Jan 31, 2022
The Weekly Scan January 31, 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 31, 2022.
Labor pains. The cost of employee wages and salaries increased at an annualized 4% rate in the fourth quarter of 2021, reportedly the biggest increase in 20 years. The jump in labor costs follows a 3.7% increase in last year’s third quarter. The increases come at a time when the economy is combatting record inflation of near 7%, and has reportedly reached maximum employment capacity.
- The takeaway. The combination of higher prices and increased job openings has reportedly encouraged record numbers of workers to demand higher wages or switch jobs. Employers reported nearly 11 million job openings at the end of November, 2021, and unemployment is near 4%. Although the economy has recovered only 84% of jobs lost during the pandemic, the size of the labor force has reportedly grown smaller.
Cryptocoaster. Bitcoin, the world’s biggest cryptocurrency fell more than 12% on January 21, 2022, dropping below $36,000 to its lowest price since July 2021. The cryptocurrency’s price fell 45% from its previous high in November, when it reached nearly $70,000. Bitcoin on the whole lost $600 billion in value. Other cryptocurrencies, such as Ethereum and “meme” coins, also tumbled in recent weeks. The cryptocurrency market altogether lost more than $1 trillion, making this largest drop in dollars for both Bitcoin and the entire cryptocurrency market. Funds that contain cryptocurrency holdings also experienced volatility, with Coinbase and MicroStrategy both declining.
- The takeaway: Cryptocurrencies, as well as stocks, were responding to the expectation that the Federal Reserve (the Fed) would reverse its pandemic policies by raising the federal funds rate, its benchmark interest rate. Last week, the Fed said it would raise interest rates in March 2022, two years after it first slashed rates to near-zero. The Fed lowered rates in order to stimulate the economy during the Covid-19 pandemic. However, concerns over how low rates have contributed to inflation, or the rate at which prices for goods and services increase over a period of time, have pushed the Fed to reverse course. Cryptocurrency is a relatively new concept and tends to be volatile, with prices moving up and down sharply.
Cannabis sales ablaze. For the first time ever, taxes generated from cannabis sales surpassed those generated by alcohol sales in Massachusetts. As of December 2021, excise taxes on marijuana for the first half of the fiscal year totaled $74.2 million, compared to excise taxes for alcohol, which totaled $51.3 million. For the entirety of 2021, excise taxes on marijuana sales came to $112 million, a figure 206% higher than anticipated. Retailers in the state of Massachusetts must pay a 10.75% excise tax on the projected price of recreational cannabis, a 6.25% sales tax, and a local tax of up to 3%. Massachusetts, which has legalized the purchase and recreational or medicinal use of marijuana, opened its first cannabis retailers in November 2018.
- The takeaway: Alcohol sales have traditionally been a massive source of tax revenue for states. Excise taxes generated from alcohol have reportedly been relatively stagnant over the past five years in Massachusetts, with the state charging $0.55 per gallon of wine and $4.05 per gallon of hard alcohol. Illinois also collected $100 million more in taxes from marijuana than from alcohol during 2021. Massachusetts’ and Illinois’ success in taxing marijuana could be a good sign for the many other states that have legalized the recreational use of marijuana in recent years. In 2020 alone, Montana, New Jersey, Arizona, and South Dakota became the latest states to legalize marijuana for recreational use in those states via ballot measures.
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The needle and the damage done. Rock-and-roll artist Neil Young sent a letter to Spotify last week demanding that it remove his library of music as long as it plans to keep content that spreads vaccine misinformation on the platform. Young specifically called out Spotify’s relationship with podcaster Joe Rogan, whose show is Spotify’s most popular podcast. Spotify acquired Rogan’s podcast “The Joe Rogan Experience” for more $100 million in 2020. Rogan and his guests have frequently made false claims about Covid-19, including saying that the vaccine isn’t necessary for the young and healthy and that those who’ve had Covid-19 could face health risks by getting vaccinated. The podcaster has also promoted the use of anti-parasite drug ivermectin to treat Covid-19, which can actually cause health issues. Spotify sided with Rogan over Young, opting to remove Young’s songs.
- The takeaway: The battle between Young and Spotify highlights the position that streaming and social media platforms play in the spread of misinformation, while also not censoring people. Daniel Ek, the company’s CEO, has previously discussed censorship on Spotify, saying: “We have a lot of really well-paid rappers on Spotify too, that make tens of millions of dollars, if not more, each year from Spotify. And we don’t dictate what they’re putting in their songs, either.” In defending the decision to keep Rogan’s podcast on Spotify, the company said it has detailed content policies in place and has removed over 20,000 podcast episodes related to Covid-19 since the start of the pandemic.
Jaws: Covid-19 edition. In 2021, the number of unprovoked shark bites worldwide increased to 73, returning to levels seen before the Covid-19 pandemic. The number of shark attacks fell to 52 in 2020, when beaches closed and people avoided traveling because of the pandemic. The five-year average for the number of shark attacks, however, remains at 71. Forty-seven of the shark attacks reported in 2021 occurred in the U.S., while the others were reported in Australia, New Zealand, Brazil, and South Africa. In the U.S., most attacks happened in Florida, where blacktip sharks tend to hunt in warm, shallow waters. Globally, most of the bites can be attributed to great white sharks, which have been growing in population in recent years.
- The takeaway: The return to pre-pandemic shark attack numbers is reportedly another indication that the travel industry is recovering, after people spent most of 2020 inside to prevent the spread of Covid-19. The rollout of Covid-19 vaccines in 2021 has made it increasingly possible for people to travel and go to beaches. Demand for flights grew in 2021, as people traveled for summer vacations and holiday get-togethers more than they did in the previous year.
Here’s what we covered last week in the Scan:
- Microprocessor maker Intel said that it will invest $20 billion in the construction of two new semiconductor factories near Columbus, Ohio.
- Exercise equipment company Peloton will pause production of several of its most popular connected fitness products.
- As part of its effort to expand into the metaverse, Microsoft announced that it will acquire video game maker Activision Blizzard .
- “We Don’t Talk About Bruno,” a song from Encanto, became the first song from a Walt Disney Animation Studios movie to reach the top of Billboard Streaming Songs chart.