China’s Economic Surge Not Shared by Consumers and Small Businesses

(p. B1) Factories are whirring, new apartments are being snapped up, and more jobs are up for grabs. When China released its new economic figures on Friday, they showed a remarkable postpandemic surge.

The question is whether small businesses and Chinese consumers can fully share in the good times.

China reported on Friday that its economy grew by a jaw-dropping 18.3 percent in the first three months of the year compared with the same period last year. While the figure is steep, it is as much a reflection of the past — the country’s output shrank 6.8 percent in the first quarter of 2020 from a year earlier — as it is an indication of how China is doing now.

A year ago, entire cities were shut down, planes were grounded and highways were blocked to control the spread of a relentless virus. Today, global demand for computer screens and video consoles that China makes is soaring as people work from home and as a pandemic recovery beckons. That demand has continued as Americans with stimulus checks look to spend money on patio furniture, electronics and other goods made in Chinese factories.

China’s recovery has also been powered by big infrastructure. Cranes dot city skylines. Construction projects for highways and railroads have provided short-term jobs. Property sales have also helped strengthen economic activity.

But exports and property investment can carry China’s growth only so far.

. . .

(p. B3) A slow vaccination rollout and fresh memories of lockdowns have left many consumers in the country skittish.  . . .  When virus outbreaks occur, the Chinese authorities are quick to put new lockdowns in place, hurting small businesses and their customers.

. . .

Families continue to save at a higher rate than they did before the pandemic, something that worries economists like Louis Kuijs, who is head of Asian economics at Oxford Economics. Mr. Kuijs is looking at household savings as an indication of whether Chinese consumers are ready to start splurging after months of being stuck at home.

“More people still seem to not go all the way in terms of carefree spending,” he said. “At times there are still some lingering Covid concerns, but there is perhaps also a concern about the general economic situation.”

. . .

Mr. [Jinqiu] Li, who is recently married and has a baby at home, is still choosing to save instead of spend. He had planned to work for the family business, but it has been hit by the pandemic and he doesn’t think there is much opportunity for him if he stays.

“The whole family has some sense of crisis,” Mr. Li said. “Because of the pandemic and because of family business, I have a sense of crisis.”

For the full story, see:

Alexandra Stevenson and Cao Li. “China’s Gain Is Hardly Felt by the People.” The New York Times (Friday, April 16, 2021): B1 & B3.

(Note: ellipses, and bracketed first name, added.)

(Note: the online version of the article has the date April 15, 2021, and has the title “China’s Economy Is Booming. Shoppers Are Skittish Anyway.” The quote starting “More people” appeared in the print, but not in the online, version of the article.)

22% of U.S. Small Businesses Closed from February to April 2020

(p. B4) In early February [2020], things were looking good for Practice San Francisco, a center offering individual psychotherapy and classes for children and adults that promote physical and mental well-being. Business was so good that owner Nina Kaiser, a psychologist, had just renovated and moved into a bigger space with the goal of doubling revenue.

Then the coronavirus pandemic hit. In early March [2020], Ms. Kaiser moved all her classes and counseling services online. Fairly quickly, however, video fatigue set in. “After a few weeks, we saw a big downturn in attendance across all our programs, even psychotherapy,” she said. Thus began a period of “endless pivoting and troubleshooting.”

Like many other small businesses, Practice San Francisco, which has been around for three years, has essentially become a start-up again, employing a strategy similar to the “fail fast” approach well known in start-up culture: A change is made to some aspect of the business and if it works, it sticks, but if it fails, data is collected and something else is tried.

“There has been a lot of flying by the seat of your pants,” Ms. Kaiser said. “We see what doesn’t work, where we run into trouble, and we course-correct. It’s this constant, iterative process.”

That process is crucial right now for small businesses, whose numbers dropped by 22 percent — 3.3 million — between February and April [2020], according to the National Bureau of Economic Research.

For the full story, see:

Eilene Zimmerman. “Small-Business Owners Pivot and Troubleshoot In Battle to Stay Afloat.” The New York Times (Tuesday, December 1, 2020): B4.

(Note: bracketed years added.)

(Note: the online version of the story was updated Dec. 17 [sic], 2020, and has the title “Can a Start-Up Mentality Save Small Businesses?”)

