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The World
Treasury Secretary Janet Yellen warned interest rates may need to rise to keep the U.S. economy from overheating, in prerecorded comments from Monday that exacerbated a sell-off in technology stocks. Yesterday, the former Fed Chair played down her previous comments, saying “that’s not something I’m predicting or recommending… I don’t think there’s going to be an inflationary problem, but if there is, the Fed can be counted on to address it,” she said Tuesday in an interview at The Wall Street Journal’s CEO Council Summit. (Financial Times, Wall Street Journal)
Consumer demand drove U.S. imports to a record high in March. The trade deficit widened to $74.4 billion as imports were up 6.3% and exports rose 6.6%. (Wall Street Journal)
The booming U.S. recovery is leaving some communities completely behind: The national unemployment gap between white and Black groups, and between whites and Hispanics, widened by more than 2.9 and 2.3 percentage points, respectively, by fall of 2020. The recovery is also patchy geographically, with minority communities facing more substantial unemployment gaps in cities like Dallas and Philadelphia, compared to Phoenix and San Francisco. The difference primarily comes down to local labor conditions and fluctuations in industries that typically hire greater shares of minorities, which may vary from city to city. (City Lab)
Corporate America’s campaign to defend voting rights has moved on to Texas, with dozens of companies including Microsoft, HP and Salesforce calling on local officials to oppose changes that would restrict eligible voters’ access to the ballot. The open letter marks the latest in a series of rebukes by large companies of voting bills proposed by Republicans after Trump’s election loss. The Fair Elections Texas letter, whose signatories included American Airlines, Levi Strauss and Unilever, pitched ballot accessibility as popular with voters of both parties, good for business and core to companies’ commitments to racial equity. (Financial Times, Texas Tribune)
How two Black CEOs got corporate America to pay attention to voting rights: Ken Chenault, former head of American Express, and Ken Frazier, head of Merck, have helped lead the campaign to get companies involved. (Washington Post)
Everyone in the UK aged over 50 will be offered a third Covid-19 vaccination jab in the autumn in an attempt to eradicate the threat from the infection entirely by Christmas. (The Times)
Germany canceled Oktoberfest for 2nd year over virus fears. Australia told its citizens in India: Don’t come home. (Associated Press, New York Times)
Fierce new Covid-19 waves are enveloping other developing countries. Nations ranging from Laos to Thailand in Southeast Asia, and those bordering India such as Bhutan and Nepal, have been reporting significant surges in infections in the past few weeks. (Bloomberg)
New app usage data suggest U.S. interest in activities such as travel and live entertainment is starting to recover. In March, according to Census Bureau data, sales at eating and drinking places rose 36% from their 2020 level, while total retail sales were up 9.8%. During the first week of April, 45% of Americans said they had dined out, up from 29% in early February, according to the pollster Ipsos. Demand is even higher for outdoor dining. According to Morning Consult, 68% of U.S. adults said they felt safe sitting down for a meal outside. (Wall Street Journal)
Israel Prime Minister Benjamin Netanyahu failed to form a government ahead of a midnight Tuesday-Wednesday deadline, telling the president he could not muster a majority and leaving him close to losing power after 12 straight years in office. However, the rival bloc of parties could also fail to build a Knesset majority, and Netanyahu continues as transitional prime minister for the time being. (Times of Israel)
Germany’s interior minister has said that a dramatic rise in rightwing extremist crime demonstrates a “brutalization” of society and poses the biggest threat to the country’s stability. Police recorded almost 24,000 far-right crimes last year, a rise of almost 6% on the previous year and the highest level since records began 20 years ago. Crimes ranged from displaying Nazi symbols and antisemitic remarks to physical attacks and murder. (The Guardian)
The nation's largest HBCU is having a blockbuster year for fundraising. North Carolina A&T State University in Greensboro has raised $88 million since its fiscal year began last summer. That's almost six times what the university typically fundraises annually — and the fiscal year isn't over yet. (NPR)
Antarctic ice sheet melting will lift the sea level higher than thought; new calculations show the rise due to warming would be 30% above forecasts. (Harvard Gazette)
Economy
Goldman Sachs told bankers in the U.S. and UK that they should be ready to return to the office next month. U.S. staff were asked to be ready to report to the office by June 14, while UK employees will be called back one week later on June 21. (Financial Times)
JPMorgan will require employees to return to their offices by July, striking a blow to the remote-work trend. CEO Jamie Dimon wasn’t sold on operating virtually. He said, “Most professionals learn their job through an apprenticeship model, which is almost impossible to replicate in the Zoom world.” The CEO expressed his concern, “Over time, this drawback could dramatically undermine the character and culture [of the company.]” According to JPMorgan, relying too much upon “Zoom meetings actually slows down decision making because there is little immediate follow-up.” With remote work, there is an absence of “spontaneous learning and creativity because you don’t run into people at the coffee machine, talk with clients in unplanned scenarios or travel to meet with customers and employees for feedback on your products and services.” (Forbes)
Why Working from Home Will Stick: A fascinating new paper from Stanford, University of Chicago and Instituto Tecnologico Autonomo de Mexico: (National Bureau of Economic Research)
Our data say that 20% of full workdays will be supplied from home after the pandemic ends, compared with just 5% before. We develop evidence on five reasons for this large shift: better-than-expected WFH experiences, new investments in physical and human capital that enable WFH, greatly diminished stigma associated with WFH, lingering concerns about crowds and contagion risks, and a pandemic-driven surge in technological innovations that support WFH.
