Category: Banking

In celebration of our new Shelburne Village branch recently opening, we have collected input and insights from the wonderful community of people working and living in Shelburne, Vermont.

To start with an introduction to Dave Micklas, Asst. Vice President, Branch and Business Development Manager:

“After more than 27 years in banking it’s good to finally work for a Vermont based bank. I reside in Shelburne and have lived here with my wife, Dorothy, for 23 years.  We have two golden retrievers (who we consider our kids), named Daisy and Shea.  My wife also works in Shelburne, managing The Terraces, a retirement community.

As a member of the Shelburne Rotary Club, community service has always been important to me.  I especially enjoy our neighborhood. Like many communities in Shelburne, we are friendly, caring, and all look out for each other.

Local organizations that I would like to highlight are the Shelburne Food Shelf and Shelburne Rescue. I would encourage people to join Rotary and get connected with people that helped build and serve our Country and Community.”

 

Shawn Sweeney of Sweeney Designbuild

“Sweeney Designbuild is a full-service design-build company with a focus on sustainable residential home renovations and custom building.  We are located in a historic structure that was built in 1800 by Benjamin Harrington, directly across the street from the new branch of Union Bank.

We started the business in 2006 here in Shelburne and moved to our present location in 2014.  Before moving in, we undertook a major upgrade to our office space turning what was once a chicken coop into our headquarters.  I personally grew up in Montpelier and one of my fondest memories as a kid was getting to eat rock candy at the Shelburne Museum back in the late ’70s.

Shelburne is a unique community.  Both of my sons went to Shelburne Community School and both graduated from Champlain Valley Union Highschool.  We have been fortunate to have a thriving volunteer fire department, great police force, strong town leadership, and a variety of community boards that have led Shelburne on a well-thought-out path to a sustainable and exciting future.

SCHIPPS, our local Community Food Shelf, all of our houses of worship and the Champlain Housing Trust have all been bedrock contributors to a well-balanced community.”

 

Kenneth Albert of Shelburne Vineyard

“Along with our partners and wonderful staff, we at Shelburne Vineyard are farming 20 acres of cold, hardy grapes on our three Sites located in Shelburne (our home site), as well as our Charlotte and Middlebury area sites. All the winemaking happens at our Shelburne Winery on Route 7 just across from Fiddlehead Brewery and Folino Pizza.

We’ve been in Shelburne for 50 years.  The recognition of how special this place is led to both Gail and I being involved in Shelburne, serving on many town committees. The love of growing things led to planting grapevines.  Our first commercial planting was in 1998 on 3 acres we leased from Shelburne Farms. What we learned there encouraged us to buy our own land and we opened our Rt 7 winery in 2008.

We’ve made life-long friends here in Shelburne and we are still involved in town activities.  Shelburne welcomed us. It is a great place with a classic village center and some spectacular countryside, from lakeside to the open rolling land to the east.

I encourage involvement and volunteering with our town government, and some of the service organizations.  It’s the key to maintaining the character of our town and making the town more welcoming to newcomers. It provides a connection to neighbors, a feeling of belonging to a wonderful place and leads to a sense of accomplishment.”

 

Stephen Kendall

Executive VP – Senior Residential & Consumer Loan Officer  NMLS: 627431

Union Bank

Working out of our Williston Loan Center, Stephen oversees the bank’s residential and consumer lending functions.  He chairs the Town of Shelburne Planning Commission, serves on the Board of Directors of Lyric Theater, and is a member of St. Catherine’s parish in Shelburne.

“My wife, Kelly, and I have lived in Shelburne for 12 years.  I grew up in Shelburne and we live in the house I grew up in!  I was part of the first kindergarten class of Shelburne, went through all of my primary education in Shelburne, and graduated from CVU.

What I especially love about Shelburne is how much it has to offer: great people who love their town; great schools; public access to the lake; Shelburne Farms; Shelburne Museum; great nature trails; quintessential VT village with town green, great shops, restaurants and library; and its close proximity to downtown Burlington and the amenities and services the greater Burlington area offers.

I would recommend people who are in a position to give back with time, treasure or talent, do so!  Especially in the areas they are passionate about whether it be Shelburne Rescue, Shelburne Fire, Pierson Library, Shelburne Food Shelf, service organizations, or town government.  Get involved!”

 

Stay Local. Go far!

As a community bank, we’re loyal to the people and businesses we serve across the great state of Vermont. We invite you to meet our Shelburne Village team and learn more about the convenient banking services you can find at Union Bank. We look forward to being a part of your community!

The U.S. economy continues to recover from widespread disruptions in product and labor markets spawned by the pandemic. But the strong rebound in real gross domestic product (GDP) growth in 2021 has been accompanied by high inflation, which caught most forecasters and Federal Open Market Committee (FOMC) participants by surprise. With inflation on pace to be the highest in more than 30 years, the FOMC—the Fed’s main monetary policymaking body—signaled at its Dec. 14-15 meeting that it has accelerated the unwinding of its asset purchase program (“tapering”) that was announced at the beginning of the pandemic in March 2020. A new COVID-19 variant (omicron) poses a downside risk to the U.S. and global economic outlook in 2022. Another threat to the U.S. economy is the possibility that inflation will remain higher and more persistent than currently expected.

Inflation Nation

Consumer price inflation has surprised to the upside in 2021. For example, in February 2021, the Survey of Professional Forecasters projected that the headline and core personal consumption expenditures price indexes (PCEPI), which are the Fed’s preferred measure of prices, would increase by 2% and 1.8%, respectively, in 2021 (Q4/Q4). By mid-November, these inflation forecasts had risen to 4.9% and 4.1%, respectively. When all of the data are in, it is likely that the headline and core PCEPI inflation rate for 2021 will have been the highest in 30 years or more.

Higher inflation also helped to boost inflation expectations—by some measures, to levels not seen in many years. Rising inflation expectations are troubling because it could signal that households, firms and financial market participants expect high levels of inflation to persist for longer than Fed policymakers expect; this would be an unwelcome development.

Throughout the year, it became apparent that a change in the economy’s wage and price dynamics was triggering outsized inflation increases. Many firms across multiple industries were reporting that labor shortages and supply disruptions were hampering their ability to produce and sell the volume of goods and services demanded by consumers. To fill job openings and compete with other firms for scarce labor, many firms were forced to raise wage rates. When combined with material shortages that raised input costs, unit labor and nonlabor costs began accelerating. But firms were also reporting strong demand for goods and services, which enabled many to pass along their higher costs to customers. Thus, as the FOMC convened its final meeting of the year on Dec. 15, 2021, it continued to be confronted with a development not seen in decades: Firms willing and able to raise prices at jaw-dropping rates.

This was evident in the November consumer price index (CPI) report, as the headline CPI was up by almost 7% in November from a year earlier—the largest increase in more than 39 years. With an inflation rate exhibiting few signs of quickly returning to the FOMC’s 2% inflation target, the FOMC announced at its December meeting that it plans to end its asset purchases by mid-March 2022. Moreover, all 18 participants expect to raise the federal funds target rate at least once in 2022. By contrast, at its March 2021 meeting, only four of 18 participants believed that an increase in the federal funds target rate in 2022 was appropriate policy.

Most FOMC participants continue to project that 2021 will be the highwater mark for inflation going forward. (See the figure below.) Further improvements in supply chains that enable an increased supply of durable goods, such as new vehicles; vaccines and other therapeutics that spur more workers to rejoin the labor force; and the waning effects of the large monetary and fiscal economic policies implemented in 2020-21—which could slow the demand for goods and services—are some of the key factors that forecasters point to in helping to drive inflation lower over the medium term.

The Near-Term Outlook for the Economy and Labor Markets Is Good

The pace of economic activity slowed sharply in the third quarter after rising at an exceptionally brisk pace over the first half of 2021. However, improving economic and labor market conditions in October and November suggest that real GDP growth in the fourth quarter could be the strongest of the year—and growth for all of 2021 is expected to be the strongest since 1983. Supported by the expectation of continued healthy financial market conditions, increased production to restock lean inventories, further gains in the consumption of services as consumer and business travel picks up, and a resilient housing market, continued above-trend growth is likely in 2022. At this point, the most probable outcome is 3% to 4% real GDP growth.

Strong GDP growth will continue to be a boon for labor markets. The number of unemployed persons actively seeking employment is at a record low relative to the number of job openings. In addition, the number of people quitting their jobs as a share of employment, often to seek higher-paying jobs, remains near a record high. Strong demand for labor is likely to lower the unemployment rate to around 3% to 3.5% by the end of 2022 and generate continued strong growth in employee compensation. The latter will help mitigate the reduction in purchasing power from higher prices of goods and services. But if the reduction in household purchasing power from higher inflation persists, consumers will either need to reduce real spending or draw down their savings. Either development could pose a threat to consumer spending, and thus real GDP growth.

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Devin Werner, a research associate at the Bank, provided research assistance.

By Sheetal Shah, Head: Transactional Banking Sales, Nedbank CIB

Covid-19 and the national lockdown have created some of the toughest trading and operating conditions that businesses have ever experienced. Many businesses have chosen to prepare themselves for worst-case scenarios, rather than adopting a wait-and-see approach. They feared the pandemic may leave them financially vulnerable should a worst-case scenario materialise. For most businesses, this approach has entailed a few priority focus areas.

