May 16, 2022
The Weekly Scan May 16, 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 May 16, 2022.
The debt digest. Household debt in the U.S. totaled a record $15.84 trillion in the first quarter of 2022,, according to a household debt report released by the Federal Reserve Bank of New York. Although it was the smallest increase in a year, the biggest contributor to that jump was a $250 billion jump in mortgage debt, which currently totals $11.8 trillion, or 71% of all household debt. That’s the highest percentage in about 10 years. New mortgage originations and those for refinancing fell 17% to $859 billion, which is still well-above pre-pandemic levels. Both new mortgages and auto loans have decreased for three consecutive quarters.
- The takeaway: The Fed has been taking steps to combat inflation and decrease borrowing by increasing its benchmark interest rate, the federal funds rate. Earlier in May, the Fed raised that rate by half a percentage point, the largest increase in more than 20 years, in an effort to curb inflation. The federal funds rate is now set between 0.75% and 1%. Ideally, higher interest rates make it more difficult for people to borrow money for cars, homes, and more, slowing down the growth in household debt.
Feed me. Parents across the U.S. are facing a critical baby formula shortage. As of April 24, 2022, 40% of retailers were out of stock of top-selling baby formula brands, an increase of nine percentage points from April 3, 2022, and up from 11% in November, 2021. Supply-chain snags, such as a lack of ingredients, packaging problems, a labor shortage, and difficulties getting formula from overseas, have all contributed to the scarcity. Additionally, baby formula recalls in January and February continue to have ramifications for supply. Abbott Nutrition, a division of global health care products provider Abbott, recalled some of its baby formula products after several babies were infected with the bacteria Cronobacter sakazakii. The Food and Drug Administration (FDA) deemed the Sturgis, Michigan plant where those products had been made “unsanitary.”
- The takeaway: The shortage has pushed some retailers to limit the sale of formula products and raise prices. Both CVS and Walgreens are restricting the purchase of baby formula to three items per customer. Online shoppers at Target can buy no more than four containers of baby formula. The most popular brands of baby formula now reportedly cost 18% more on average year-over-year. Seventy-five percent of babies drink formula in the first six months of their lives.
Retweet. Tesla founder Elon Musk announced last week that if his acquisition of Twitter is approved, he would reinstate former President Donald Trump’s account on the platform. Trump’s account was suspended for his role in inciting the January 6th U.S. Capitol riot. Twitter’s board of directors has accepted an offer from Musk to purchase the company for $44 billion, or $54.20 per share. Musk plans to take the company private
- The takeaway: The potential deal between Musk and Twitter has received mixed responses from users and Twitter employees alike. Musk, who has 80 million Twitter followers, has a complicated history with Twitter. In 2018 his tweets figured prominently in a complaint brought by the Securities and Exchange Commission (SEC), which said Musk made fraudulent claims about taking Tesla private. Trump has reportedly said he will not return to Twitter,and will instead focus on his building out his own social media platform.
Uber’s big brake. Uber CEO Dara Khosrowshahi announced that the rideshare company will now treat hiring as a “privilege” and cut spending on areas, such as marketing and incentives. “We will be even more hardcore about costs across the board,” said Khosrowshahi, who emphasized that the company will be deliberate about headcount across departments.
- The takeaway: Uber isn’t the only tech company reexamining its staffing needs. In fact the decision comes in response to the choppy market, which has hit tech stocks especially hard. Meta, the parent company of Facebook announced that it’s slowing or stopping hiring of mid level or senior employees. And investment app Robinhood said that it is letting go roughly 9% of its workers. Shares of Uber hit a 52-week low last week, and have declined more than 45% year-to-date. The tech-heavy Nasdaq composite also experienced its fifth consecutive week of losses, the longest streak of losses since 2012.
Other stories we’re following:
A settlement in Florida. Victims of a Surfside, Florida condo development that collapsed on June 2021 reached a $997 million settlement with insurers. The 12-story Champlain Towers South, near Miami Beach, collapsed without warning, killing 98 people and leaving hundreds homeless. It was the deadliest building collapse in U.S. history.
Gassed up. The national average price for gas reached the highest level on record, at $4.37 per gallon, unadjusted for inflation.
Here’s what we covered last week in the Scan:
- The Fed raised its benchmark interest rate by half a percentage point, the largest increase in more than 20 years, in an effort to curb inflation.
- Both job openings and quits hit all-time highs during March.
- Biogen is reportedly ending its work on Aduhelm, the controversial Alzheimer’s drug.
- Many large companies announced initiatives to support employees seeking abortions.