Finance

On september 11th Tom Brady marked his “unretirement” from America’s National Football League, guiding the Tampa Bay Buccaneers to a decisive win over the Dallas Cowboys in their first game of the season. Mr Brady, probably the greatest quarterback in history, had earlier this year announced that he was retiring, only to change his mind a few weeks later. The 45-year-old athlete is, it seems, not the only one who cannot bring himself to give up the grind. Across the rich world, old folk are flocking back to work.It is quite a turnaround. When the covid-19 pandemic struck in 2020, many people already close to retirement brought the date forward. Using data from a variety of sources, we estimate that the rich world’s labour-force participation rate for people aged 65 and over crashed that spring (see chart). This represented a relatively larger decline than for people of working age. Like everybody else, some oldies were fired as demand dried up. In addition, though, they also faced higher risks of becoming seriously ill or dying if they caught covid, meaning many no longer wanted to work. Economists had assumed, based on historical experience, that pandemic retirees would never come back. Employers often unfairly turn their noses up at older job applicants; for their part, older folk can find the idea of learning the ropes at a new place daunting. Indeed, two years on many appear to have followed the example of Rob Gronkowski, Mr Brady’s former partner in crime, hanging up their cleats for good. But a surprising number have followed the path of Mr Brady. There are probably more over-65s in the rich world’s labour force today than there were in 2019. Old-age participation is lower than it would have been without the pandemic. But we estimate that the number of pandemic-induced retirees has fallen by 20-40% from its peak. In Britain and South Korea old-age activity is higher today than it was in 2019. Other data back up the idea of a wave of unretirements. Statistics from Europe suggest that, as early as the end of 2020, an unusually large share of people aged 55 to 74 were moving from economic inactivity to employment. According to our analysis of official microdata, in the second quarter of this year, some 75,000 Britons in paid work said that they had been retired the year before, much higher than the pre-pandemic norm. It is a similar story in America. Nick Bunker of Indeed, a jobs site, finds that the share of retired workers returning to the workplace each month is higher than it was before the pandemic.In some cases retirees have little choice but to return. Market turmoil has reduced the value of pension pots (in America the total value of retirement assets fell by 4.5% in the first quarter). Some retirees have run down “excess” savings that they had accumulated during the covid lockdowns. And inflation, now approximately 10% year on year across the rich world, is cutting the purchasing power of fixed payments that those in their dotage are receiving. Yet there are pull factors, too. The threat of the virus has dissipated, meaning more people are comfortable with being in public spaces. Thanks to red-hot demand for workers, employers have had little choice but to set aside their prejudice, and some erstwhile retirees are able to earn pretty well, even if only working part-time. Others, though, may simply have realised, in Mr Brady’s words, that their “place is still on the field and not in the stands”. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

In a speech to the Vatican in January, Pope Francis made an observation fit for an economist. He argued that declining fertility rates might lead to a “demographic winter”. In every European country the total fertility rate, the expected number of children a woman will have in her lifetime, has now fallen below 2.1, the level needed to maintain a stable population without immigration. The same is true in many developing countries, including China and (as of this year) India. This, the pope warned, would weigh on the world’s economic health.Economists have long considered such a slowdown inevitable. In the best-known model of fertility, popularised by Gary Becker, a Nobel-prizewinning economist, and others in the 1960s, there is a central role for the trade-off between the “quantity and quality” of children. As countries grow richer and the returns to education rise, it is expected that families will invest more in a smaller number of children. And as women’s working options expand, the opportunity cost of their time will grow, making the trade-off between family and career more difficult. Fitting this theory, many places have already gone through a “demographic transition”, in which poor, high-fertility countries become rich, low-fertility ones. In some, the transition has been so dramatic that their populations have started to decline. The number of people in Japan has fallen by about 3m since peaking at 128m in 2008. Many demographers suspect China’s population is also falling, no matter what the country’s official figures claim. Yet an emerging body of research suggests that fertility may go through another shift at a later stage of development. A recent review of the literature by Matthias Doepke of Northwestern University and co-authors makes the case that, in rich countries, fertility may rise, or at least fall at a slower rate, if norms, policies and the market for child care make it easier for a woman to have children and a career. In countries with, say, supportive family policy or fathers who take on a greater share of child-care duties, one would expect working women to have more children than in the past.One way to see if this is true is to compare fertility rates across countries with differing incomes and female labour-force participation. In 1980 countries in the oecd with higher female participation rates had lower rates of fertility. By 2000 that relationship had flipped: countries with higher rates of female labour-force participation had higher rates of fertility. Since then, the picture has muddied slightly. By 2019 the new relationship had weakened a little, and it looks less sturdy when considering gdp per person More