Protection of liquidity

The first cornerstone on which most worst-case business scenarios have been built, is the protection of liquidity to ensure greater operational resilience. Traditional collection methods have been thrown into disarray due to disrupted operations throughout much of 2020, and into 2021. As a result, corporate companies have had to partner with their banks to support their liquidity, often by drawing down on revolving credit facilities and overdrafts, or through the creation of new bilateral loans. In many ways, banks have had to go back to basics to respond to these business requirements. For Nedbank CIB, that has meant ensuring that we are able to provide our corporate clients with day-to-day visibility of their cash and real-time insights into their liquidity positions. Cash has once again become king for many businesses, and business cashflow forecast methods that may have worked in the past, have become invalid due to the vastly different success metrics and operational parameters.

Productivity in the new normal

A second cornerstone of the way many businesses have been positioning themselves to deal with a worst-case business and economic scenario is by focusing even more on productivity, particularly given the significant operational changes that have taken place in the so-called ‘new normal’ work environment. The pandemic has forced millions of employees to work from home, many of whom have never before experienced this type of working arrangement. Many new working arrangements were implemented hurriedly, leaving employees and managers to navigate largely unchartered territory, while also dealing with personal anxieties about the global health crisis.

Most businesses recognised that it would take effort to limit disruptions and feelings of disconnectedness while also ensuring a quick return to optimal productivity levels – and that’s what numerous companies have been focussing on for the past number of months.

Supply chain resilience

Supply chains have also been significantly impacted and have become a key pain point for many Nedbank CIB clients, primarily due to increased levels of counter-party risk, significantly higher levels of economic and market volatility, and the rapidly rising cost of goods.

Against this backdrop, one of the key areas that clients have been focusing on in recent months is the financial supply chain. Companies have taken to accumulating far more stock and inventory than they would ever have considered in the past, trying to avoid a repeat of the financially devastating stock shortages experienced during the first hard lockdown, grounding supply chains to a halt. It’s likely that this will be an ongoing trend for at least the next year, or until businesses are confident that the uncertainty around potential future restrictions has been addressed.

Ensuring good relationships with suppliers has also become a priority. Companies recognise the value of suppliers that are willing to prioritise their orders during times of restrictions or uncertainty; and many companies are looking to partner with their banks to access finance facilities that help them to build solid and trusting supplier relationships through a track record of reliable and timeous payments.

Digitisation

The pandemic has significantly accelerated the digitisation imperative across the vast majority of businesses. This large-scale digitisation has brought about significant changes in many areas of business, from buying processes to entire value chains, and many businesses have now established themselves as primarily digital organisations.

Before Covid-19, there were still many businesses that considered an online presence to be little more than an add-on to their physical presence. Today an effective e-commerce strategy is a central component of top-line income and a key to sustainable business growth.

Nedbank’s focus is on partnering with its corporate clients to deliver the support they require to drive the necessary adaptation in their businesses and integrate all of these preferences and behaviours into their new ways of working. We believe it is imperative that organisations ensure they partner and align closely with their banks to enable this adaptation, mitigate the risk of disruption going forward and set themselves up for resilience and sustainable success in the future.

Major stakeholders in South Africa’s mining sector recently came together in Johannesburg to discuss challenges and opportunities in the industry, especially regarding sustainable development and transformation. Nedbank CIB’s Vusi Mpofu unpacked this with Business Day TV.

If you enjoyed watching this, you may find Future of Business: Mining Industry Outlook interesting as well.

For more info, get in touch with us here.

As a public service, the Federal Reserve Bank of St. Louis tracks the latest significant rules and interpretations affecting depository institutions and their holding companies.

While the St. Louis Fed updates this information regularly, updates correlate with official publication in the Federal Register or agency press releases, where appropriate. Updates include links to published material and federal agency websites.

Although this page attempts to capture significant rulemakings, it does not include all federal registration, guidance, proposals, studies and reports. For example, Federal Register notices pertaining to meetings, roundtable discussions, data collections, studies, reports and similar matters are not included.

The U.S. has experienced an inflation shock this year. Headline PCE inflation, measured as the percentage change from a year ago in the price index for personal consumption expenditures, rose to 5.0% in October. Core PCE inflation, which is a smoothed measure that excludes food and energy prices, rose to 4.1%—its highest reading since early 1991. These inflation readings have turned out to be substantially higher than Federal Open Market Committee (FOMC or Committee) participants were predicting last December. In the December 2020 Summary of Economic Projections (SEP), the median projection among FOMC participants was that headline PCE inflation and core PCE inflation both would be just 1.8% in 2021.

An important consideration is what will happen with inflation going forward. While the latest SEP projections have inflation coming down closer to the FOMC’s 2% target next year, there are reasons to be concerned that inflation might be more persistent than expected. That is why a risk management approach to monetary policy is prudent.

Monetary Policy during the Pandemic

The FOMC reacted swiftly to the initial shock of the COVID-19 pandemic in March-April 2020 with a very accommodative monetary policy to help alleviate financial market stress and moderate the pandemic’s impact on the economy. The monetary policy response included moving to a near-zero target range for the federal funds rate (i.e., the policy rate) and beginning substantial asset purchases, split between U.S. Treasury securities and agency mortgage-backed securities (MBS).

The economic situation is substantially improved today compared to the pandemic-induced free fall of March-April 2020. Accordingly, the FOMC has begun the process of removing some of the monetary policy accommodation put in place at the beginning of the pandemic.

At its November meeting, the FOMC decided to begin reducing the pace of asset purchases (also known as “tapering”) by $10 billion per month for Treasury securities and $5 billion per month for agency MBS. The Fed had been purchasing $80 billion per month of Treasuries and $40 billion per month of MBS. Therefore, if the reduction in purchases continues at the pace announced in November, the taper would be completed by mid-2022. In the past, the FOMC has phased out asset purchases before beginning to raise the policy rate. Furthermore, reducing the pace of purchases in a way that is well communicated to minimize any disruptions in financial markets is considered best practice.

Where Will the Economy Be When Tapering Ends?

In terms of national income, the U.S. economy has already recovered from the pandemic-induced recession, as real gross domestic product (GDP) surpassed its pre-pandemic peak level in the second quarter of this year. Although the real GDP growth rate was slower in the third quarter due to the COVID-19 delta variant’s impact on the economy, I expect rapid growth to return in the fourth quarter and to continue through 2022.

In addition, the labor market seems to be exceptionally strong. The unemployment rate, which was 4.6% in October, has been declining at a rate of about two-tenths per jobs report this year. If that kind of improvement continues, the unemployment rate will fall below 4% sometime in the first quarter of 2022 and could hit the pre-pandemic rate of 3.5% in the second quarter.

When it comes to inflation in 2022, views differ. Important variables that might influence inflation, including the state of public health, the degree of supply chain disruption and the strength of consumer demand, are hard to forecast with any degree of confidence. Accordingly, the FOMC cannot be certain whether inflation will dissipate naturally or, alternatively, remain persistently above the Committee’s 2% target. However, by the time the tapering process is complete, the FOMC will have more information and be in a better position to assess which of these two scenarios is more nearly correct.

A Risk Management Approach

A risk management approach to monetary policy in the current situation entails putting some probability on each of the two inflation scenarios above and positioning monetary policy accordingly. In my own assessment, I am currently putting half the weight on the first scenario in which inflation naturally declines closer to 2% next year, and the other half on the second scenario in which inflation does not dissipate as much as expected or perhaps not at all in the absence of additional policy action from the FOMC.

For most of 2021, U.S. monetary policy has been almost entirely positioned for the first scenario, where inflation moderates naturally. In that scenario, inflation returns to the 2% target without further policy action by the FOMC. The FOMC could begin to taper asset purchases later and at a more gradual pace, and the Committee would not need to contemplate taking additional action by increasing the policy rate until some point further in the future.

Only recently has monetary policy become better positioned for the second scenario, in which inflation does not naturally moderate. In that scenario, inflation does ultimately return to the 2% target but only because of additional monetary policy action. To prepare for this possibility, the FOMC would have to begin to taper asset purchases sooner and at a faster pace, and the Committee would need to begin to contemplate increasing the policy rate sooner.

The FOMC’s recent decision to begin tapering asset purchases and, by current estimates, to end the taper by mid-2022, embeds the risk management approach. As new data arrived during 2021, the probability of the second scenario began to rise and the probability of the first scenario began to fall. Accordingly, the tapering process began sooner and is scheduled for a faster pace than many anticipated six months ago, and market probabilities of an earlier date for raising the policy rate from near zero (i.e., liftoff) have increased. This is good news because it means that monetary policy will be better positioned to respond smoothly to either of the two inflation scenarios in the year ahead.

Endnote

1. These projections are based on the percentage change in the relevant price index from the fourth quarter of 2020 to the fourth quarter of 2021.

Currencies	The rand remains above the 16,0000 level as global risk appetite diminishes in an already limited liquidity trading environment.
Commodities	Gold has fallen below $1,800 per ounce while PGM’s have recovered from Fridays declines.
Equities	We expect the local bourse to open higher as investors assess the President’s measured response to the new variant, keeping us at Level 1.

