post-World War II rise of suburbia, however, saw this role of refuge move to New Jersey, Long Island and Westchester County. In the meantime, Jackson Heights endured the suburban exodus along with the rest of New York City, most painfully during the dark days of the 1970s. It was a time, remember, when New York was losing garment industry jobs, shipping jobs and manufacturing jobs. Thanks to finance, media, health care, tourism and education jobs, the city’s fortunes would rebound sharply in the 1990s. Manhattan, thereafter becoming unaffordable for most immigrants, was nevertheless a short 20-minute subway ride from Jackson Heights. Newcomers poured in, but so did many young professionals lured by lower rents, falling crime (major felonies dropped by 45% between 2000 and 2018) and the area’s cultural and culinary vibrancy. Jackson Heights today is home to a large LGBTQ community as well (it’s in fact the site of the annual Queens Pride parade). LaGuardia airport is minutes away. So is Citi Field (where the New York Mets play baseball) and Arthur Ashe stadium (site of the U.S. Open tennis tournament). According to a report by the New York State Comptroller, payrolls and tax receipts grew faster in Jackson Heights than the city as a whole during much of the 2010s. By 2018, the unemployment rate was just 4%. The poverty rate fell from 20% in 2010 to 13% in 2017, significantly lower than the citywide rate and the second-largest decline among the city’s 55 neighborhoods. From 2009 to 2018, Jackson Heights welcomed 660 new businesses, many of them small shops and restaurants operated by immigrants. The area has many doctor and dental offices too, along with diagnostic laboratories and home health care services. Outside of health care, some of the most common jobs among residents are construction workers, housekeepers, janitors, taxi drivers, retail workers, restaurant workers, administrative assistants and office clerks, all living alongside upper income professionals and knowledge sector workers. It’s not an entirely happy story though. Jackson Heights is more affordable than Manhattan, for sure, but still expensive, increasingly so as more affluent people move in. The Comptroller report noted a 26% increase in median rents between 2009 and 2017, far outpacing a 10% increase in neighborhood incomes. Schools in the area are overcrowded. Nearly 30% of residents lack health insurance, more than twice the citywide figure. In 2017, 13% of households received Supplemental Nutrition Assistance Program benefits (or SNAP, also known as food stamps). More than 40% relied on Medicaid, the federal-state program for insuring the health of low-income Americans. In 2014, a quarter of homes reported the presence of cockroaches! Only 20% of adults hold a college degree. And less than half can speak English proficiently. New York’s immigrant heavy neighborhoods also worry their populations were undercounted by the 2020 Census, which leads to under-representation in political bodies like the U.S. Congress. As it happens, Jackson Heights is represented in Congress by one of America’s most famous politicians: Alexandria… (TO CONTINUE READING, VISIT www.econweekly.biz)
Abroad
Global Debt: The IMF gave its latest update on government and private borrowing, which now amounts to $226 trillion worldwide. That’s after the largest one-year increase in debt since World War II. “Debt was already elevated going into the crisis,” said the IMF, “but now governments must navigate a world of record-high public and private debt levels, new virus mutations, and rising inflation.” The $226 trillion by the way, equals 256% of global GDP. Government debt specifically is at 99% of GDP. The rest is debt by households and companies.
Looking Back
2012: Four years after the global financial system imploded, the U.S. economy was recovering. But not swiftly. As the Fed’s policymakers met in mid-December 2012, the nation’s housing market remained depressed and its job market weak. Hopes for a V-shaped recovery had faded, in part because of stubbornly expensive… (TO CONTINUE READING, VISIT www.econweekly.biz)
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