Jan 3, 2022
The Weekly Scan January 3, 2022
Find out what’s happening in the world of business this week.
Welcome to the Weekly Scan. Here’s what we’re following for the week of January 3, 2022.
Holiday blues. Closed restaurants, canceled flights at airports, and not enough workers showing up for shifts in retail stores and other businesses are just some of the ways the fast-spreading Omicron variant of Covid-19 has thrown a wrench in the U.S. economic recovery. First identified in South Africa in November, 2021, the new strain has smashed daily records for Covid infections worldwide, sickening millions. Visits to restaurants around the holidays in the U.S. were down approximately 16% compared to pre-pandemic levels, while the number of businesses open in the leisure and hospitality industry reportedly fell by about 25%, and the number of employees working fell by 12%. Meanwhile, thousands of flights were canceled nationwide over the holiday period, due to sick workers in the airline industry.
- The takeaway: The Omicron variant has more than 30 mutations, making it drastically more contagious than previous strains, although there is some evidence that it may make people less sick and lead to fewer hospitalizations than earlier strains, such as the Delta variant. In addition to Omicron, the U.S. economy has been struggling with the highest rate of inflation in a generation, near 7% in November, as well as supply chain interruptions and a lack of workers, due to something called the Great Resignation. A record 4 million people quit their jobs in July, 2021, leaving a record 11 million jobs open nationwide.
Tax credit crunch. Payments for the advanced child tax credit, which provided nearly 30 million qualifying families with hundreds of dollars in monthly federal payments, ended in December, 2021. The $80 billion program was part of the American Rescue Plan, and raised the yearly credit to $3,600 for children under six, and to $3,000 for children between six from its current $2,000 per child. In addition to increasing the amount per child, the credit was also issued partially in advanced installments between July 15, 2021 and the end of the year, instead of as a lump sum as part of a tax return.
- The takeaway: The advanced tax credit was the latest pandemic-era benefit for struggling families as Covid-19 cases continue to rise, and new strains of the virus threaten shutdowns. Extra unemployment benefits halted in September 2021, and the federal government sent out its last round of direct stimulus payments in the spring of 2021. Democrats in Congress were reportedly hoping that the changes to the child tax credit would be popular, allowing them to pass more funding for it in 2022. However, split public opinion and pushback from moderates such as Senator Joe Manchin (D-WV), has prevented the approval of such financing. One study from Columbia University found that the changes to the credit have resulted in a 30% reduction in the child poverty rate.
5G OMG. Transportation Secretary Pete Buttigieg and Federal Aviation Administration (FAA) lead Steve Dickson have reportedly asked AT&T and Verizon to delay their launch of 5G and C-Band wireless service, citing potential interference with aircraft electronics and aviation systems. The companies had scheduled 5G rollout for January 5, 2022. Buttigieg and Dickson, in a letter sent to the companies on December 31, 2021, asked the companies to delay deployment of 5G for no more than two weeks. Verizon and AT&T won an $80 billion federal auction to develop the 5G spectrum in American airspace. Airlines and transportation authorities have emphasized potential disruptions to flights, while the wireless carriers urged that the letter was intended to make wireless carriers pay for costs of upgrades to air travel technology.
- The takeaway: While AT&T and Verizons resisted the delay, representatives from the company said they might be willing to pause the launch of 5G near particular airports for six months. Such a deal would allow the carriers to test 5G service, while potentially limiting flight disruptions. The conflict comes as the spread of new variants of Covid-19 has caused flight delays and cancellations around the holidays.
Makin’ Bacon. Amid surging prices for food nationwide, the Supreme Court will consider a petition from the National Pork Producers Council and the American Farm Bureau Federation on January 7, 2022 over a California law known as the Prevention of Cruelty to Animals Act, or Proposition 12. The law, passed by 63% of California residents in 2018, outlines minimum space requirements for farm animals, and bans the sale of meat from animals where those requirements were not met. Those found in violation of the law can face $1,000 in fines, 180 days in jail, and misdemeanor charges.
- The takeaway: Hog farmers would reportedly be the most affected by the law, which could lead to price increases for pork products such as bacon. Proposition 12 would require hogs to have 24 square feet of floor space, which could force farmers to keep them in group pens. Pork prices are already on the rise. Over the last year, the price of pork has risen 17%, as inflation pushes consumer costs up across the board.
Here’s what we covered in our last Scan of 2021:
- The Fed announced it will end its bond-buying program earlier than expected and may raise the federal funds rate three times in 2022.
- Bruce Springsteen reportedly sold the rights to his catalogue of songs to Sony Music Entertainment.
- The House of Representatives voted to increase the government’s borrowing limit by $2.5 trillion, preventing them from default until early 2023.
- Restaurants nationwide are reportedly trimming their menus.
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