Date	Region	Event	Actual /Expected/ Prior	Implications
29/11	US	Pending home sales MoM	-/ 0.8%/ -2.3%	Home sales are expected to improve from September month.
30/11	SA	South Africa Unemployment	-/ -/ 34.4%
30/11	SA	Absa Manufacturing PMI	-/ 53.3/ 53.6	Manufacturing PMI is expected to remain at October levels, as rolling blackouts weigh on factory activity.
30/11	SA	Trade balance rand	-/ 23bn / 22.2bn	Trade surplus of R23bn expected in October.

Nedbank CIB Market Commentary | CIBMarketComm@Nedbank.co.za | +27 11 537 4091

If you are looking for other relevant market commentary, you might find Markets and Research relevant as well.

 

 

It began with silence.

 

To commemorate the beginning of this year’s 16 Days of Activism against Gender-based Violence (GBV), we chose complete silence on our social media accounts for 24 hours, calling on 16 important entertainers, influencers and activists to join us in making this statement.

There are 2 reasons behind our decision: the first is that with no online noise, deafening but powerful silence is sometimes the best way to get people to listen; the second is that our silence is symbolic of the silence that is imposed on women and children through abuse that discourages its victims from speaking out. Our message is that progress in the fight against GBV can come only through men and women alike letting their voices be heard, sending a clear message that we have had enough and will do what we can as a financial institution to ensure that money, in particular, is not used to silence women.   

Now the silence is over, and the voices of South Africa’s women will be heard. Throughout the next 16 days, we will highlight the courage of those who have overcome GBV.

 

 

Violence affecting women and children is one of the most, if not THE most, pressing problems South Africa faces as a nation. According to SaferSpaces, between 25% and 40% of South Africa’s women have experienced abuse at the hands of a partner, and a 2016 Optimus study showed that 40% of young South Africans have experienced some form of abuse in their lifetime.

GBV is such a prolific and common problem in society that sometimes silence seems easier. Perhaps the issue seems too complex, or too unsettling, to talk about or even acknowledge.

 

 

Our message this month is that focusing on the struggle to end GBV does not have to be a conversation that is hopeless. We believe that taking positive action is more important than simply contemplating how truly awful this problem is in silence. 

That’s why this month and beyond, we are focusing on content that doesn’t simply highlight the problem of GBV but plots a way forward, ways for us to unlearn, learn, grow and overcome cycles of abuse to produce future generations of happier, healthier adults who have no desire to control or hurt others.

Our content will be built around a series of events. We will be hosting a weekly Twitter Spaces session to offer support and advice on issues related to GBV, an exhibition of photography that lends a voice to the stories of South African women who have overcome abuse and, lastly, Run for Her, a virtual run on 11 December to spark not only awareness but also community action against GBV.

Stories of GBV are rooted in unresolved trauma and pain but are not without hope. We are inspired by the stories of survivors who have shown incredible courage not only in overcoming their past traumas but also in using these traumas to help fuel their current success and guide them towards a better future.

We hope our activities this month and going forward serve not to simply highlight a problem but, through accessible solutions and demonstration of the power of actions, big or small, when taken, can ensure that tomorrow is better than today.

Let’s move towards this brighter future, together. #ItCanBe

If you have been a victim of abuse or know someone who is, please reach out to one of these organisations:

Helplines:

 

Childline South Africa: 0800 055 555

GBV Command Centre: 080 042 8428

Legal Aid: 0800 110 110

LifeLine South Africa: 0861 322 322

National Counselling Line: 0861 322 322

National GBV Helpline: 0800 150 150

South African Depression and Anxiety Group: 080 021 2223

South African Police Service: 10111

Tears Foundation (free SMS helpline): *134*7355#

 

Websites:

 

Childline South Africa

 

Helpline Center

 

LifeLine South Africa

 

National Shelter Movement of South Africa

 

Ntethelelo Foundation

 

POWA

 

Safe Helpline

 

SaferSpaces

 

Shelters.org.za

 

Sonke Gender Justice

 

Tears Foundation

During the COVID-19 crisis, media coverage has been the object of coverage and analysis itself. The discussion of media coverage is often political: Media outlets from one side of the political spectrum are routinely accusing their competitors at the other end of being politically motivated in their reporting.

This article comments on a fascinating working paper by economists Bruce Sacerdote, Ranjan Sehgal and Molly Cook, which offers a systematic analysis of the relationship between pandemic-related media coverage and the actual evolution of the COVID-19 situation.

The authors’ work can be described as “sentiment analysis,” a field of study in which researchers assess, among other things, the effects associated with a text. In the Sacerdote, Sehgal and Cook working paper, the authors classified news stories (e.g., print articles and television transcripts) as positive or negative, and compared the degree of negativity (the share of negative words) across news outlets, across U.S. and non-U.S. outlets and against the actual evolution of the virus.

In the working paper, Sacerdote, Sehgal and Cook analyzed the text of about 43,000 English-language COVID-19-related news stories from Jan. 1 to Dec. 31, 2020. The stories were from four sources, according to the article:

• The top 15 major U.S. media outlets defined by their readerships/viewerships (Newsweek, USA Today, Los Angeles Times, ABC, CBS, CNN, Fox News and others)
• The general U.S. media
• Major international media (The Daily Mirror, India Today, The Sunday Herald, The Sydney Morning Herald, The Times of India, Toronto Star and others)
• The general international media

The authors ranked stories using two metrics. First, using statistical and machine learning techniques, they estimated the probability that a story would be deemed “negative” by a human reader. For example, a story with the phrase “death toll” is more likely to be negative in tone, while an article with the phrase “clinical trial” is less likely to be negative, the authors noted. Second, they used a well-established dictionary of positive and negative words and textual analysis tools to compute the fraction of negative words in each news story.

COVID-19 and the Findings of Sacerdote, Sehgal and Cook

The first figure below reviews findings of Sacerdote, Sehgal and Cook, which show the probability that a story was negative in the major U.S. media and the major international media. The data are then compared to the weekly average of daily new cases in the U.S.

Using data from the working paper, the second figure shows the “standardized” share of negative words. That is, instead of showing the actual share of negative words in, say, major U.S. media stories, the U.S. major media line shows the difference, with the mean number of negative words across COVID-19-related stories in all media. Thus, a positive number indicates that a story is more negative than the average story about COVID-19. A negative number indicates that a story is less negative.

Data analysis in these figures reveals that the evolution of media negativity appears unrelated to the evolution of the virus. In other words, the ups and downs of the numbers of new cases are not matched by any changes in media negativity. In the first figure, the probability that a major U.S. media story is negative is noticeably stable over time, regardless of the evolution of new cases; in the second figure, the downward trend in the standardized share of negative words is similarly unresponsive to new cases.

These figures are consistent with and confirm data gathered by Sacerdote, Sehgal and Cook through formal statistical tests. The authors found that, indeed, average media negativity over time was not correlated with new case counts.

Both figures show that major U.S. media were more negative in tone than major international media, affirming the assertions of Sacerdote, Sehgal and Cook. On average, 90% of stories published in major U.S. media outlets were negative in tone, while 54% of non-U.S. stories were negative. Similarly, the authors found the share of negative words in U.S. major media stories was higher than in non-U.S. stories.

Sacerdote, Sehgal and Cook found the negativity (measured by the share of negative words) in major U.S. media to be noticeably higher (22%) than in major international media, while the general U.S. media were significantly less negative (31%). In their working paper, the authors wrote that the positive or negative tone of a story depended also on its topic of emphasis. They differentiated between three types of stories: vaccine-related stories, stories about the increases and decreases in case counts, and stories about reopening (e.g., businesses, schools, parks, etc.), according to the article. Major U.S. media were 38% more negative than international major media when presenting vaccine-related stories, 19.5% more negative when covering COVID-19 case counts and 17% more negative with reopening stories.

Sacerdote, Sehgal and Cook noted that major U.S. media were generally more negative in tone than other media, including for stories unrelated to COVID-19. But they found that the negative tone of the U.S. major media has increased during the COVID-19 crisis. Interestingly, the authors noted that stories published in scientific media outlets were less negative in tone than in the average publication.

Media Coverage before COVID-19

Another point that Sacerdote, Sehgal and Cook brought up is how the negativity of COVID-19 coverage in major U.S. media may have important mental health consequences for the U.S. population: “In discussing this increase in mental health problems, U.S. Centers for Disease Control and Prevention recommend against heavy consumption of news stories about the pandemic,” the authors wrote. Indeed, on its website, the CDC advises Americans to “take breaks from watching, reading, or listening to news stories.”

Negativity in news outlets is not recent. As early as 1979, a well-known article by Barbara Combs and Paul Slovic already made the point that newspapers tend to “overemphasize … homicides, accidents and disasters and underemphasize diseases as causes of death.” What Combs and Slovic meant by “overemphasize” is, for example, that the media’s representation of accidents as a cause of death is unrelated to the actual risk of dying from an accident. The recent findings by Sacerdote, Sehgal and Cook are very similar in nature: The negative tone of the coverage of the COVID-19 crisis is uncorrelated with the actual evolution of the disease.

More recently, in a 2008 article, Larisa Bomlitz and Mayer Brezis found that for a variety of health risks, the number of media reports was inversely correlated with the actual number of deaths. Specifically, they counted the number of media reports (U.S. newspapers plus television and radio transcripts) on a few health issues, such as severe acute respiratory syndrome (SARS), the West Nile virus, bioterrorism, AIDS, smoking and, finally, physical inactivity.