Bully Market. By Jamie Fiore Higgins. Simon & Schuster; 320 pages; $28.99.Goldman sachs, the world’s most famous investment bank, is used to criticism. Insiders complain about its callousness to employees, harsh hours and fierce internal competition. Outsiders are less polite. Matt Taibbi, an American polemicist, famously called it “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money”.Jamie Fiore Higgins, a former Goldman banker, is the latest to participate in the venerable American tradition of Goldman-bashing. In her memoir, “Bully Market: My Story of Money and Misogyny at Goldman Sachs”, Ms Higgins writes of her “perceptions and experiences as a high-ranking woman in finance”. Ms Higgins quit the company in 2016 when her “Spreadsheet of Freedom”, updated throughout her 17-year career, indicated she had the money to walk away. The book recounts some despicable behaviour. One of Ms Higgins’s colleagues threatened to rip her face off, after she removed him from an account for an affair with the client; two men made mooing noises as she went to express milk for her baby. The only partial consolation is that Ms Higgins thinks sexism and abuse are less rampant since the #MeToo movement.It is all rather grim. Ms Higgins admits to having failed to support colleagues for fear it would damage her professional advancement (and chances of a juicy bonus). Longing to quit but staying for the money made her feel “dirty”, she writes. She worked hard, was promoted often and became a managing director. “Another 365 days of hardly seeing my family,” she sighs. At times, the author wants to have it both ways. Ms Higgins praises herself for shopping at tj Maxx, a retail chain store, enraged by the fact that other women at the bank have expensive clothes, designer handbags and even clear skin. She repeatedly says she aspired to become a social worker only to have abandoned that calling because of her parents. “I felt guilty making so much,” she writes. “My income covered me with a mix of satisfaction and shame.”Goldman Sachs has said that it has a zero-policy tolerance for discrimination, and strongly disagrees with Ms Higgins’s anonymised allegations and description of its culture. The threats and abuse are unpleasant; in truth, though, the firm won’t be too bothered about the rest. Everyone knows the deal.For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

