Yellen and Biden Wonder Why People Are Down on the Economy. Here’s the Reason.
A man rides his Citi Bike past a gas station in Manhattan earlier this month.
Treasury Secretary Janet Yellen said yesterday that “it’s amazing how pessimistic” Americans are about the economy, “given that we have the strongest labor market we’ve had in the entire postwar period.”
She must have been asking a rhetorical question, because everyone knows why. Yellen got very close herself when she pointed out that “it’s unlikely that gas prices are going to fall soon.”
That is the answer. For most people, gasoline prices are the economy. Having to pay nearly $5 a gallon—heck, just seeing those gas prices on signs every time you leave the house—creates a lot of bad feelings, outweighing any good vibes that might have come from wage gains.
It may be unfortunate and unfair that people equate high gas prices with a poor economic outlook. President Joe Biden says he has done all he can about gasoline, though he entered office by rejecting a pipeline and pausing new drilling on federal lands. But skyrocketing fuel costs are mainly the result of a war on the other side of the world.
It is also true that unemployment is historically low and pay has really picked up. The Atlanta Federal Reserve’s wage tracker shows median wage growth climbed to 6% in May, the highest since at least 1997, when the series began.
But that doesn’t mean it is wrong to be pessimistic. Even a 6% pay raise doesn’t feel good when inflation is running at a worse than expected 8.6%, latest data for May showed Friday. Add in the fact that it is probably only a minority of the nation’s 117 million workers who are getting really outsize pay packets now and you can see why people are gloomy.
Americans may be making more money, but it doesn’t go as far. So even if we avoid a recession later this year—and Yellen said there is no indication that one is coming—it feels like we are already in one.
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Auto-Safety Regulator Elevates Investigation Into Tesla Autopilot
The National Highway Traffic Safety Administration has elevated its investigation of
The NHTSA began investigating Tesla in August, after the cars, where Autopilot was engaged, struck stationary first-responder vehicles tending to collision scenes. It is expanding that investigation and has identified 15 crash-related injuries and one death.
The NHTSA, part of the Transportation Department, tries to decide within a year if there should be an auto recall or if it should close the investigation. It is looking at 16 crashes, up from the original 11.
In a majority of the 16 crashes, the Teslas issued forward collision warnings just before impact. Automatic emergency braking intervened in about half. In 11 cases, the drivers didn’t take evasive action seconds before impact even though their hands were on the steering wheel, the agency said.
Auto-safety regulators are scrutinizing technologies that automate some or all driving tasks, The Wall Street Journal reported. The agency requires about 100 companies, including
’ Cruise LLC, to report crashes when such systems are being used.
What’s Next: The NHTSA will release new crash data in June in the first detailed public look at the frequency and severity of crashes involving autonomous driving or advanced driver-assistance technology.
High Gas Prices Forcing Businesses and Consumers to Adapt
The high price of gasoline is dealing a blow to nearly every corner of business and forcing changes in consumer behavior. The national average price at the pump reached $5 a gallon on Thursday, according to price-tracking site GasBuddy.
The average price of regular gas is about 26 cents higher than last week and nearly $2-a-gallon higher compared with this time last year, according to AAA. Gasoline prices could reach a national average of $6.20 a gallon by August,
Drivers are buying fewer gallons on each visit to gas stations, but making more frequent trips to fuel up. Shoppers are visiting
Costco Wholesale Corp.
more often for its discounted gasoline.
High gasoline prices cut consumption because drivers shift their routines. A 10% rise in gasoline prices leads to a 2% to 3% decline in gasoline consumption in the short term, Lucas Davis, an economist at the University of California, Berkeley, told The Wall Street Journal.
Energy prices have added to the cost of transportation, ingredients, and packaging.
maker of Oreos and other snacks, said its overall input costs will be up about 10% to 13% this year.
What’s Next: Online car shoppers are getting more interested in hybrid vehicles. Auto makers including
are reporting strong hybrid and plug-in hybrid sales, and sales of some smaller, more economical vehicle models are starting to take off, according to the Journal.
Disney Shakes Up TV Division as Board Throws Support to Chapek
shook up its television division, naming Dana Walden as chairman of General Entertainment Content to succeed Peter Rice, who had been viewed inside the industry as a possible candidate to take over the CEO role of the company one day.
Disney’s chairman Susan Arnold, threw support behind CEO Bob Chapek, who has been under pressure from investors and lawmakers, including a high-profile battle with Florida’s governor.