Bomlitz and Brezis then computed the death rate in the U.S. in 2003 associated with these health issues and found a significantly negative correlation between death rates and media reports: “In the United States, SARS and bioterrorism killed fewer than a dozen people in 2003, but together generated over 100,000 media reports,” they wrote. “Almost 800,000 people each year die from the consequences of smoking and physical inactivity, but these triggered far less media attention.” Bomlitz and Brezis concluded that, “Emerging health hazards are over-reported in mass media compared to common threats to public health.”

Conclusion

The Sacerdote, Sehgal and Cook working paper raises again the question of whether the media misled their audiences by “over-reporting” negative news. In considering the question, one would first need to define “over-reporting.” If there were a “best” or “optimal” level of media coverage, it could depend on more than just the prevalence of the virus and, thus, there would be no reason coverage should reflect exactly this prevalence.

Since many media sources in the U.S. are for-profit businesses, one definition of “best” could be “profit-maximizing.” That, of course, would be best for the media. But what about society as a whole? This is not an easy question. In fact, it is part of a broader, age-old question: Is there a disconnect between what is good for individuals (people or businesses) and what is good for society as a whole?

In the case of COVID-19, media outlets may have done their reporting with profit-maximizing motives. Yet, they also promoted what Sacerdote, Sehgal and Cook call “prosocial behaviors.” According to the authors, despite being more negative overall, U.S. major media sources were more likely to mention the benefits of mask wearing and socially distancing than their non-U.S. counterparts.

References

Bomlitz, Larisa J.; and Brezis, Mayer. “Misrepresentation of Health Risks by Mass Media.” Journal of Public Health, 2008, Vol. 30, No. 2, pp. 202-204.

Combs, Barbara; and Slovic, Paul. “Newspaper Coverage of Causes of Death.” Journalism Quarterly, 1979, Vol. 56, No. 4, pp. 837-849.

Sacerdote, Bruce; Sehgal, Ranjan; and Cook, Molly. “Why Is All COVID-19 News Bad News?” Working paper, March 2021.

Unauthorized immigration has been an issue of central concern to U.S. policymakers, as well as the country’s general population. There are two prominent dimensions around which this issue is discussed: First, what is the size of the unauthorized immigrant pool in the existing U.S. population? Second, how is this pool growing or shrinking over time? The nature of unauthorized immigration makes exact accounting of these numbers difficult.

However, the first question can be addressed by Department of Homeland Security estimates of people in the unauthorized immigration pool. To answer the second question, we assumed, along the lines of the existing literature, that if a greater number of immigrant border encounters are reported by U.S. Customs and Border Protection, this suggests a larger number of attempts to cross the border. In turn, one can expect that a larger number of unauthorized immigrants will cross the border successfully.

In this article, we first discuss some factors that drive unauthorized immigration. Next, we focus on the magnitude of the unauthorized immigration pool in the U.S. and identify the major source nations contributing to this pool. Finally, we see how immigrant border encounters have evolved in recent months and discuss some characteristics of these potentially unauthorized immigrants.

Drivers of Unauthorized Immigration

While legal immigration is subject to policy limits, there is no direct and acceptable way to restrict unauthorized immigration to some predetermined level. The federal government tries to restrict the inflow of unauthorized immigrants by using border control measures enforced by border patrol agents.

However, as long as “push” factors (such as poverty or violence in source nations) and “pull” factors (like good job opportunities in the U.S.) are strong enough, some potential immigrants will try to cross the border in spite of potential costs that may include payments to smugglers or detention. In the 1990s and until the Great Recession of 2007-09, the economic incentive of relatively good job opportunities in the U.S. drove most of this unauthorized immigration. However, in recent years, push factors such as violence and political instability in source nations have become more prominent drivers.

The U.S. Unauthorized Immigrant Pool and Major Source Nations

The total pool of unauthorized immigrants in the U.S. rose sharply through the 1990s and kept rising through 2007. However, from 2007 onward, the estimated pool has been steady at around 11.5 million to 12 million people. This has happened despite a relatively steady decline in the unauthorized pool of Mexican nationals because of a compensating rise in the unauthorized pool from other source nations.

The first figure below presents the evolution of the unauthorized immigrant pools of the top six source nations, of which Mexico is the largest. Immigration from Mexico began falling during the Great Recession (shaded in gray) and has been falling steadily since then. All the other top source nations in the graph exhibit increases in their respective unauthorized immigrant pools in recent years.

The relatively large numbers for far-away nations like China and India may be because of the population sizes of these nations and the fact that immigrant pools reflect not only unauthorized border entrants but also people who may have overstayed their visas. The large numbers from Central American nations such as El Salvador, Honduras and Guatemala reflect, among other factors, push factors such as violence and civil strife.

Border Enforcement Encounters in Recent Times

Next, we focused on border enforcement encounters in recent times to get a sense of the recent unauthorized immigration inflow to the U.S. We present the data for the southwestern U.S. border because that is where most unauthorized border crossings occur. The starting point of January 2015 precedes by two years the beginning of the Trump administration, which had signaled its intention to reduce border crossings, and provides a useful benchmark to see whether the 2016 election led to discernible changes.

Indeed, there was a sharp dip in early 2017, followed, however, by a steady increase. (See the second figure below.) There was a spike in enforcement encounters around the middle of 2019, driven mostly by “Family Units” enforcement encounters. Although precise identification is beyond the scope of this piece, the spike in Family Unit encounters suggests push factors were driving entire families from violence-prone source nations to the perceived safety of a more stable host nation.

COVID-19 and its associated governmental measures led to a sharp decline in enforcement encounters by the middle of 2020 and an almost complete elimination of encounters in the Family Units or “Unaccompanied Alien Children” categories. However, in recent months, there has been a surge driven most prominently by large numbers in the Family Units category.

We based the third figure below on enforcement encounters data, which identify some source nations of the apprehended. (These monthly data were available starting in fiscal year 2018.) While overall enforcement encounters in recent months have increased, the increases are particularly strong for the three Central American nations shown in the figure. While the data are available for too short a period to draw any definitive conclusions, they suggest that push factors have driven families and children from many Central American nations to try to immigrate to the U.S.

Conclusion

Unauthorized immigration remains a major policy issue for the U.S. The evidence points to the primacy of push factors in driving the recent surge. More research is necessary to shed light on the contributions of different push factors such as poverty, violence or political instability that may be contributing to this increase in unauthorized immigration.

While greater enforcement at the border can dampen immigration flows, a durable solution lies in identifying the central push factors and how they can be best addressed by the U.S. in coordination with the source nations of the immigrants.

Endnotes

1. Data for unauthorized immigrant pools based on national origin are available on a continuous basis from 2005 to 2018. The “Other” category in the first figure represents the unauthorized immigrant pool from all countries other than the top six source nations identified.
2. Enforcement encounters are composed of U.S. Title 8 apprehensions and U.S. Title 42 expulsions. Title 8 apprehensions are processed under U.S. Customs and Border Protection’s immigration authority; they refer to the physical control or temporary detainment of a person who is not lawfully in the U.S., which may or may not result in an arrest. Title 42 was invoked as a public health-related response to COVID-19 during March 2020.
3. Family Units represent the number of individuals (either a child younger than age 18, a parent or legal guardian) encountered in a family unit. “Other” is the difference between total enforcement encounters and the sum of the “Unaccompanied Alien Children” and Family Units categories. This difference has been identified as “Single Adults” since fiscal year 2019, in the data provided by U.S. Customs and Border Protection.
4. As we discuss later, the third figure points to similar strife-driven push factors.

After the easing of travel and lockdown restrictions, we will all be looking forward to going away for a much-needed break this holiday season. With the lifting of travel bans imposed on the country by places like the UK and US, there are even more options for holidaymakers and travel is expected to increase to the highest levels since early 2020.

 

While those of us who are gearing up to go on holiday may be excited about a change in scenery after being homebound for so many months, it’s important to make necessary provisions to ensure that our homes and their contents will stay safe while away. This is especially true if when going out of town for an extended period of time.

 

A vacant home without security measures in place could be a target for potential opportunists, who are particularly active over the December/January period. According to a 2019/2020 report released by Stats SA, housebreaking or burglary remains the most common crime experienced by households in South Africa. The report states that an estimated 169 000 incidences of home robberies occurred during the period, affecting 139 000 households with incidents peaking in June and December.

With that in mind, many of us are uneasy about our spaces remaining unoccupied for the duration of their time away from home. For peace of mind while on holiday, homeowners and renters alike should consider the following:

 

Make sure you have insurance cover in place

It may seem like a grudge purchase, but the benefits of home insurance cannot be overstated. Should something unfortunate happen to your home while you’re away, whether it be a break-in or burst geyser, the impact on your finances could be significant. This is where insurance plays a critical role – it shields your finances from the impact of theft or damage to your home. Generally, if you own a home, you are likely to have homeowner’s insurance in place as it is often a prerequisite when taking out a bond. This covers physical structures like your garage, walls and roof and protects you in the event of damage caused by lightning, explosions, or fire.

Many people make the mistake of thinking that their household contents are covered by their homeowner’s insurance when in fact, this is seldom the case. Home contents insurance, on the other hand, covers everything inside your home including furniture, appliances and art or jewellery against theft, loss or damage. This type of insurance cover is also appropriate for renters who want to cover their personal belongings and household contents. So, if you wish to leave your laptop at home to properly disconnect while on holiday, for example, and the item is covered under household contents, it can potentially save you a lot of valuable time, money and energy in the unfortunate event you suffer a loss.