The marshmallow test is a classic of standardised psychology. A young child is given a marshmallow, and told they can eat it whenever they like. Wait for 15 minutes, though, and they can have two. Then they are left alone. When the test was first performed, at Stanford University in the 1960s, the average child succumbed in three minutes. But those who did not were rewarded with more than just a sugar rush. A follow-up study in 1990 showed that success on the test was associated with a whole range of goodies in later life, from academic achievement to coping better with stress.By now, the associated investment lesson is eye-rollingly familiar. Jam tomorrow should be prized over jam today. Valuing a firm by its present earnings, assets and dividend yield is for the dinosaurs. The pace of technological innovation has made these metrics obsolete; instead, what matters is a company’s chance of explosive future growth. For the canonical example look to Amazon: unprofitable for decades, now the world’s fifth-largest company. To their proponents, the beating growth stocks have taken over the past year simply does not matter. Truly innovative, disruptive firms will eventually provide returns that make any number of temporary setbacks eminently bearable.Such thinking has guided some of the most successful investors of the past few decades. Yet their strategies have played out during a 40-year period in which interest rates have mostly fallen. Should that trend now reverse—and the Federal Reserve seems set to raise rates by three-quarters of a percentage point for its third meeting in a row on September 21st —the logic will be turned on its head. In a world of higher interest rates, waiting for jam tomorrow just isn’t worth it.To see why, first consider a crucial driver of this year’s downturn. In place of current profits, growth stocks offer the prospect of bigger ones in the future. But a dollar in ten years’ time is not worth the same as a dollar today, because the dollar today can earn income in the meantime. At an interest rate of 1%, you need to deposit $91 to have $100 in ten years’ time. At a rate of 5%, you can deposit just $61. Hence this year’s fall in growth stocks: as rates have risen, the promise of future profits has become worth considerably less in the present.This logic has broader implications than most investors realise. Now imagine you will receive $100 a year, for ever. By the reasoning above, this has a finite present value, since compound interest means payments in the distant future are almost worthless. With interest rates at 1%, the payment stream is worth $10,000; at 5%, it is worth $2,000. But as well as reducing the value, the higher rate also changes the distribution of that value. With rates at 1%, less than a tenth of the stream’s value comes from payments made in the first ten years. At 5%, around two-fifths does.In other words, higher interest rates dramatically alter firms’ incentives when choosing which timeline to invest over. Sacrificing short-term profits for longer-term gains is one thing when you are trying to persuade investors that your superapp, machine-learning algorithm or gene-sequencing widget has the potential to up-end an industry. It is another when even the best-case scenario has its value so heavily skewed towards what can be done in the next decade. Startup founders are used to shaking off derision over implausible, Utopian dreams. It is more of a kick in the teeth to realise that even Utopia is not worth much unless it can be achieved in short order.Nor are the implications limited to early-stage firms, or even to the stockmarket. Should profits be reinvested in a project that may not make returns quickly enough to be worthwhile, or should they just be returned to shareholders as a dividend? Should a company with callable bonds and cash to spare bother repaying? Is there any point in a fixed-rate mortgage-holder overpaying, just to reduce future payments whose value has already fallen?The original marshmallow test, it turned out, had a flaw. Exclude some children from better-off families (which seems to make them both more willing to delay gratification and more likely to succeed in later life) and much of its predictive power suddenly disappears. Investors who have spent the past few decades betting on long-term, world-changing disruption were similarly fortunate. It was not that they were wrong to be so optimistic. But in falling interest rates, they got a helping hand that is now being withdrawn.Read more from Buttonwood, our columnist on financial markets:Emerging-market stocks are struggling in an intangible world (Sep 8th)Why investors are reaching for the astrology of finance (Sep 1st)Investors are optimistic about equities. They have no alternative (Aug 18th)For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

The main target of Ursula von der Leyen’s state-of-the-union address on September 14th was energy companies. It is wrong, the president of the European Commission said, for them to make such profits “from war and on the back of consumers”. Windfall taxes raising €140bn ($140bn) would follow, she announced. Yet the speech also included a telling sideswipe at a once obscure part of commodity markets: the Dutch Transfer Title Facility (ttf), a gas-trading network. Russia’s invasion of Ukraine has thrust the ttf into the limelight. The network sets Europe’s benchmark price for natural gas—so it is now a measure for the continent’s economic health. With such attention comes criticism. “Our gas market has changed dramatically: from pipeline gas to increasing amounts of liquid natural gas,” Ms von der Leyen said. The ttf has not adapted, she added, and so the commission would start work on a new lng index.The ttf was born of European politics. In the 2000s the eu pushed for deregulation of Europe’s gas market, moving it from bilateral contracts to trading on exchanges. The Netherlands was first out of the blocks to establish a euro-denominated trading hub, says Mike Fulwood of the Oxford Institute for Energy Studies (and the father of an Economist journalist). This free-market zeal combined with state investment in storage and pipelines to make the Netherlands Europe’s natural-gas hub.The problems facing Europe are not caused by the ttf. As Europe’s hub, it gathers participants from across the bloc. Consequently it is a liquid market, allowing power firms and utilities to manage risk. In 2020 there was 60 times as much volume traded as demand for the fuel in the Netherlands. The only market in Europe that comes close is Britain’s National Balancing Point, which in 2020 handled 11 times as much volume as underlying demand. Even so, ttf prices have been volatile. The cost of a megawatt hour (mwh) of front-month gas rose from €80 in June to €340 in August, after Russia cut the flow to Germany and then shut it down. More recently prices have fallen to €218, after Germany hit its winter-storage target early. These are extreme changes, but reflect highly unusual circumstances.Lofty prices increase the cost of failed trades, leaving the clearinghouse, which is responsible for settling deals, on the hook. So as prices rose, it demanded more “margin”, to be seized if traders cannot make good on the deal. A cycle of such margin calls and nervy traders stepping back may have helped drive up prices over the summer. Governments across Europe have been forced to step in to provide guarantees. A Finnish minister warned the situation had “all the ingredients for the energy sector’s version of Lehman Brothers”.The commission’s criticism of the ttf may have some justification. The close correlation between it and some other European trading hubs broke down this year, notes Ben Wetherall of icis, a research firm. Congestion in the Netherlands means European lng prices are in fact slightly lower than those on the ttf. Using the ttf as a benchmark could lead firms in Spain, which has a quarter of the continent’s lng terminals, to overpay. On September 14th the cost of a mwh of gas on the Iberian Gas Market for delivery in October was €171 compared with €218 on the ttf. But these differences should be short-lived, suggesting a new index is probably not needed. High prices have spurred investment in lng infrastructure elsewhere. Meanwhile, researchers at Goldman Sachs, a bank, argue that Europe’s energy prices are likely to have halved by spring 2023, owing to lower demand. If they are right, the Dutch gas market’s moment in the spotlight may not last all that long. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