The published-online-ahead-of-print version of the National Bureau of Economic Research (NBER) working paper mentioned above is:

Fairlie, Robert. “The Impact of Covid-19 on Small Business Owners: Evidence from the First 3 Months after Widespread Social-Distancing Restrictions.” Journal of Economics & Management Strategy (2020): 10.1111/jems.12400.

Communist Dictator Kim Jong-un Is “Really Sorry” for North Koreans’ Economic Suffering

(p. A10) “Our five-year economic development plan has fallen greatly short of its goals in almost all sectors,” Mr. Kim said in his opening speech to the ruling Workers’ Party’s eighth congress that began in Pyongyang, the capital, on Tuesday [Jan. 5, 2021].

. . .

. . . he had little to show on the economic front. He apologized to his people for failing to live up to their expectations. “I am really sorry for that,” he said, appearing to fight back tears. “My efforts and sincerity have not been sufficient enough to rid our people of the difficulties in their life.”

For the full story, see:

Choe Sang-Hun. “Kim Admits That He’s Failed In His 5-Year-Plan to Rebuild North Korea’s Feeble Economy.” The New York Times (Thursday, January 7, 2021): A10.

(Note: ellipses, and bracketed date, added.)

(Note: the online version of the story was updated Jan. 15, 2021, and has the title “North Korea Party Congress Opens With Kim Jong-un Admitting Failures.”)

Least-Well-Off Were Gaining Before Pandemic

(p. A3) U.S. families’ income and wealth rose in the years heading into the coronavirus pandemic, with those in lower-income and lower-wealth categories reaping relatively large gains, the Federal Reserve said in a report on household finances.

. . .

The distribution of wealth between low- and high-income households narrowed slightly in the latest survey period, Fed economists said, a shift from the 2010-to-2016 period when incomes largely stagnated for all but the most well-off after the 2007-2009 recession.

Families in the lowest two income groups recorded large percentage increases in median net worth, suggesting the decadelong expansion benefited a wide swath of society. Net worth rose 37% to $9,800 for the lowest earners, and increased 40% to $44,000 for the second-lowest group. The median net worth of the highest and second-highest groups declined 8% and 9%, respectively.

For the full story, see:

Harriet Torry. “Household Wealth Rose Before Crisis.” The Wall Street Journal (Tuesday, September 29, 2020): A3.

(Note: ellipsis added.)

(Note: the online version of the story was updated Sep. 28, 2020, and has the title “Household Wealth Rose in Years Before Pandemic, Fed Says.”)

Before Covid-19, Poverty and Unemployment Were Lowest in 50 Years

(p. B8) WASHINGTON — A record-low share of Americans were living in poverty, incomes were climbing, and health insurance coverage was little changed in 2019, a government report released on Tuesday showed — though the circumstances of many have deteriorated as pandemic lockdowns and industry disruptions have thrown millions out of work.

The share of Americans living in poverty fell to 10.5 percent in 2019, the Census Bureau reported, down 1.3 percentage points from 2018. That rate is the lowest since estimates were first published in 1959.

Household incomes increased to their highest level on record dating to 1967, at $68,700 in inflation-adjusted terms. That change came as individual workers saw their earnings climb and as the total number of people working increased.

. . .

Unemployment was hovering at around 3.5 percent before the crisis took hold, the lowest in 50 years, and wages were steadily rising.

For the full story, see:

Jeanna Smialek, Sarah Kliff and Alan Rappeport. “Census Shows Record-Low Poverty in U.S. Before Virus Struck.” The New York Times (Wednesday, September 16, 2020): B8.

(Note: ellipsis added.)

(Note: the online version of the story has the date Sept. 15, 2020, and has the title “U.S. Poverty Hit a Record Low Before the Pandemic Recession.”)

Covid-19 May Make New York City “Cheaper, Messier, More Diverse”

(p. B1) Cities are remarkably resilient. They have risen from the ashes after being carpet-bombed and hit with nuclear weapons. “If you think about pandemics in the past,” noted the Princeton economist Esteban Rossi-Hansberg, “they didn’t destroy cities.”

. . .