 

 

 

 

 

 

Check that you are not underinsured

Before heading off on your travels, always check in with your insurer to make sure that the values of all your household contents are reflected accurately. It can take years to furnish your home, and you don’t want to face a situation where these items are not accounted for properly in your cover and thus, cannot be replaced.

While in contact with your insurer to check that you are not underinsured, it is worth notifying them that you will be away for a certain period of time. They will be able to tell you if there are any conditions that you need to comply with to make sure that you will be correctly insured while on holiday.  

 

Secure your home

Ensure that all doors and windows are securely locked and that there are no weak points for easy entry into the home. Ladders, hosepipes, and other items which are normally stored outside could assist criminals in gaining access to homes.

If you don’t already have an alarm system in place and have the funds to do so, consider investing in this security measure. If anything happens while you’re not there, the relevant security company will be able to conduct a check.

 

Befriend a neighbour

Ask a neighbour to regularly check on the property and report anything suspicious. They may also be able to assist with uncollected mail or tend to the garden to limit any signs that you’re away.

 

Avoid sharing on social media

As tempting as it may be to post pictures of yourself navigating busy airports and relaxing at the poolside, insurers are increasingly warning against this practice.

 

If you have to claim for insurance, download the Standard Bank Insurance App. IOS or Android

 

Standard Insurance Limited (Reg. No. 1993/007593/06) (“SIL”) is a short-term insurance company and an authorised financial services provider (FSP 33348). SIL is part of the Standard Bank Group.

Looking for the best lending options for small businesses can be a challenge, particularly if this is your first time taking out a commercial loan. You have unique needs that a larger corporation may not have and small business owners around the country are starting to notice that working with a bigger bank doesn’t always mean more benefits and better service.

In fact, local banks can usually offer the same, if not more, banking and lending opportunities to help small businesses succeed. It’s important to understand exactly what your options are when thinking about the best bank for your businesses, and the benefits of local banks are hard to overlook.

Local Expertise and Personalized Service

Financial institutions are often the cornerstone of your community, and it’s not unusual to be greeted by a familiar face when you walk through the door. Not only do they know you by name, they probably shop at the same stores as you, root for the same local teams, and their children might even play in the same neighborhood as yours.

When considering your options for commercial loans, it is wise to take into account the differences in personalized service that a local bank can provide in comparison to a larger, nationwide financial institution. Because the team knows you and your business personally, any red flags in your financial history that would result in an immediate rejection by a national bank can be discussed and potentially worked around with a community bank.

The team at your local bank wants to build a long-lasting relationship with you, their neighbor, and you’ll never be seen as simply another account number. In a world where so much of our lives is digitized and lacks face-to-face communication, having that personal attention can really make a big difference.

You won’t be the only business owner in the area that your local bank is familiar with and, because of that, they’ll have insight into the community and market that you can’t find anywhere else. They’ll be able to make decisions and approve loans faster thanks to their inside information, a luxury that bigger banks likely won’t be able to support. Not only will this save you time, but you’ll be able to get answers to questions that relate specifically to your business and the location you’re based in.

Local community banks will work to understand exactly what your business needs are and can offer you specific products or services accordingly, rather than leaving you to choose between endless options that might not be appropriate for the type of business you manage. Banks with a nationwide presence tend to focus their attention on bigger corporations, leaving few options for small enterprises. Working with a local bank means that you’ll feel like a valued customer and partner, no matter how big or small your business is.

If your small business is also in need of a Merchant Services Provider, it is best to have local expertise in that regard as well. To learn more about what to look out for, explore our Guide to Choosing a Merchant Services Provider in Vermont and New Hampshire.

When you’re wondering “how to choose a bank for my business,” community banks should be high on your list. Don’t forget, they’re a small business too, so making use of their expertise and knowledge can be incredibly beneficial for both new and experienced business owners.

Supporting the Local Community

We all love to see our communities grow and thrive, and local banks often help this to happen in several ways. By investing in your business and others in your area, local banks are reinvesting in the community to create better opportunities for everyone. They help small businesses to startup and grow, which in turn allows for more employment in the area, as well as improving resources for the community as a whole. They may even sponsor the local little league team or scout troop, or donate to charitable organizations in your area.

Local banks are just as committed to your community as you are because their success is ultimately tied to yours in a way that large banks are not. If every business in your town prospers, you’re all helping to strengthen your local economy together.

If you’re still asking yourself, “should I bank locally for small business lending needs,” we hope that some of these benefits will convince you that community banking can be the best solution for your small business. Because when you choose a local bank for your small business financing needs, you have access to flexibility, regional expertise, and local decision-making that big banks can’t often provide.

Union Bank is proud to support local industry and community reinvestment throughout Vermont and New Hampshire, with 18 local branch offices and 3 loan centers. Our staff of friendly and experienced commercial lenders is ready to help you identify the right financial solutions for your small business, whether you’re just getting started or have been in operation for decades. Stop by or contact a member of our Commercial Lending Team to learn how we can help you and your business prosper.

Examining the ins and outs of the labor force is essential for understanding the dynamics of the labor market, especially during the COVID-19 pandemic. This article focuses on two dimensions of the labor force, both in the Eighth District and nationally. The first is the demographic makeup of who is in the labor force (i.e., employed or unemployed people) versus out of the labor force. The second is the industrial composition of employment and unemployment.

We found that, compared with the U.S. as a whole, the Eighth District experienced a slightly milder downturn in 2020-21. Although the pool of individuals who left the labor force in the Eighth District looks similar to that of the nation, the recovery of employment in the hardest-hit industries has evolved faster in the Eighth District.

What Labor Force Participation Reveals

We began by analyzing labor force participation. An individual is considered out of the labor force, or a nonparticipant, if he or she is not currently searching for work. Although workers who are out of the labor force do not contribute to the unemployment rate, they do contribute to the shortfall in the number of jobs that the U.S. has seen since the start of 2020.

We used microdata from the Current Population Survey (CPS), which is a source for the Bureau of Labor Statistics’ official employment reports. In this survey, respondents can be tracked from month to month (in four-month blocks), which means we can record changes in labor force status.

In the first figure, we report the number of workers who exited the labor force in each month for the entire U.S. and the Eighth District. In all cases, the series is normalized to 100 in February 2020, immediately before the pandemic impacted the economy.

The figure shows that, relative to pre-pandemic levels, labor force exits increased over the rest of 2020, with the largest spike early on. Compared with the U.S. as a whole, the Eighth District had a lower incidence of exiters initially, but they have since followed a similar path.

Labor force exits are now slightly lower in the Eighth District. Note that these exits are not necessarily permanent, but once somebody exits, their probability of being reemployed in the future decreases relative to someone who remains unemployed but is still actively searching for a job. Therefore, the pattern of exits is relevant to how quickly the recovery unfolds.

Next, we examined who remained out of the labor force from May to August 2021. Specifically, we looked at how an individual’s demographic characteristics relate to whether they are in or out of the labor force. The second figure shows the probability that a member of each demographic group was out of the labor force.

The general trends are similar in the U.S. as a whole and in the Eighth District. Women, less-educated workers and non-prime-age workers are most likely to be out of the labor force. These facts are robust and have generally held true over the past several decades, regardless of the state of the business cycle.

The likelihood of being out of the labor force is similar for individuals inside and outside the Eighth District, with the exception of a few groups: Blacks, other race, high school dropouts and workers older than 55 are slightly more likely to be out of the labor force in the Eighth District; Asians and Pacific Islanders, as well as workers younger than 25, are more likely to be in the labor force in the Eighth District.

Industry-Specific Statistics during COVID-19

Next, we analyzed how different industries have been impacted by the pandemic. The CPS microdata enabled us to observe the most recent industries for respondents who reported being unemployed. Using these responses, we calculated the percentage of unemployed workers who were previously in each industry.

The results are shown in the third figure below. The industry composition of the unemployed partly reflects the number of jobs in each industry: For example, nationwide, there were many unemployed health care workers because there are a lot of health care jobs. Relative to the rest of the U.S., the Eighth District had more unemployed workers in manufacturing; transportation and warehousing; administrative and support and waste management services. It had fewer unemployed workers in accommodation and food services; health care and social assistance; retail trade; and educational services.

How quickly these workers get reabsorbed into jobs will depend on several factors: demand for each industry’s output, the bounce-back from pandemic-related shutdowns and wages offered. Note also that the facts reported in the third figure do not account for new labor market entrants (who, by definition, do not have a previous industry of employment) and may not be indicative of the industries in which these workers are truly focusing their job search efforts.

We can get some sense of how quickly each industry is recovering by looking at the evolution of employment for different industries during the pandemic. This gives a more complete picture of what has been happening across time. These changes in employment also reflect people who have left the labor force and do not appear in the unemployment pool. These data come from the Quarterly Census of Employment and Wages (QCEW), which aggregates employer-related counts of employment and wages.

