Economics in the News

Economics in the News - Aug. 24-30 How economics impacts our lives on a daily basis

Economics impacts our lives every day. Below are some of the top storylines from this past week related to economics.

Mexico has turned to television in order to educate its children remotely, due to fears of spreading COVID-19 in schools with in-person classes and unreliable Internet access throughout the country. Many of Mexico’s 30 million public school children are learning via a lesson across a mix of public and private TV channels.

Each student’s school day lasts roughly two and a half hours per day in order to accommodate pre-K to high school. In a culture that averages five hours of TV watched per day, some worry that the decision to educate via television would further encourage a sedentary behavior and lead to future obesity, diabetes and cardiovascular disease. Others worry that children will fall further behind in school if programs are turned off by bored students. [The Wall Street Journal]

The Dow Jones Industrial Average is dropping its longest-tenured member. ExxonMobil, for years known as the world’s largest publicly traded company, joined the Dow in 1928 and will be dropped from the index beginning Monday, Aug. 31. ExxonMobil is one of three companies being removed from the Dow, including pharmaceutical giant Pfizer and defense contractor Raytheon.

Cloud software company Salesforce will replace ExxonMobil on the index. Amgen, a biotech company, and Honeywell, a manufacturing business, will also join the index. The change is due to Apple announcing a 4-for-1 stock split that will slash its share price beginning Monday. As a result of Apple’s lower price per share, the technology sector would make up a less than ideal portion of the Dow’s index. [NPR]

Listen to former Federal Reserve Chair Janet Yellen’s interview on NPR’s The Indicator from Planet Money. She discusses her op-ed piece that she co-authored with Jared Bernstein of the Center of Budget and Policy Priorities.

In the editorial, Yellen accuses Congress of neglecting its fiscal responsibilities and that the Federal Reserve needs assistance in solving the current economic crisis brought on by the COVID-19 pandemic. She argues that the extra $600 unemployment benefit that millions of Americans received through the end of July helped stimulate the economy and warns that without fiscal support the economy could begin to stagnate. [NPR]

Apple and Tesla completed their respective stock splits Monday, Aug. 31, as both companies are being traded at their adjusted prices. Apple’s stock split was a 4-for-1, while Tesla’s is a 5-for-1.

What is a stock split and why do companies do them? A strong misconception is that an investor is buying a company at a lower price, but that isn’t necessarily true when market capitalization is taken into account. Two shares trading at $100 prior to a 2-for-1 split become four shares trading at $50. In each case the investor owns $200 of that stock. Stock splits are becoming less common today than they were in the 1990’s due in part to services such as Robinhood offering fractional shares. [Fortune]

When Hurricane Laura made landfall in Cameron, La., as a Category 4 hurricane, it became the most powerful storm on record to hit Louisiana with wind speeds measuring up to 140 miles per hour.

Taking the brunt of the damage was Lake Charles, a city of 78,000 and many of its jobs in the oil and gas industry. The city left thousands in Lake Charles and the surrounding areas without power, while the storm caused an estimated $8-12 billion in insured losses according to data analytics firm CoreLogic. Experts fear the coronavirus may become a greater threat to the area that has already suffered 7,439 confirmed cases and182 deaths. [The New York Times]

Fed chairman Jerome Powell announced a change in policy. The long-standing 2% inflation target will be ignored. The objective is to stimulate the economy by providing businesses the expectations that interest will remain low for a long time, thereby creating more jobs

The move is aimed with the labor market in mind. Critics argue that the changes would push asset prices to higher levels and do little to boost economic growth. [The Wall Street Journal]

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