In the aftermath of the global financial crisis in 2007-09, China’s stimulus efforts, which pumped around 4trn yuan ($575bn) into the economy, left observers gushing with praise. Robert Zoellick, then head of the World Bank, expressed his delight at the fiscal expansion. The imf credited the world’s second-largest economy with leading the global recovery.This year, during a new period of economic turmoil, China is again helping to bring supply and demand back together—albeit in a very different way. With the price of fuels surging, the collapse in Chinese purchases of natural gas and other forms of energy has been an unexpected boon to countries around the world. Arrivals of seaborne liquefied natural gas (lng) have declined most markedly. China remains the largest lng importer in the world but, between January and August, imports dropped by a fifth compared with the same period last year. That shortfall, at roughly 14bn cubic metres, is roughly equivalent to the entire annual lng imports of Britain. Industry experts had expected imports to grow throughout the year, if not as rapidly as they had in previous ones. But China’s endless covid-19 lockdowns have caused a sharp drop in household spending and a meltdown in the residential property market has held back the construction industry. Meanwhile, volumes imported through the Power of Siberia pipeline, which pumps cheap Russian gas into China, have increased by an estimated 60% (this accounts for less than half the fall in seaborne imports). It is not just imports of lng—which is typically used for heating, industrial power and electricity generation—that have slumped. Lockdowns also mean considerably less travelling. Between January and July highway traffic fell by more than a third compared with the same period last year, reducing demand for petrol. Chinese crude-oil imports in August were 9% lower than last year, and the International Energy Agency, a think-tank, forecasts the first annual drop in oil demand since 1990. Coal imports were also down, by 15%. What happens next is crucial. The behaviour of an importer as big as China moves prices, especially in a market under severe stress. An end to the country’s “zero-covid” policies looks unlikely any time soon. But Chinese energy demand is muted even relative to last year when the approach was already in force, meaning demand may yet rise a little. The weather also makes a difference. If it is “exceptionally cold”, China could return to the spot market, notes Laura Page of Kpler, a data firm, pulling much-needed lng supplies away from Europe.China’s neighbours would also struggle in the face of a further squeeze. Price-sensitive buyers of lng in developing economies in Asia are already being forced out of the market. According to the Institute for Energy Economics and Financial Analysis, a research firm, $97bn-worth of infrastructure for lng imports in Bangladesh, Pakistan, the Philippines and Vietnam risks being underused or mothballed if prices remain unaffordably high. For good reason, the Chinese policies that have crushed energy imports this year will not gain the plaudits that the country’s stimulus did during the global financial crisis. But European buyers of globally traded gas, already desperately scrambling for the imports needed to make it through the winter, will miss them if they go. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

In China, 32% of respondents said they were concerned about the impact of inflation on their job security, as did 30% of respondents in Brazil, an Oliver Wyman survey found.
That’s far higher than the share of respondents in the U.S. and U.K. saying they were worried about their jobs, the report said.
However, in terms of the economic outlook, U.K. respondents were the most pessimistic, with 75% expecting conditions to worsen, the report said, while Chinese and Brazilian respondents were most optimistic.