 

The results for overall employment, as well as a few select industries, are shown in the table. Each column shows the percentage drop in employment relative to February 2020. The table shows that in the U.S. as a whole, employment had fallen to 84% of its pre-pandemic level by April 2020—a 16% decline. The decline was similar but slightly milder in the Eighth District, which saw only a 13% decline. Since then, both have been recovering at similar paces, but the Eighth District remains slightly ahead of the U.S. as a whole, with 3% lower employment compared with 5% nationwide.

Disaggregating these numbers by industry helps in understanding where the shortfalls remain and why the Eighth District looks different from the U.S. Retail, which is a large industry that contains a mix of essential and nonessential services, evolved similarly to aggregate employment. Health care, another sector at the forefront of the pandemic, saw smaller initial declines and has since rebounded similarly nationwide and in the Eighth District. Both industries have nearly returned to pre-pandemic levels.

The largest declines in employment and the greatest differences between the Eighth District and the rest of the country lie in the following industries: arts, entertainment and recreation; accommodation and food services; and other services (which include repair services and personal services, such as salons and dry cleaning).

These industries were generally hit less hard in the Eighth District compared with elsewhere. An interesting case is the arts, entertainment and recreation industry: In the Eighth District, it had a larger initial decline but now remains closer to pre-pandemic levels than in the U.S. as a whole. These harder-hit industries are where the gaps between the U.S. and the Eighth District remain largest today.

Conclusion

We found that the demographic characteristics of those who have left the labor force are similar in the Eighth District and elsewhere. However, the Eighth District experienced a milder downturn compared with the rest of the country. This was driven by different responses in the Eighth District for the sectors of the economy most affected by the pandemic.

These differences may be related to less-restrictive economic policies put in place to battle the pandemic, rather than the course of the virus itself. It is also important to keep in mind that the features of labor force composition examined here are just one dimension of how the Eighth District has fared; just a few others include differences in health outcomes, wages and business closures.

 

Endnotes

1. As of August 2021, employment remained 5.3 million below its value in February 2020.
2. Because of the high incidence of missing values in the CPS’ county variable, we classified a respondent as being a resident of the Eighth District if he or she reported living in one of its metropolitan statistical areas; people living outside of the District MSAs were excluded from this study.
3. Note that there is overlap between the different bars in this chart. For example, if a certain gender, education or racial group is disproportionately composed of prime-age workers, the bar will exhibit a lower probability of those workers being out of the labor force.
4. However, employment is reported monthly in the QCEW.

 

 

Digital transformation has become a familiar term over the last few years as more businesses embrace digital solutions, technological advancements, and the benefits of taking businesses online. With Black Friday and festive season shopping almost upon us, Standard Bank’s innovative SimplyBlu offering provides the solution for small businesses to make the most of upcoming sales and boost their business.

 

Creating a digital presence and access to online customers

Standard Bank’s eCommerce-in-a-box solution – SimplyBlu – offers everything small businesses need to operate smoothly and efficiently online. As businesses adjust to new customer demands after months of pandemic-related lockdowns, a sustainable, cost-friendly, and future-forward business solution has never been more critical.

SimplyBlu includes no-code website building features, allowing business owners to customize their online store with built-in themes and templates, as well as e-Invoicing services, and various online payment options powered by MasterCard Payment Gateway Services.

As a bonus, SimplyBlu is offering free Google Ads to the value of R500 for first-time signups. This will help businesses establish a presence on Google to attract more customers, generate leads, and drive traffic to their online stores.

 

“Businesses are definitely realizing the benefits of operating online,” says Head of Card and Payments at Standard Bank South Africa, Nelisa Zulu. “During the COVID-19 period, our SimplyBlu platform has seen over 100% growth, with one of our customers – fashion designer Candy Smith – making more than seven times her initial daily sales after just three months on the platform. Even as lockdown restrictions ease, it’s crucial for companies to keep innovating and adapting to the new world of business. SimplyBlu allows them to do just that – all on one safe, secure platform.”    

 

South Africa’s eCommerce boom

In a recent report, global business data platform Statista projected that the South African eCommerce market will reach over $5 million in revenue by the end of 2021. And that by 2025, there will be over 33 million eCommerce users in the country.

“It’s essential for businesses to be able to tap into this growing market and reach online customers on their preferred shopping platforms. Brick and mortar stores still have their place, but by giving customers the option to do business with you online, you’re increasing your chances of thriving in today’s increasingly digital economy,” adds Zulu. “Standard Bank is committed to breaking down the barriers to the online entry for small businesses so that every SME has the opportunity to grow and prosper after nearly two years of pandemic-related challenges.”

While consumers have also faced financial strain, this doesn’t seem to have diminished their appetite for eCommerce. Last year’s Black Friday results saw a 60% increase in online transactions, with local payment processing service PayFast reporting a 283% increase in total payment volumes that day, compared to normal peak shopping days, such as payday at the end of the month.

As lockdown restrictions ease and consumers start planning their festive-season gifts, increased economic activity can be expected in the coming months. By signing up on the Standard Bank SimplyBlu platform, businesses can be prepared for the potential sales boost to make it a truly prosperous time.     

 

                                                                                               

                                                                                                         – ENDS –

Beginning with the passage of the Coronavirus Aid, Relief and Economic Security (CARES) Act in March 2020, the federal government supplemented regular state unemployment insurance (UI) programs in several ways. It included an extension of benefits beyond regular state programs’ durations, eligibility extensions to workers who wouldn’t otherwise be covered by the state programs and an additional $600 per week. Since the passage of the CARES Act, further federal legislation has extended each of these, with the $600 weekly add-on reduced to $300. These emergency federal programs ended in early September.

In May and June, 26 states announced they would halt, or stop participating in, these emergency federal programs before September. Note that all these states have continued operating their regular state programs.

The Bureau of Labor Statistics (BLS) released data that measure the employment situation at the state level through the second week of July. These data allow analysts to look at the labor market performance of halting states and non-halting states as well as the labor market as a whole following the actions of halting states. Because some of the states terminating benefits enacted their policies right before or after the second week of July, I will focus my cross-state comparisons based on whether a state was an “early halter.” I define early halters as the 12 states that terminated at least a portion of emergency federal benefits before June 25.

At the national level, employment in July (including for the self-employed and gig workers) as measured by the BLS Current Population Survey, grew by more than 1 million people over the preceding month. This was the first time this measure increased by more than 1 million since October 2020.

An Employment Growth Decomposition Using Household Survey Data

A natural question is how much of national employment growth was driven by early-halting versus other states. To answer this question, I partition this year’s monthly data into three subperiods of two months: two subperiods before the states’ policy announcements (January through March and March through May) and one subperiod after the policy announcement (May through July).

For each of the subperiods, I compute the share of employment growth coming from the early-halting states. In the two subperiods before the announcement, the early-halting states contributed about 23% and 17%, respectively, to national employment growth. After the announcement (and including several weeks in which the benefits had ended), this share more than doubled to about 50%.

Thus, employment growth from early-halting states has become a relatively more important driving factor of national employment growth over the past two months and coincides with the UI policy change and its associated announcements.

An Employment Growth Decomposition Using Establishment Survey Data

Whereas the calculation above is based on the household component, the BLS also reports jobs in the economy measured from the employer side using the Current Employment Statistics survey. This counts the total number of people on the payroll during the second week of the corresponding month’s data. Between the second week of May and second week of July, this employment measure increased by almost 2 million people. This reflects the strongest two-month growth of employment in the U.S. since fall 2020.

The second figure plots the corresponding growth decomposition using the employer-based, instead of household-based, worker counts. As with the household data, there is a marked increase in the contribution of the early-halting states. Early-halting states went from contributing about 18% to over 35% of all establishment-based jobs growth in the three months immediately preceding the policy change to the three months afterward.

One important drawback of the employment statistics survey is that it excludes self-employed and gig workers. Since many people collecting federal emergency benefits had been self-employed before their job separations, it stands to reason that many of the people returning to work would resume being self-employed. Thus, the calculations based on the employment statistics survey may undercount the total employment growth.

A Word of Caution

In this article, I have explained how early-halting states have become an increasingly important driver in the recent strong national employment growth, measured using either the household or employment statistics surveys. Whether these driving factors remain, intensify or weaken is an important and open question.

The answer to that question will likely be influenced by two things. First, the time between the halting states’ terminating benefits and the collection of the July employment data was three to four weeks. It may take additional time for people reentering the labor market to search, interview for and accept employment. Any differential effects on employment between states that ceased accepting benefits early and those losing benefits in September will likely dissipate over time.

Endnotes

1. Several of these states ended the $300 weekly add-on, but have continued to participate in other federal emergency UI programs. Also, there have been legal challenges to the cessation of these programs in a few states, with varying outcomes.
2. In a recent blog post, I show a major departure in continuing claims in regular state programs in halting versus non-halting states.
3. In the calculations that follow, I define the early halters as states that ended at least a portion of federal emergency UI benefits before June 25. They include Alabama, Alaska, Idaho, Indiana, Iowa, Mississippi, Missouri, Nebraska, New Hampshire, North Dakota, West Virginia and Wyoming. I group all the remaining states into the non-early halters.
4. In this article, all data are seasonally adjusted, and July employment counts are preliminary.
5. The calculation used to construct this figure is known as a decomposition analysis. It parses the observed growth into that coming from early-halting states versus other states. This type of analysis uses fewer assumptions than a counterfactual analysis, which tries to answer the question: What would have happened in the halting states had they not halted benefits? Answering this question requires making potentially non-innocuous assumptions, such as constructing a “pre-trend” path for employment in the period preceding the policy announcement. Moreover, it is well known that the answer to this type of counterfactual question can depend critically on what exact assumptions one makes. This article’s decomposition avoids making these assumptions.

