May 9, 2022
The Weekly Scan May 9, 2022
By Stash Team
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 9, 2022.
It’s half time. The Federal Reserve (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. The federal funds rate is now set between 0.75% and 1%.. The last time the Fed raised the interest rate so dramatically was in 2000. The Fed also said it plans to reduce its $9 trillion asset portfolio, but has yet to outline the plan to achieve that goal. In March, the Fed increased the federal funds rate a quarter of a percentage point, the first increase since 2018. Ideally, higher interest rates make it more difficult for people to borrow money for cars, homes, and more, so demand for those things slows down, and so do price increases.
- The takeaway: The inflation rate has remained high in recent months. Inflation increased at an annualized 8.5% rate in March, the biggest increase since 1981, according to data from the latest Consumer Price Index (CPI). Inflation has increased steadily since 2021. The CPI is a cost of living index that measures the value of goods and services consumed by people in the U.S. Various factors have contributed to increasing inflation, including supply-chain issues and the war in Ukraine.
A broken record. Both job openings and quits hit all-time highs during March, according to the latest report from the Bureau of Labor Statistics, as the Great Resignation continues. The number of quits reached 4.5 million, while there were 11.55 million job openings, meaning that the number of jobs was higher than the number of available employees by 5.6 million. The number of open jobs and quits increased by 205,000 and 152,000, respectively, between February and March 2022. The number of job openings outweighs the number of job seekers. New hires totaled 6.74 million in March, a slight month-over-month decrease. In the leisure and hospitality sectors, job openings fell 2.6% by 45,000 and hiring increased by 40,000. The unemployment rate in those industries is 5.9%, higher than it was before the pandemic. Leisure and hospitality numbers are considered indicative of a wider economic recovery.
- The takeaway: The Great Resignation has caused shifts in the overall labor market. Workers have more leverage than they have historically, as employers attempt to attract—and keep—employees. Average hourly wages have reportedly increased 5.6% year-over-year, as of March. Other companies have attempted to woo workers with perks. Over the summer of 2021, Walmart said it would cover some college costs for workers. Meanwhile, companies like Target, Amazon, and Costco are raising wages and offering new perks. Target has raised its minimum wage to as much as $24.
Biogen bids adieu. Biotech company Biogen is reportedly ending its work on Aduhelm, the controversial Alzheimer’s drug the U.S. Food and Drug Administration speedily approved in 2021. CEO Michel Vounatsos, who was the primary person behind the introduction of Aduhelm, will also leave the company once a replacement is found for him. The company plans on reducing its spend on marketing its Alzheimer’s treatment in an overall $1 billion cost-reduction plan. Biogen said that in the first quarter of 2022, it booked $275 million in charges from Aduhelm write-offs, which brought the entire company’s first quarter performance down. The biotech firm reported an adjusted net income of $3.62 per share, falling below the projected $4.34 per share.
- The takeaway: Aduhelm was initially met with excitement, since Biogen claimed that the drug mitigates the early effects of Alzheimer’s, which include memory loss. But results of clinical trials of the drug were mixed. Doctors also demonstrated doubts over the cost and efficacy of the drug. And in April, federal government health insurance provider Medicare said that it would not cover Aduhelm for most patients. Most people who would need the drug qualify for Medicare. The cost of the drug was initially $56,000 per year, before Biogen cut the price in half to $28,000.
Roe v. Wade and workers. Many large companies announced initiatives to support employees seeking abortions. That follows the leak last week of a draft judgment from the Supreme Court showing a majority of the top court’s justices are prepared to overturn the 1973 Roe v. Wade decision legalizing abortion. Amazon, Citigroup, Levi Strauss, Match Group, and Yelp have all announed plans to help employees who need to leave their state for an abortion. Salesforce also said in September that it would help its workers move out of Texas, which passed the country’s most restrictive aboriton law.
- The takeaway: Increasingly, companies are taking sides on political issues that could affect their employees. In 2021, after several states enacted harsher voting restrictions, executives from companies such as Amazon, Google, BlackRock, and Starbucks all signed a statement expressing opposition to those laws. And recently, Disney found itself in a tricky spot as it responded to Florida’s “Don’t Say Gay Bill,” which banned public school teachers from teaching students in kindergarten to third grade about sexuality and gender identity. Disney didn’t initially speak out on the bill. But after the company came out against it, the Florida House of Representatives voted to remove Disney World’s distinction as a special tax district. That designation has allowed Disney to self-govern the park for 55 years, and has saved the company millions in taxes and fees annually.
Other stories we’re following:
Nay for J&J. The Food and Drug Administration (FDA) restricted the use of Johnson & Johnson’s Covid-19 vaccine. The decision came in response to 60 cases of blood clots and nine deaths following use of the Johnson & Johnson vaccine.
Uber XL. Uber reported $6.9 billion in revenue for the first quarter of 2022, a 136% year-over-year increase. The ride-sharing app also lost $5.6 billion due to investments in other apps.
Here’s what we covered last week in the Scan:
- U.S. gross domestic product (GDP) decreased 0.4%—or 1.4% annualized—in the first quarter of 2022.
- President Biden is reportedly considering large-scale forgiveness of federal student loan debt.
- The Food and Drug Administration (FDA) released a long-expected plan to ban the sale of menthol cigarettes and flavored cigars.
- Ford has started to roll out its electric F-150 Lightning pick-up truck. The carmaker says it has had strong demand with 200,000 pre-orders for the electric truck.