So even as the Covid-19 death toll rises in the nation’s most dense urban cores, economists still mostly expect them to bounce back, once there is a vaccine, a treatment or a successful strategy to contain the virus’s spread. “I end up being optimistic,” said the Harvard economist Edward Glaeser. “Because the downside of a nonurban world is so terrible that we are going to spend whatever it takes to prevent that.”

. . .

(p. B5) Mr. Glaeser and colleagues from Harvard and the University of Illinois studied surveys tracking companies that allowed their employees to work from home at least part of the time since March. Over one-half of large businesses and over one-third of small ones didn’t detect any productivity loss. More than one in four reported a productivity increase.

Moreover, the researchers found that about four in 10 companies expect that 40 percent of their employees who switched to remote work during the pandemic will keep doing so after the crisis, at least in part. That’s 16 percent of the work force. Most of these workers are among the more highly educated and well paid.

. . .

“Everybody agrees on what are the key forces,” said Gilles Duranton, an economist at the Wharton School of the University of Pennsylvania. “The question is which will play out, and where are the tipping points?” One of the big remaining questions is whether remote work will prove sustainable. The productivity increases captured in the surveys examined by Mr. Glaeser’s team might prove fleeting.

. . .

Consider life in a reconfigured New York City. Rents are lower, after the departure of many of its bankers and lawyers. There are fewer fancy restaurants, but probably still many cheaper ones. People with lower incomes, including the young, can again afford to live in town. City services may be reduced, but if a fifth or more of workers aren’t going to the office on any given day it will be easier to get around.

Mr. Duranton argues that the cities that will be devastated by Covid-19 are the ones that have been falling for a long time: the Rochesters and the Binghamtons, which lost their sustenance once the manufacturing industries that supported them through much of the 20th century folded or moved away.

But for a city like New York, he said, Covid-19 offers an opportunity for redemption. “New York was running into a dead end, turning into a paradise for the rich,” he said. “Culturally dead.” Moving back to a cheaper, messier, more diverse equilibrium may carry a silver lining.

For the full story, see:

Eduardo Porter. “If Workers Opt Out, Star Cities May Dim.” The New York Times (Tuesday, July 21, 2020): B1 & B5.

(Note: ellipses added.)

(Note: the online version of the story has the same date as the print version,s and has the title “Coronavirus Threatens the Luster of Superstar Cities.”)

The study co-authored by Glaeser and mentioned above is:

Bartik, Alexander W., Zoe Cullen, Edward L. Glaeser, Michael Luca, and Christopher Stanton. “What Jobs Are Being Done at Home During the Covid-19 Crisis? Evidence from Firm-Level Surveys.” Harvard Business School Division of Research Working Paper #20-138, (July 2020).

Capital-Intensive Toilet Paper Firms, Already Near Capacity, Unable to Quickly Fill 600% Surge in Demand

(p. 4) As the chief executive of a company that makes toilet paper, Joey Bergstein has been through an intense few months.

. . .

You’ve mentioned that you anticipated some demand, but nothing like what was about to come.

The week of March 8 [2020] we saw a surge in demand of somewhere between 600 and 750 percent. When you build a supply chain and package, you normally have about a 30 percent buffer to be able to meet a surge in demand. Nobody built a supply chain to be able to respond to that kind of surge in demand. So the team has been in a constant state of triage ever since, and we’re still in that.

. . .

What was it about toilet paper that made it so hard to come by?

First of all, nobody anticipated the level of stocking up you would see on toilet paper. That shocked everybody. But any of these paper businesses are very capital-intensive businesses. You only make money in that business if you’re running your machines pretty close to capacity. So when you have a big surge in demand, it’s hard to increase more than you’re already producing, because you’re generally producing pretty close to capacity. You don’t have the kind of flexibility that you would normally expect to have in another business.

For the full interview, see:

David Gelles, interviewer. “Selling 2-Ply in a Pandemic (It’s Harder Than You Think).” The New York Times, SundayBusiness Section (Sunday, June 7, 2020): 4.

(Note: ellipses, and bracketed year, added; bold in original.)

(Note: the online version of the interview has the date June 5, 2020, and the title “Selling Toilet Paper and Paper Towels During the Pandemic.” The first sentence and the bold questions are from the interviewer David Gelles. The answers after the bold questions are from the interviewee Joey Bergstein.)