The economic shutdowns caused by the COVID-19 pandemic in spring 2020 primarily impacted the leisure and hospitality sector.  Travel restrictions cut down on the visitors who power the industry, and social-distancing mandates limited capacity at venues that remained open. By one measure, many leisure and hospitality jobs are among the most high-contact occupations; this left the sector’s employees particularly vulnerable to job losses and at risk of contracting COVID-19.

The result was a surge in job losses across the nation as these businesses temporarily closed their doors. For example, New York state saw its number of leisure and hospitality employees fall a staggering 62% from April 2019 to April 2020.

While the Eighth District’s employment decline in the sector wasn’t the worst in the nation, every state in the District experienced decreases of at least 35% in April 2020 alone. However, economic conditions improved quickly after that initial shock, and by July 2020 Illinois was the only Eighth District state with year-over-year employment declines in the sector greater than 20%.

A year later, the availability of vaccines, federal aid and improved consumer confidence have provided the sector with a much-needed boost. July 2021 leisure and hospitality employment was up at least 12% in all District states relative to the same period one year ago. Still, a significant shortfall remains. When compared with pre-pandemic employment levels, all District states have leisure and hospitality employment below their 2019 levels, which suggests that there is still space for additional hiring as economic conditions improve.

Sector Employment in the District vs. Nationwide

To better understand where the leisure and hospitality sector stands, this article examines employment data across the District using metropolitan statistical areas (MSAs) and statewide data. By learning where sector employment fell, where it’s returning and how these data compare to national trends, we can glean valuable information about what changes to expect in the coming months.

Prior to the pandemic, the Eighth District’s leisure and hospitality sector composed a slightly smaller share of the economy than the U.S. average. Around February 2020 (the last full month before the effects of the pandemic), leisure and hospitality jobs in the District made up 10.7% of total employment, 4.3% of quarterly wages and 3% to 5% of total output, measured by GDP. The fact that this industry makes up a disproportionate fraction of employment compared with wages and output makes intuitive sense, since leisure and hospitality is a labor-intensive and relatively low-wage sector.

As a result, the economic shock to the leisure and hospitality sector resulted in significant job losses but had less of an impact on overall output than shocks to sectors like manufacturing or construction, which are capital intensive and can spill over to many other sectors. This helps explain why the recovery from the pandemic has seen GDP growth return to pre-pandemic trends while labor market recovery lags.

There are also significant disparities in leisure and hospitality sector size and activity across geographic regions in the District. Within the Eighth District’s tourism-heavy counties near the Ozarks and Arkansas’ Hot Springs, the leisure and hospitality sector’s share of wages and employees is three to four times higher than the national average. Taney County, Mo., for example, had 39.7% of all employed people working in the leisure and hospitality sector in December 2019, accounting for 30.6% of wages. The increased importance of the sector to output means that downturns are felt acutely in these regions.

The Pandemic’s Impact and the Region’s Recovery

While the District’s leisure and hospitality sector suffered significant employment declines during the pandemic, the overall magnitude of the fall was lower than national averages; notably, while the Louisville and St. Louis MSAs experienced declines similar to the national average, Little Rock and Memphis fared better.

The recent recovery, however, has put all four MSAs and the national average in a similar situation. As conditions have improved across the District, the MSAs that saw the largest declines have been able to improve faster because of the amount of slack in their economies; as a result, all major MSAs have converged to an employment rate close to the national average.

Employment growth in leisure and hospitality rose sharply as pandemic restrictions were lifted and COVID-19 hospitalizations declined. By early 2021, however, the recovery had begun to wane in many parts of the District as hospitalization rates increased and workers remained at home, with vaccines still on the horizon. The spring 2021 employment gains resumed, and most District MSAs are now about 90% of the way back to pre-pandemic levels of leisure and hospitality employment.

While these figures have been rising steadily since the first few months of 2021, the pace at which they are increasing suggests that a return to pre-pandemic employment levels remains several months away. The slow return has been attributed to many factors: continued fear of COVID-19 exposure, family and child care responsibilities and expanded federal payments, to name a few. Faced with these challenges, many firms report significantly increasing wages and providing incentives to attract workers, particularly to meet seasonal demand.

Consumer Sentiment Improving, but Delta Variant Poses Risks

Leisure spending data for the summer months aren’t available yet, but there are indications that demand was strengthening during that period. The Conference Board’s bimonthly consumer confidence survey found that vacation intention expectations had rebounded modestly through the summer. See the figure below.

June 2021 saw 37.9% of survey respondents planning to take a vacation within the next six months, up 12% from the previous year (33.8%) but down 27% from June 2019 (51.7%). August saw an even stronger rebound, with 41.1% of respondents planning a vacation—up 16% from 2020 (35.3%) and down 24% from 2019 (54.3%).

In contrast, plane travel expectations didn’t respond as quickly to the pandemic but have been slower to return to pre-pandemic levels. This effect is explained by the difference between business and leisure travel: Because tourism is generally planned well in advance, people still expected to take future vacations in the initial stages of the pandemic. The share of respondents expecting to travel by plane reached a low of 12.4% in August 2020 and had only risen to 20.6% by August 2021, down 32% from August 2019.

Relative shifts in vacation expectations using different modes of travel this summer reflected continued COVID-19 concerns and international uncertainty, both of which could have proven helpful to the District’s leisure sector. Vehicle travel expectations were faster to recover after the pandemic than plane travel; only 15% of survey respondents intended auto vacations in April 2020, but by October 2020, 35.9% of respondents did—the highest rate in over a decade. By August 2021, auto vacation expectations had fallen to 28.1% of respondents—5% less than in August 2020, but still above historical levels for this time of year.

While these indicators suggest strengthening demand, the rise of the delta variant threatens to put a damper on the leisure and hospitality sector’s hopes for continued recovery. Measures of national consumer sentiment, which had shown rapid improvement after the winter months, saw slower growth in the spring and then significant decreases in late summer as cases started to pick back up.

The University of Michigan’s Index of Consumer Sentiment, for example, reached a pandemic-era high of 88.3 in April before falling to 70.3 in July and 78.2 in August, an even lower level than in April 2020. On the employment front, August 2021 saw a net loss in food services and drinking places of employment nationwide and a net zero change in leisure and hospitality employment overall—a sharp contrast after average national job gains of 350,000 per month over the previous six months.

While these measures do not necessarily indicate an impending sharp decline in economic activity, they reflect that consumer expectations remain highly sensitive to changes in pandemic circumstances, even after the arrival of vaccines.

Since the health of the District’s leisure and hospitality sector is linked to consumer confidence and consumers’ ability to go out in public safely, it is one of the sectors most vulnerable to these expectations. The challenge for the winter months lies in restoring public confidence and giving the industry the demand it needs to continue a steady recovery.

1. The leisure and hospitality supersector consists of the arts, entertainment and recreation sector and the accommodation and food services sector. See Industries at a Glance: Leisure and Hospitality (bls.gov).
2. The Eighth District includes all of Arkansas, southern Illinois, southern Indiana, western Kentucky, eastern Missouri, northern Mississippi and western Tennessee.
3. This information was calculated using raw data from the Bureau of Labor Statistics.

Government regulators often rely on third-party monitors in their oversight of corporate accounting practices. Monitors impose costs, which are borne by the regulated, and create benefits, which accrue to society more generally. The scope of monitors’ activities within this trade-off has been vigorously debated as regulatory environments have evolved over time.

This article examines monitoring by external auditors in the banking industry. The key issue—what auditors accomplish in this heavily regulated environment that justifies their costs—is investigated using information from bank examination files and interviews with bank examiners. Evidence provided from these sources serves to narrow the scope of what third-party monitors have been thought to accomplish in financial reporting quality.

Defining Intensity of Oversight

First, I identified banks that became subject to greater oversight by auditors and supervisors. This allowed for a look at interactions between them in a dynamic context that is common in regulated industries such as banking.

External auditing requirements for banks were first mandated under the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA). They were meant to address bank failures in the 1980s that were attributed, in part, to inadequate oversight of internal controls and financial accounting practices. Under FDICIA, insured depository institutions with more than $500 million in assets must prepare annual financial statements that are audited by an independent public accountant.

For banks with more than $1 billion in assets, external auditors must additionally “examine, attest to and report separately on the assertion of management concerning the effectiveness of the institution’s internal control structure and procedures for financial reporting.” Internal control is a process, established by a bank’s board of directors and management, to ensure information flows are reliable, accurate and timely.

Following this size-based distinction, audit intensity is assumed to increase when banks with assets exceeding $500 million but less than $1 billion choose to upgrade their audits to include internal controls. Audits become mandatory above the $500 million mark, but internal controls are optional; internal controls become mandatory when assets exceed $1 billion. Supervisory intensity is assumed to increase when banks are cited for violations of laws or regulations or matters requiring attention and matters requiring immediate attention in which banks must take corrective action.

Evidence from Examination Files

Next, I developed a sample based on disciplinary actions imposed in 2017 and 2018 on 100 banks with assets between $500 million and $1 billion that changed audit status in those years—that is, from audit under internal controls to audit without internal controls or from audit without internal controls to audit with internal controls. The banks represented about 5%, per year, of all banks with assets between $500 million and $1 billion.