We also use our survey data to project three consequences: First, employees will enjoy large benefits from greater remote work, especially those with higher earnings. Second, the shift to WFH will directly reduce spending in major city centers by at least 5-10 percent relative to the pre-pandemic situation. Third, our data on employer plans and the relative productivity of WFH imply a 5 percent productivity boost in the post-pandemic economy due to re-optimized working arrangements. Only one-fifth of this productivity gain will show up in conventional productivity measures, because they do not capture the time savings from less commuting.
Earnings: Lyft posts significantly lower losses than expected; Activision Blizzard raises annual sales forecast on 'Call of Duty' boost; Tinder owner Match bets on 'summer of love' to lift revenue as curbs ease. (Reuters)
Auto makers are retreating from 50 years of “just-in-time” manufacturing. The hyperefficient auto supply chain is undergoing its biggest transformation in more than half a century, accelerated by the troubles car makers have suffered during the pandemic. After sudden swings in demand, freak weather and a series of accidents, they are reassessing their basic assumption that they could always get the parts they needed when they needed them. “The just-in-time model is designed for supply-chain efficiencies and economies of scale,” said Ashwani Gupta, Nissan Motor Co.’s chief operating officer. “The repercussions of an unprecedented crisis like Covid highlight the fragility of our supply-chain model.” (Wall Street Journal)
A wave of cash flooding bank balance sheets has prompted some of the largest US lenders to advise corporate clients to move money out of deposits. Banks including JPMorgan Chase and Citigroup have held conversations with some large corporate clients about putting cash into money market funds rather than in deposits. (Financial Times)
The value of UK buyout deals by high-net worth investors shot up by 626% in 2020, rising from GBP132 million in 2019 to GBP958 million. The increasing number of buyout deals led or co-funded by HNWs goes against the overall decline in deal value across the wider private equity market over the same period. (Private Equity Wire)
Technology
Young investors are flocking to Discord and Telegram for financial advice. The live chat rooms are quicker than message boards and more engaging than prerecorded videos. (Wall Street Journal)
How did Atlanta become a top breeding ground for billion-dollar startups in the Southeast? Over the past five years, the Southeastern region, led by Atlanta, has gone from being “one of the best kept secrets” in tech, to a vibrant ecosystem teeming with a herd of the billion dollar tech businesses that are referred to in the investment world as “unicorns” (thanks to their supposed rarity). In those five years venture capital investments surged to $2.1 billion in the region, with $1 billion invested in the last year alone, according to Lisa Calhoun, a partner with the Atlanta based investment firm, Valor Ventures. It’s indicative of the entrepreneurial talent coming from the network of private and public schools across the region like Georgia Tech, the University of Alabama, Auburn, the University of Georgia, Vanderbilt, Emory, and the historically black colleges and universities like Morehouse, Spelman, and Xavier. And it’s also a sign of a reinvestment in local entrepreneurship — a decades-long campaign to turn Atlanta into the center of a hub-and-spoke network of startup cities that spans Miami to Atlanta, with stops in Birmingham, Nashville, New Orleans. (TechCrunch)
Twitter’s acquisition spree continued with Scroll, a $5-a-month subscription service that removes ads from participating news sites. Twitter is working on building out a new kind of subscription plan that will include Scroll, the recently acquired Revue newsletter service, and other homegrown Twitter services. In a blog post announcing the deal, Scroll CEO Tony Haile says that one reason he sold his company is because “Twitter’s ambitions are larger than people suspect.” (The Verge)
Taiwan Semiconductor Manufacturing Co is planning to build several more chipmaking factories in the U.S. state of Arizona beyond the one currently planned. (Reuters)
WhatsApp relaunched a feature in Brazil allowing users to send each other money after an initial attempt was blocked by regulators and is now pushing to launch business payments in the market as well. The Facebook-owned messaging app said it would bring back person-to-person transfers free of charge in the South American nation, its second-largest market with 120m users, as it pursues plans to introduce payments for businesses in the country. (Financial Times)
The 70-30 revenue split is causing a reckoning in the game industry. Once upon a time, the 70-30 split was revolutionary. Compared to the share of revenues taken by GameStop or Walmart and the costs associated with physical retail, a flat 30% commission was a cause for celebration. And so game makers flocked to digital, and sales soared. But the 70-30 model is now coming under close scrutiny. The last few years have called into question how justified these arrangements are, and what, if anything, might shift attitudes, business models and developer agreements toward a more equitable sharing of profits for creators. (Protocol)
Smart Links
Dogecoin surges ahead of Elon Musk’s upcoming SNL appearance. (CNBC)
We reviewed three at-home covid tests. The results were mixed. (MIT Technology Review)
A blood test may help the diagnosis and treatment of depression. (The Economist)
Will Brexit make Scotland leave the UK? (GZERO Media)
CVS profit up 10%, but warns vaccine hesitancy could dampen earnings. (Healthcare Dive)
NOAA unveils new U.S. climate ‘normals’ that are warmer than ever. (Washington Post)
Live Events
Today, 3 pm ET: A Conversation on the Future of Aid. COVID-19 has made the world poorer. If it means more aid is needed, will wealthy nations heed the call for more aid? What is the role of aid versus investment and trade policy? Where should aid be focused in the future? The event will feature: Rachel Glennerster, chief economist at the United Kingdom’s Foreign, Commonwealth & Development Office (FCDO), and Nancy Birdsall, president emeritus and a senior fellow at the Center for Global Development. (Stanford University)