Vaccine Progress Gives Hope That Pandemic Will Begin to End in September

(p. A1) In a medical research project nearly unrivaled in its ambition and scope, volunteers worldwide are rolling up their sleeves to receive experimental vaccines against the coronavirus — only months after the virus was identified.

Companies like Inovio and Pfizer have begun early tests of candidates in people to determine whether their vaccines are safe. Researchers at the University of Oxford in England are testing vaccines in human subjects, too, and say they could have one ready for emergency use as soon as September.

. . .

(p. A11) The coronavirus itself has turned out to be clumsy prey, a stable pathogen unlikely to mutate significantly and dodge a vaccine.

“It’s an easier target, which is terrific news,” said Michael Farzan, a virologist at Scripps Research in Jupiter, Fla.

An effective vaccine will be crucial to ending the pandemic, which has sickened at least 4.7 million worldwide and killed at least 324,000. Widespread immunity would reopen the door to lives without social distancing and face masks.

For the full story, see:

Carl Zimmer, Knvul Sheikh and Noah Weiland. “Tests Fuel Hope That Vaccine Is Months, Not Years, Away.” The New York Times (Thursday, May 21, 2020): A1 & A11.

(Note: ellipses added.)

(Note: the online version of the story was updated June [sic] 10, 2020 and has the title “A New Entry in the Race for a Coronavirus Vaccine: Hope.” The online versions says that the title of the New York print version is “Labs Step Up Race to Be First, Or Even 4th, to Find a Vaccine.” the title of my National print version was “Tests Fuel Hope That Vaccine Is Months, Not Years, Away.”)

Like During the Great Depression, Wages May Now Be Sticky-Downward

Economists have sometimes claimed that the reason that the labor market did not quickly clear during the Great Depression, was that wages were sticky-downward. The result of sticky-downward wages can be long-term high levels of unemployment.

(p. 7) Much as now, in the Great Depression people were very focused on maintaining a “fair wage” in the face of economic distress. But this led to nationwide resistance to nominal wage cuts for anyone, even when retail prices were falling rapidly.

This appears to have had the unintended result of inducing employers, who could not afford to keep everyone working at their former wages, to lay off many people. The economists Harold L. Cole of the University of Pennsylvania and Lee E. Ohanian, of U.C.L.A., have shown that this may explain some of the extreme duration of Great Depression unemployment.

For the full commentary, see:

Robert J. Shiller. “ECONOMIC VIEW; Looking Back for Clues About What’s Ahead After the Pandemic.” The New York Times, SundayBusiness Section (Sunday, May 31, 2020): 7.

(Note: the online version of the commentary has the date May 29, 2020 and has the title “ECONOMIC VIEW; Why We Can’t Foresee the Pandemic’s Long-Term Effects.”)

The Cole and Ohanian paper mentioned above, is:

Cole, Harold L., and Lee E. Ohanian. “New Deal Policies and the Persistence of the Great Depression: A General Equilibrium Analysis.” Journal of Political Economy 112, no. 4 (Aug. 2004): 779–816.

In Most Red States, the Benefits of Opening Economies Exceed the Costs

(p. A4) Two-thirds of confirmed coronavirus cases are in states with Democratic governors. When states are measured by the sheer number of coronavirus cases, six of the top seven have Democratic governors. Together, those six blue states have about half of the nation’s cases, though only about a third of its population.

. . .

“A red-state governor is losing his business in exchange for blue-state lives,” said Angus Deaton, a Nobel Prize-winning economist at a Brookings Institution seminar last week. “So for him, opening up is a no-brainer, which is sort of why it is happening.”

He added: “It is a lot to ask those governors to kill their businesses and their GDP for people who live far away, and who they may not even like very much.”

For the full commentary, see:

Gerald F. Seib. “CAPITAL JOURNAL; Virus Exacerbates the Red-Blue Divide.” The Wall Street Journal (Tuesday, May 19, 2020): A4.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date May 18, 2020 and has the title “CAPITAL JOURNAL; Why Coronavirus Increasingly Exacerbates the Red-Blue Divide.”)

Deaton’s comments quoted above, are consistent with the central message of his co-authored book:

Case, Anne, and Angus Deaton. Deaths of Despair and the Future of Capitalism. Princeton, N.J.: Princeton University Press, 2020.