“We are committed to keeping Disney on the successful path it is on today, and Bob and his leadership team have the support and confidence of the board,” Arnold said in a separate statement on Thursday.
Rice had just renewed his contract in August through the end of 2024. The Wall Street Journal reported that Rice was dismissed, making him the second top Disney executive to be ousted in the past six weeks. A spokeswoman declined to comment on Rice’s behalf to the Journal.
Walden will now lead the part of Disney that churns out some 300 shows annually for ABC network as well as Disney Channel, Hulu, FX, and the relatively new Disney+ streaming service. She joined Disney in 2019 in its acquisition of 21st Century Fox.
What’s Next: Shares of Disney are down 33% this year. A
analyst said this week that investors are growing increasingly skeptical about long-term growth in the streaming industry.
DocuSign Tumbles After Company Cuts Its Outlook
shares were falling sharply, after the e-signature company cut its guidance for the fiscal year ending in January. The company has been facing tough year-over-year comparisons after business was boosted early in the pandemic by the use of its e-signature software for Covid-related government loans and programs.
CEO Dan Springer said in an interview that results in the April quarter were “solid in challenging times,” but the guidance for billings—a signal of future revenue growth—was reduced sharply for the full year. He said there has been some impact on the size of new contracts from macro issues, particularly in parts of Europe closer to Ukraine.
For the January 2023 fiscal year, the company reiterated its revenue guidance of $2.47 billion to $2.482 billion, while trimming billings guidance to a new range of $2.521 billion to $2.541 billion, down from a previous target of $2.706 billion to $2.726 billion.
He also said the company has been experiencing a spike in turnover in the sales force, forcing the company to spend more time on recruiting new staff. “We’ve had to retool the field organization,” he said. “That’s been a challenge.”
What’s Next: It is no surprise investors were seeking signs the company had made more progress adjusting from the spike in business during the pandemic. The stock reaction after Springer said the process isn’t quite finished—down around 23% Friday—shows the extent of that disappointment. It also highlights the pressure on pandemic stars to deliver.
—Eric J. Savitz and Rupert Steiner
Stitch Fix Hits Snag as Demand Wanes and Costs Rise
is the latest company to announce layoffs as rising costs and diminishing demand make for a difficult operating environment. The online personal shopping and styling service said it lost 200,000 active users in the third quarter compared with last year.
Stitch Fix will cut 15% of its salaried workers, or about 330 people, mostly in nontech corporate jobs and styling leadership. The job cuts are expected to create cost savings estimated at $40 million to $60 million in fiscal year 2023.
The move comes as the company reported disappointing results for the fiscal third quarter and gave a weak outlook for the fourth quarter. The stock fell 15% in after-hours trading and is down nearly 59% so far this year.
Stitch Fix sells subscriptions for online clothing and styling services. It gained momentum during the pandemic when people shopped online while staying home. But consumers have returned to in-store shopping, and its introduction of a direct-buying option hasn’t been as strong as hoped.
Other former pandemic success stories are also scaling back hiring or cutting jobs, including
What’s Next: Stitch Fix forecast fourth-quarter revenue of $485 million to $495 million, which would be a decline of 13% to 15% from last year. Analysts are expecting revenue of $494.1 million.
Do you remember this week’s news? Take our quiz below about this week’s news. Tell us how you did in an email to firstname.lastname@example.org.
1. Bowing to inflation pressures, the European Central Bank laid out plans to increase interest rates for the first time in more than a decade. The plans include:
a. Raising its key rate by 25 basis points in July
b. Raising its key interest rate again in September
c. Ending its bond-buying program on July 1
d. All of the above
2. Activist Carl Icahn is dropping a proxy fight with supermarket-chain Kroger over which issue:
a. The treatment of pregnant pigs
b. Out-of-stock products
c. A and B
d. None of the above
3. Individual income tax collections are expected to reach a record $2.6 trillion, or 10.6% of the economy this fiscal year. What do experts believe may be driving the surge?
a. Higher wages
b. Capital gains
c. Business income
d. B and C
4. What is the World Bank’s revised projected global economy growth rate for 2022, raising concerns of stagflation, a period where the economy sees slow growth and high inflation?
5. Which NFL team is a group led by Walmart billionaire-heir Rob Walton buying for $4.65 billion?
a. Carolina Panthers
b. Denver Broncos
c. New York Jets
d. None of the above
—Newsletter edited by Liz Moyer, Camilla Imperiali, Steve Goldstein, Rupert Steiner, Joe Woelfel