Of these 100 banks, I had access to 76 reviewable files. Of these, 44 added internal controls and 32 eliminated them in the year in which disciplinary actions were either imposed on the bank or removed. (See the table below.) Among the 44 banks that expanded audits to include internal controls, 36, or 82%, had disciplinary actions imposed in the same year. Of the 32 banks that dropped internal controls, 14, or 44%, had disciplinary actions removed.

I concluded that audit intensity is linked with supervisory intensity. This is important because supervisory intensity improves financial reporting quality. It suggests that purported benefits of using external auditors are attributable, at least in part, to coincident scrutiny of supervisors exerted elsewhere. In this case, only three of the 50 disciplinary actions at banks changing audit status—the 36 banks that added and the 14 banks that eliminated consideration of internal controls—addressed financial reporting.

The Federal Reserve, in commenting on FDICIA prior to its enactment, said at least some of its required auditing procedures duplicated practices already required by regulators. The Fed was, therefore, “reluctant” to impose a costly requirement for outside audits of banks.

Later, in exempting smaller banks from FDICIA’s internal control requirements, the FDIC similarly noted that those requirements had “become more burdensome and costly.” Both comments are consistent with a recent survey of bankers by the Conference of State Bank Supervisors showing that more than 40% of all accounting and auditing expenses went toward regulatory compliance.

What Examiner Interviews Revealed

Structured interviews I conducted with a dozen bank examiners provided some support, albeit qualified, for external auditors’ influence on the quality of financial reporting. But most reported they felt otherwise. One of them said he has “not found issues with financial statement reliability for non-externally audited institutions.” Another “accepts financial [statements] as readily from a bank that’s not audited as one that is.” Another “has not found any differences in the reliability of financial statements across banks regardless of the type of audit.”

These doubts offer insight into improvements in financial reporting quality during the overlap of heightened monitoring activities by examiners and auditors. They also underscore a sensitivity of bankers to earnings management practices that examiners may perceive to be a minor concern in most circumstances but not when they occur in the context of disciplinary action.

“When problems come up, boards of directors don’t tell management to fix things up so that auditors are happy,” one examiner said. “They tell them to fix things up so that examiners are happy.”

Conclusions

Examination files show that banks choosing to be audited more intensively are more likely to operate under an enhanced level of supervisory attention that seldom involves accounting practices. This raises doubts about the underlying cause of observed improvement in financial reporting quality when auditors are more intensively employed. Examiners themselves tell a similar story.

Although these findings were generated in the banking industry, they are relevant to understanding the role of third-party monitors in other regulated industries. For the biggest firms, these auditing costs can amount to millions of dollars annually; for the smallest firms, they can account for substantial portions of annual operating expenses.

This analysis is incapable of determining whether the benefits of external auditors exceed the costs involved. But it does raise questions about the value these auditors provide in ensuring the integrity of financial statements in a regulatory context. It suggests a continuing need to evaluate the extent to which requirements for third-party monitoring comply with their original objectives.

 
 

References

• Community Banking in the 21st Century Research and Policy Conference. National Survey of Community Banks. 2020.
• Dahl, Drew. “Third-Party Monitoring, Regulatory Compliance and Financial Reporting: Evidence from the Banking Industry.” 2021.
• Ghosh, Aloke; Jarva, Henry; and Ryan, Stephen G. “Do Bank Regulation and Supervision Displace Bank Auditing?” Working paper, July 2017.
• Hirtle, Beverly; Kovner, Anna; and Plosser, Matthew. “The Impact of Supervision on Bank Performance.” The Journal of Finance, October 2020, Vol. 75, No. 5, pp. 2,765-808.

Endnotes

1. This article is based on a study conducted by the author that is accessible at the Federal Reserve Bank of St. Louis. See Dahl.
2. This analysis is not statistical in nature. It is partly descriptive, based on a small sample of disciplinary actions, and partly anecdotal, based on interviews with a handful of examiners from a single Federal Reserve district. Findings must be qualified accordingly.
3. Actions were imposed and removed in the same year at three banks, of which two added, and one eliminated, consideration of internal controls.
4. These percentages are understated to the extent that actions at some banks were imposed or removed late in a calendar year, thereby missing changes in audit status that may have been reported in the following year.
5. The Federal Reserve and the Office of the Comptroller of the Currency supervise different categories of banks.
6. Hirtle et al. and Ghosh et al.

On July 19, 2021, the National Bureau of Economic Research (NBER) Business Cycle Dating Committee announced that the U.S. recession, which began in February 2020, ended in April 2020. This recession was not only the deepest in U.S. history, but also the shortest.

Over the second half of 2020 and into the first quarter of 2021, the economy recovered at a brisk pace, once the severe business disruptions stemming from the COVID-19 pandemic began to ease. However, the supply of labor and many material inputs lagged the strong demand for goods and services. As a result, price pressures began to build.

A little more than a week after the NBER announcement, the Bureau of Economic Analysis reported that real gross domestic product (GDP) finally surpassed its pre-pandemic peak in the second quarter of 2021; the peak occurred in the fourth quarter of 2019.

In business cycle analysis, the transition from economic recovery to economic expansion occurs when real GDP surpasses its previous peak. The start of the business expansion in the second quarter of 2021 is important because economic expansions tend to last several years. Of course, some expansions last longer than others, and there are many reasons why economic expansions end.

A Troublesome Rise in Inflation Confronts Forecasters

The current expansion is unique because it has some qualities that mimic what often occurs in the latter stages of an expansion: healthy economic growth, solid job gains and a falling unemployment rate, but intensifying inflationary pressures. Indeed, the quickening pace of economic activity and the intensification of price pressures have surprised most forecasters.

Since the end of 2020, forecasters have significantly boosted their estimates for real GDP growth in 2021 (from 3.6% to 6.4%) and lowered their forecast for the average unemployment rate in the fourth quarter of 2021 (from 5.7% to 4.9%). At the same time, forecasters have dramatically increased their consumer price index inflation forecast for 2021 (from 2%* to 4.9%), according to Blue Chip forecasters.

The marked acceleration in inflation is troublesome because—from an historical standpoint—many expansions end because Federal Reserve policymakers raise their interest rate target to combat higher-than-desired inflation. Given the economy’s profile thus far in 2021, the Federal Open Market Committee (FOMC)—based on past policy responses—would thus be expected to begin raising its federal funds target rate from its current range of 0% to 0.25%.

Often, in setting the current and prospective policy rates, monetary policymakers would closely monitor—though not necessarily act upon—a policy rule, such as a Taylor rule. There are many versions of this rule, but one rule estimates where the FOMC’s policy rate should be set based on (1) the economy’s current inflation rate, as measured by the four-quarter change in the GDP implicit price deflator, (2) where inflation is relative to the FOMC’s 2% target rate, (3) where the current level of real GDP is relative to the estimated level of real potential GDP and (4) the estimate of the economy’s natural rate of interest (r*). As seen in the chart below, this particular rule (using r*=1%) suggests that the federal funds interest rate target should be about 5% in the second quarter of 2021.

Policymakers Expect Continued GDP Growth but Watch Inflation Expectations

However, today’s Federal Reserve policymakers have signaled that they are content to keep the federal funds target rate at its current level well into 2023, given the economic outlook. In effect, Fed policymakers believe that they should not adjust the policy rate to combat rising inflation pressures for two main reasons.

The first is the belief that this year’s inflation surge will be transitory. Although inflation is on pace to be the highest since 1990, the June FOMC economic projections, as well as the August Survey of Professional Forecasters, have the personal consumption expenditures price index inflation rate falling back very close to the 2% target by the end of 2022. Forecasters also expect continued strong (above-trend) real GDP growth next year and an unemployment rate that is forecast to fall to 4% or less by the end of 2022.

The second reason for the FOMC’s reticence to raise its federal funds target rate is its commitment to the new monetary policy framework that was announced in August 2020. Under the new framework, the FOMC is willing to accept inflation moderately above its 2% inflation target to help make up for previous years when inflation was below the 2% target.

In conjunction with this strategy, the FOMC is now targeting maximum employment. Although not defined, the term is generally interpreted to mean an unemployment rate close to the FOMC’s long-run projection of 4%.

However, an important caveat to this new framework is that long-term inflation expectations must remain anchored at 2%. Thus far, inflation expectations have begun to drift modestly above 2%—and much higher, according to the expectations of consumers—but policymakers have not viewed this development as a permanent increase.  Should inflation expectations continue to rise, the FOMC will probably need to pivot.

In sum, there is uncertainty surrounding the outlook for the economy and inflation. The current forecasts for the rest of 2021 and 2022 appear bright. However, as history teaches, forecasts are often wrong. Accordingly, policymakers must continually strive to identify key risks (such as the emergence of the Delta variant), and then decide whether to adjust their strategy to ensure their desired outcomes. It can be a difficult task.

* The article has been updated to correct this forecast percentage.

Devin Werner, a research associate at the Bank, provided research assistance.

Endnote

1. For the former, see: https://www.federalreserve.gov/econres/notes/feds-notes/research-data-series-index-of-common-inflation-expectations-20210305.htm. For the latter, see: https://www.newyorkfed.org/microeconomics/topics/inflation.