This week in charts
National elections
E.U. industrials
U.S. equities
Over the last decade, the excess-of-cash return on the S&P 500 averaged 11.9% per year. Relative to history, this is an exceptional outcome—well above the 90th percentile of rolling ten-year performance across global developed equity markets since January 1, 1950.
Corporate profits
Visualizing 150 Years of S&P 500 Returns
Population
China Is Pressing Women to Have More Babies. Many Are Saying No.
Fed up with government harassment and wary of the sacrifices of child-rearing, many young women are putting themselves ahead of what Beijing and their families want. Their refusal has set off a crisis for the Communist Party, which desperately needs more babies to rejuvenate China’s aging population.
With the number of babies in free fall—fewer than 10 million were born in 2022, compared with around 16 million in 2012—China is headed toward a demographic collapse. China’s population, now around 1.4 billion, is likely to drop to just around half a billion by 2100, according to some projections. Women are taking the blame.
In October, Chinese leader Xi Jinping urged the state-backed All-China Women’s Federation to “prevent and resolve risks in the women’s field,” according to an official account of the speech.
Party lectures on “family values” are having little effect, even in rural parts of China.
When Beijing said it would abolish its 35-year-old one-child policy in 2015, officials expected a baby boom. Instead, they got a baby bust.
Demographers and researchers predict that data will show Chinese births dipping below 9 million in 2023. The United Nations forecasts 23 million births in India, which in 2023 passed China as the world’s most populous country. The U.S. will have around 3.7 million babies born in 2023, the U.N. estimated.
The one-child policy brought much of China’s demographic gloom: There are fewer young people than in the past, including millions fewer women of childbearing age every year. Those women are increasingly reluctant to marry and have children, accelerating the population decline.
How Supply-Chain Snarls Made Everyone Wrong on Inflation
When U.S. inflation first began to heat up in 2021, it was written off by many economists as largely a temporary thing. The interaction of reopening economies with the supply-chain snarls the pandemic had set off caused a burst higher in prices that wouldn’t last. Or, as Federal Reserve policymakers put it when they left rates on hold near zero in November 2021, “Inflation is elevated, largely reflecting factors that are expected to be transitory.”
As 2022 got under way, the New York Fed’s Global Supply Chain Pressure Index, a widely followed measure based on freight costs and manufacturing surveys, showed the shipping snarls that had beset the economy were getting untangled. By September 2022, it was back to prepandemic levels. But inflation kept running hot: That same month, the Commerce Department measure that the Fed prefers showed that prices excluding food and energy were up 5.5% from a year earlier, just shy of the 39-year high it hit that February. By then some economists were advancing a new narrative—one in which inflation was getting driven by a tight labor market, and where the economy would need to endure a spate of high unemployment to bring prices under control.
Since then, however, inflation has cooled markedly even though unemployment stayed low. How could this happen? At least a partial explanation might be that those supply-chain problems really were transitory, but were also in place longer than most economists realized.
Overseas container shipping accounts for a major portion of international trade, and containerships carry transceivers that broadcast positional information, including their headings and speed. Economists Xiwen Bai, Jesús Fernández-Villaverde, Yiliang Li and Francesco Zanetti used this data to determine how bad congestion problems at container ports worldwide were in any given month. If, for instance, ships’ headings show that they are quickly arriving at berth, where they can load and unload cargo, a port probably isn’t experiencing congestion problems. If, on the other hand, ships spend time moored in an anchorage, the port is more likely to be dealing with congestion problems. They used this to create an average congestion rate measure, which shows globally the share of containerships that experienced delays loading or unloading after arriving at port.
The measure shows delays increasing in late 2020, and by the start of 2022 showed that 35% of ships were getting delayed versus an average of 26% in 2019. Unlike the New York Fed’s index, it shows congestion problems at global ports stayed elevated through July 2022 before falling. Because these congestion problems are representative of costs to businesses beyond the prices they paid to ship goods, they help explain why inflation was so persistent.
“What really kills you is when they tell you it will arrive on Monday but it arrives on Friday,” says Fernández-Villaverde.
Starting in August 2022, average congestion rates started falling, and shortly after that core inflation turned lower, too. According to the Commerce Department, core prices were up 3.2% from a year earlier in November. Compared with six months earlier, they were up just 1.9% at an annual rate.
But the broader takeaway is this: If supply-chain problems lasted longer than economists recognized, neither inflation’s persistence through much of 2022, nor its cooling in 2023, is as surprising as it seemed.
This week’s fun finds
2024 predictions
It was a mere four years ago that Bird, the rent-a-scooter company, was rewarded with a $2.5 billion valuation for clogging up the sidewalks of America with its electric devices. Different times. Back then, it was plausible this Silicon Valley–ish company, flush with cash from venture capitalists and, later, SPAC financing, would capitalize on the very real movement to make cities less reliant on cars and take advantage of the hundreds of miles of bike lanes that New York and other megalopolises were building. People needed to get around, so why not scoot? The thesis, however, didn’t work out exactly the way they thought it would. Now, crushed under the weight of personal injury lawsuits and inflation, the company is worth about $1.3 million and falling and has filed for bankruptcy protection.
To understand why Bird has failed, it’s important to disentangle it from its lofty marketing. The scooter company has a lot in common with another recent crash-and-burn from that era: WeWork. Where WeWork infamously aimed to “elevate the world’s consciousness,” Bird’s wildly ambitious goal was “to make cities more livable by reducing car usage, lowering carbon emissions, and improving the safety of all road users,” according to its securities filings. Its tagline, plastered over the New York Stock Exchange, was “Cleaner Air. Less Traffic. More Joy.” It said it was “actively reducing the hundreds of billions of trips under five miles made by gas-powered cars every year.” The buzzword here was micromobility. Not quite as lofty as Neumann’s cult-y hype machine, but come on: They were renting scooters for $3.90 a mile in some cities. Their goal was to make bazillions of dollars. Even their claim to tamp down our reliance on cars was, putting it generously, a stretch.
To be fair to the company, it’s possible that its descent into bankruptcy could help turn it around. Personal injury lawsuits are a nuisance for Bird, but it probably should have thought harder about how to avoid dumping tripping hazards onto busy sidewalks if it didn’t want to get sued. The company had hundreds of millions of dollars in debt, much of which got more expensive as interest rates rose. Bird is clearly a product of the heady, pre-pandemic era of the VC-backed tech world. In that way, it’s possible to see Bird as a victim of timing — the right idea with the wrong era of leaders, making the wrong decisions for a market that wasn’t as big as they thought. But there’s still a strong argument to make that people need more ways to get around. Congestion pricing is finally coming to New York, and other cities are likely to follow suit. Subway ridership is up, but the MTA is still plagued by delays. Whether or not Bird can actually emerge from bankruptcy is an open question. What’s more likely is that its vision of the future will live on without it.
