The Weekly Scan March 21, 2022

Welcome to the Weekly Scan. Here’s what we’re following for the week of March 21, 2022.

Gotta go up to get down. Last week, the Federal Reserve (the Fed) raised the federal funds rate by a quarter of a percentage point, its first increase since 2018. The new rate is between 0.25% and 0.5%. The Fed slashed the rate to near 0% in March 2020 as the pandemic shut down the economy. The Fed reportedly will raise that rate up to six more times in 2022. This central interest rate affects interest rates throughout the economy. One goal of raising interest rates is to combat inflation, the rate at which prices for goods and services increase over a period of time. Ideally, higher interest rates make it more difficult for people to borrow money for cars, homes, and more, so demand for those things slows down, and so do prices. 

• The takeaway: Inflation has climbed steadily over the past several months, fueled by low borrowing costs, high consumer demand, and supply chain issues, among other things. In February 2022, the inflation rate, which is measured by the Consumer Price Index (CPI), was 7.9% for the year ending February 2022, the largest spike since 1982. By raising the federal funds rate periodically throughout the year, the Fed is aiming for a “soft landing” from the current state of inflation. Raising interest rates can slow economic growth, so the Fed wants to move slowly to avoid triggering a recession.

New York Times

Can I change my order? The U.S. Department of Defense will reportedly request 61 F-35s from Lockheed Martin in its 2023 budget plan, 33 fewer stealth jets than the department had initially planned to purchase. The request includes 33 for the Air Force, 13 for the Navy, and 15 for the Marine Corps. The U.S. will also increase its purchase of Boeing’s non-stealthy F-15EX jets to 24, up from 14. The reduction of the F-35 request  could be a controversial change to the $770 billion budget plan for the year beginning on October 1, 2023. Currently, the U.S. is using F-35s to monitor Russia’s invasion of Ukraine. 

• The takeaway: The reasoning behind the Defense Department’s decision won’t be known publicly until the actual budget is released. But the change could be related to the F-35’s “Block 4” software and hardware upgrade, which is already being used on the jets despite it being “immature, deficient and insufficiently tested,” according to the Pentagon. The department could be holding off on its objective  to purchase 1,763 of the jets until that Block 4 update is successfully deployed. Additionally, a combat simulation of the jets’ against Russian and Chinese technology has been delayed to 2023, which could have contributed to the budget change.

Bloomberg

Schultz takes an extra shift. Howard Schultz is returning to Starbucks as CEO for the third time to tackle the current issues facing the coffee chain. Schultz served as the company’s CEO from 1987 to 2000, making Starbucks the household name it is today. He returned as CEO again in 2008 with the goal of improving performance, and retired again in 2017, when he was replaced by Kevin Johnson, who will step down and take on an advisory role. As CEO, Schultz will earn a base salary of one dollar, with company benefits. He won’t receive any other compensation or benefits. 

• The takeaway: When Schultz resumes his duties, he’ll be tasked with handling the increasing push for unionization among Starbucks workers, as well as recovery from a pandemic-induced sales drop. Of the 9,000 total Starbucks locations, 130 have now petitioned to unionize. Six locations are seeking representation from the Starbucks Workers Union. Some investors have asked Starbucks not to engage with employees unionizing, but Starbucks has said they hope to keep the line of communication open. Starbucks has also announced three wage increases, which are expected to amount to $1 billion. Additionally, at the height of the pandemic, Starbucks’ same-store sales fell for the first time in more than 10 years. 

ABC News

You’re hired. Walmart said that it plans to add 50,000 workers by April 30, 2022, the end of its first quarter. The new hires will cover store roles, as well as those in health and wellness, and advertising. Throughout 2021, the retail chain hired more than 100,000 workers, including 5,500 pharmacists and pharmacy managers, more than 13,000 pharmacy technicians, and roughly 4,500 truck drivers. Walmart is the largest employer in the U.S., with 1.6 million employees on its payroll in the U.S., and 2.3 million workers globally. 

• The takeaway: Walmart’s hiring announcement comes as employers struggle to attract workers during a national labor shortage. The retail giant raised its minimum wage for workers to $12 in September 2021, and pays $30 per hour for some roles. The company’s average hourly wage is $16.40. Walmart has also started offering its employees free telehealth and mental health services, as it attempts to rebuild its hiring and human-resources practices. And over the summer of 2021, Walmart said it would cover some college costs for workers. Walmart isn’t the only company wooing workers. Companies like Target, Amazon, and Costco are raising wages and offering new perks. Target has raised its minimum wage to as much as $24. 

CNN and Wall Street Journal

Other stories we’re following:

Make it. Despite ongoing supply chain concerns, U.S. factory production, a key indicator of economic health, rose to its highest level in four months in February, while manufacturing capacity increased by the biggest amount since 2018.

Can we watch? Streaming giant Netflix said it will test charging people who share account passwords outside of their families. They will encourage users to set up sub-accounts for $3 a month.

You’ve got the power. Layoffs reached a two-decade low, with employers letting go or discharging less than 1% of staff in December 2021, according to the Department of Labor.

 Here’s what we covered last week in the Scan: 

• Inflation continued to climb in February 2022, according to the latest data from the Bureau of Labor Statistics. 
• President Biden has banned imports of oil, gas, and coal from Russia as Russia continues to invade Ukraine. 
• Tesla CEO Elon Musk asked a federal judge to throw out a previous settlement he reached with the Securities and Exchange Commission (SEC)  in 2018 over allegations of fraud.