📰 This odd economy

Author

The Report
March 09, 2023

Good morning! The economy's unusual state is explained, a new scientific discovery could lead to longer-lasting batteries, and the US housing market has a shortage of 6.5 million homes.

ECONOMY

Why the Economy Feels Odd

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The current economic cycle differs from previous cycles in three significant ways, as the supply of goods and services is as important as demand, the high levels of inflation, and the absence of a recession despite high-interest rates.

Here's the breakdown:

  • The focus on supply follows a decline in output during the COVID-19 pandemic, which has led to many people leaving the labor force, as well as disruptions to supply chains.

  • Reducing supply increases inflation, making prices higher, and returning supply has the opposite effect.

  • Supply constraints led to reduced output in many industries, leading to a labor shortfall when companies tried to rehire employees.

  • Wages and prices rose faster after the pandemic than after previous demand-driven recessions.

  • The high inflation rate (running at 4% to 5% excluding food and energy) means that the Fed has to push unemployment higher to get inflation down to its target of 2%, leading to concerns about the impact of the Fed's monetary policy on economic growth.

  • The absence of a financial bust means that a recession has not yet materialized.

TECH

Longer Lasting Batteries

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Researchers at the University of Rochester have produced the first commercially accessible material that can eliminate the loss of energy as electricity travels along a wire. This development is a breakthrough in technology and could mean longer-lasting batteries, more efficient power grids, and improved high-speed trains.

Here's the breakdown:

  • The new superconductor can operate at room temperature and a lower pressure than previously discovered superconducting materials.

  • The technology can help create lossless electrical grids, better and cheaper magnets for use in future nuclear fusion reactors, and many other applications.

  • The new material, named "reddmatter," can exist at 69 degrees Fahrenheit and 145,000 psi of pressure, which makes it easier to use than previous materials.

  • The new superconductors will be available in the next five years, which means our phones and laptops will need less electricity to run, giving them longer battery life.

  • A superconducting grid could store solar or wind energy and transfer it over large distances without loss, and superconductors could pave the way to cheaper, better machines that can conduct nuclear fusion.

ECONOMY

The Persistent Housing Shortage

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Realtor.com's report shows a US housing deficit of 6.5 million homes due to the lack of construction in the past decade relative to population growth. Between 2012 and 2022, only 13.3 million housing units were built despite the formation of 15.6 million households.

Here's the breakdown:

  • The gap is cut to 2.3 million homes when new multi-family homes are included.

  • The rate of overall housing starts slowed in 2022 while completions climbed, and the homeowner vacancy rate fell from 2% in 2012 to 0.8% by the end of 2022.

  • To close the existing 2.3 million home gap, the rate of total housing starts, including both single-family and multi-family building, would need to increase by 50% from the 2022 rate to an average rate of 2.3 million housing starts per year, which would take between 2 and 3 years.

  • The shortage of housing stock may keep upward pressure on home pricing as long as the deficit exists.

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