1. As Work from Home (WFH) becomes a norm, Scott Galloway points to the risks of it contributing to widening of inequality. In particular, sample this correlation between remote workability and median hourly wage.
Clearly, the low paid workers in general have to go to their work places, while their higher paid colleagues can work from their homes.
2. Do high fee colleges generate proportionately higher earning power for their students?
Three years ago, in an examination that should have received a lot more attention, the center-left think tank Third Way put all available data for all higher education institutions together. It found that at 52 percent of the schools, more than half of the enrollees were not earning more than the typical high school graduate six years after they began their studies. After 10 years, the figure was still 29 percent.
This is the Third Way website.
3. FT long read on the success of low cost drones in ariel warfare, especially for Ukrainians in their ongoing war with Russia. The article is about Bayraktar TB2, a sleek unmanned aircraft with a 12 m wingspan, costing just about $5 million, which can stay in air for uptown 27 hours, fly at 7600 m, and can carry a heavy enough weapons load.
It's manufactured by Baykar Technology, a newish Turkish defence firm, which by 2021 became the country's top arms exporter, by selling $664 m worth drones to foreign buyers in nearly 20 countries. The company has become a matter for local pride for Turks and much sought after by small and poor country governments seeking a low-cost option to put down internal conflicts. Incidentally, one of the two brothers who own the company is married to President Erdogan's youngest daughter. Turkey has used the drone extensively in its war on PKK in Kurdistan, with great success.
In addition to heralding Turkey’s ascendancy in global defence, the TB2 embodies a new phase in the era of drone warfare in which lower-cost technology becomes increasingly accessible to regimes that cannot buy from the world’s more-established arms producers... But their role in the Ukrainian campaign against Russia has been a coup for Baykar. Many of the foreign buyers the company is courting lack sophisticated air forces of their own or are interested in using drones against adversaries without advanced air defences. “Drones allow states that don’t necessarily have the resources to buy advanced fighter jets to have that capability,” says Erik Lin-Greenberg, an expert on emerging military technology at MIT. “A TB2 isn’t going to substitute for a fighter jet. [But] many states view drones as allowing them to leapfrog generations of tech.”
4. News about UK inflation prospects,
But with Europe’s gas crisis escalating in August, Citi predicted on Monday that inflation would reach 18.6 per cent in January. Continental European gas prices are more than 14 times their average of the past decade. The benchmark European gas price rallied almost 10 per cent on Monday to €278 per megawatt hour ($81 per million British thermal units), the highest closing price on record and taking the rise over August to 45 per cent. Examining the wholesale figures, Citi predicted that the UK’s retail energy price cap — which limits how much households pay for heating and electricity — would be raised to £4,567 in January and then £5,816 in April, compared with the current level of £1,971 a year. It added that the shifts would lead to inflation “entering the stratosphere”. The bank’s projected rate would be higher than the peak of inflation after the second Opec oil shock of 1979 when CPI reached 17.8 per cent, according to estimates from the Office for National Statistics.
Energy prices have such an outsized role in today's inflation. This raises questions about the efficacy of monetary policy in containing inflation.
5. Another odd thing about the current economic environment is the persistence of strong retail sales growth with weakening consumer confidence.
Consumer confidence surveys, usually a reliable source of advance warning on which way spending is heading, could not paint a much more dire picture of the outlook as the Federal Reserve scrambles to tame rising prices. The University of Michigan’s index of consumer sentiment hit a record low in June as inflation topped 9 per cent. Even after a slight rally, it still suggests that consumers are more gloomy now than they were during the worst of the Covid-19 pandemic, the global financial crisis or any other moment since the series began in 1952. Other surveys support this trend, with McKinsey finding twice the number of economic pessimists in July as in March. Yet this pessimism is not showing up in the sales story being told by Walmart and its rivals. For all the evidence that high petrol and grocery prices are squeezing those with the tightest budgets, or that pandemic-weary Americans now prize holidays over home goods, the retailers’ figures suggest that spending remains strikingly robust... US retail sales rose more than expected in July, once fuel and car purchases were stripped out. Americans are getting less for their dollars, but they are still spending them. That shopping basket-half-full message has been echoed by executives from Visa and Mastercard to General Motors and Starbucks this earnings season. “Consumer sentiment is all over the map . . . But we have so much excess demand,” observed Tesla’s Elon Musk. Inflation, it seems, has severely affected consumers’ morale but has yet to affect their actual buying behaviour to anything like the same extent.
What's driving this divergence?
The clearest explanation is what John Leer, chief economist of data group Morning Consult, calls an unprecedented divergence between inflation and unemployment. Even as small business optimism scrapes recession-like levels, unemployment remains near record lows. The stimulus payments which helped employers keep staff on also allowed consumers to shore up their savings. US households have twice as much cash to hand as they did at the end of 2019, McKinsey noted.
6. Fascinating long read in Nikkei about the tenuous nature of the supply-chain in semiconductor chip industry.
An assessment by BCG suggests there are at least 50 chokepoints in the semiconductor supply chain across design tools, manufacturing, packaging, materials and equipment. These points are defined as areas where 65 per cent or more of a particular item is concentrated in a single country or region. The US dominates chip design tools and at least 23 types of essential equipment, it found. Japan is a leader in the production and critical formulation of critical materials that include wafers as well as photoresists. Europe is the leader in industrial gas...
There is almost no part of the chipmaking process that does not require deep specialisation and no part of the supply chain that can be simply and quickly duplicated... Chemicals and solvents used in chip plants need to reach the so-called part-per-trillion (PPT) grade — one particle to 1tn drops. Gases need to reach a purity of up to 99.9999 per cent — the so-called 6N — when it comes to cutting-edge chip production. For silicon wafers, the basic substrate materials that chips are fabricated on, all need to be as pure as 9N, or 99.9999999 per cent, an executive with the chip material distributor Wah Lee Industrial told Nikkei.
Confirming a common observation, there were more occupations available in large cities than in small cities. For instance, the largest cities had more than 450 occupations, whereas small cities had fewer than 200. And in general, the number of occupations increased by 70 as city-size doubled.
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