Unemployment among China’s youth aged between 16 and 24 has surged to nearly 20%, according to an official survey for July. Pictured here is a job fair in Beijing on Aug. 26, 2022.
Jade Gao | Afp | Getty Images

BEIJING — More people in China and Brazil are worried about their jobs than in the U.S. and U.K., according to a survey by consulting firm Oliver Wyman released this month.
In China, 32% of respondents said they were concerned about the impact of inflation on their job security, as did 30% of respondents in Brazil, the report said.

But in the U.S. and U.K., that figure was just 13%, the survey found.
Unemployment among China’s young people aged between 16 and 24 has surged to nearly 20%, while that of the working age population in cities is about 5.4%, according to an official survey for July.
In Brazil, the unemployment rate as of July was 9.1%, official data showed.
The unemployment rate in the U.S. was a far lower 3.5% in July, and 3.6% in the U.K., according to government data.

The Oliver Wyman study focused on consumers’ views about the impact of inflation. But Hong Kong-based partner Ben Simpfendorfer noted that each country faces unique situations in addition to inflation that likely affected survey results.

In Brazil, he pointed out, “periods of very high inflation are not unusual” and that income disparities tend to be greater.
That was reflected by a high 68% of respondents in Brazil saying they were worried about their ability to pay for groceries and essential products.
While being able to afford those goods was the top area of concern for consumers in all four countries, Brazil ranked first. The U.K. was second at 48%, followed by 44% in the U.S. and 42% in China.

Job and income worries in China

In the U.S., where jobs growth and wage growth have been strong despite recession fears, “worries about household abilities to pay for groceries would be primarily inflation-related, Simpfendorfer said.
“Whereas in China, growth has been a little weaker, jobs growth for certain demographics has been weaker, workers in the tech sector have struggled recently, wage growth has been sluggish,” he said. “That may also play into concerns about the ability to pay for groceries.”

China’s economy has been dragged down by Covid controls and a property market slump. A tighter regulatory environment, especially when it comes to internet tech companies, has also weighed on sentiment.
Chinese incomes are also growing more slowly than the overall pace of price increases.
Average monthly disposable income for Chinese city residents was 4,167 Chinese yuan ($598), according to official data for the first half of the year. That was only 1.9% higher than a year ago.
In contrast, China’s consumer price index rose by 2.5% in August from a year ago, slightly off a two-year high of 2.7% reached the prior month. A rebound in pork prices, a food staple, drove much of the increase.

Read more about China from CNBC Pro

In terms of the economic outlook, U.K. respondents were the most pessimistic, with 75% expecting conditions to worsen, the Oliver Wyman report said. In the United States, that figure was 56%.
Chinese and Brazilian respondents were most optimistic, with 42% and 26%, respectively, expecting conditions to improve in the next half year, the survey found in July.
However, fewer than 15% of U.S. or U.K. respondents said they were motivated by recession fears to pick up new skills or take on a side job. But that share was well over 30% in Brazil and China.

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Wind turbines at the San Gorgonio Pass wind farm, owned by NextEra Energy Inc., in Whitewater, California, on Wednesday, Feb. 17, 2021.
Bing Guan | Bloomberg | Getty Images

Check out the companies making headlines after hours.
NextEra Energy — Shares fell 3% in extended trading after the company announced its intent to sell $2 billion in equity units. Each equity unit will be issued in the amount of $50 and will consist of a contract to purchase NextEra Energy common stock in the future, as well as a 5% undivided beneficial ownership interest in a NextEra Energy Capital Holdings debenture due Sept. 1, 2027, issued in the principal amount of $1,000.

Danaher — The medical company saw shares rise 4% after announcing plans to spin off its environmental and applied solutions business to create an independent, publicly traded company. It also raised its third-quarter revenue guidance, according to FactSet.
Rhythm Pharmaceuticals — Shares of Rhythm Pharmaceuticals fell about 11% after the company announced a $100 million stock offering.
Arconic Corp — The manufacturing company’s shares slid about 8% after Arconic provided a lower-than-previously-expected revenue forecast for the full year, citing the impact of operational issues and the combination of demand declines and higher unhedged energy costs in Europe.

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