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North American Edition
31st January 2023
 
THE HOT STORY
IMF upgrades global outlook as inflation eases
The International Monetary Fund (IMF) has upgraded its economic growth projections for 2023 and 2024, suggesting that output will be more resilient than previously anticipated, and that a global recession would probably be avoided. The organization's World Economic Outlook report projects that global output will slow to 2.9% in 2023, from 3.4% last year, before rebounding to 3.1% in 2024. Inflation is expected to decline to 6.6% this year from 8.8% in 2022 and then to fall to 4.3% next year. “We are seeing a much lower risk of recession, either globally, or even if we think about the number of countries that might be in recession,” IMF chief economist Pierre-Olivier Gourinchas commented. The IMF projects growth in the United States to slow to 1.4% this year from 2% in 2022. It expects the jobless rate to rise from 3.5% to 5.2% next year, but that it is still possible that a recession can be avoided in the world’s largest economy. “There is a narrow path that allows the U.S. economy to escape a recession altogether, or if it has a recession, the recession would be relatively shallow,” Mr. Gourinchas said.
ECONOMY
Post-pandemic academic loss persists globally
The pandemic’s disruption of education persists for students around the world, according to the first meta-analysis of global learning loss. Researchers analyzed results from 42 studies of primary and secondary students in 15 high- and middle-income countries, including the United States, conducted from the start of the pandemic in 2020 through March 2022. Students in all of those countries experienced both delays in their expected academic progress compared to prior years and loss of their existing skills and knowledge, particularly in math. Gaps between low-income children and their wealthier classmates also have widened worldwide since the pandemic began. “Children still have not recovered the learning that they lost at the start of the pandemic, and this means that government programs seem to have been successful in avoiding further learning deficits as the pandemic continued, but they did not succeed in recovering the learning deficits that arose early in the pandemic, to this point, at least,” says Bastian Betthäuser, an assistant sociology professor at the Sciences Po Center for Research on Social Inequalities in France and associate researcher in public policy at the University of Oxford, England, and lead author of the study, which found evidence of worsening academic inequities across every grade as recently as March 2022.
LEGAL
J&J blocked from using bankruptcy to resolve talcum powder lawsuits
A U.S. appeals court has dismissed a bankruptcy petition filed by a unit of Johnson & Johnson (J&J), upending the healthcare company’s attempt to resolve billions of dollars of legal claims from customers alleging its talcum powder caused cancer. The decision by the U.S. 3rd Circuit Court of Appeals in Philadelphia removed from bankruptcy the company’s LTL Management unit, which was facing more than 38,000 legal claims tied to products such as its Johnson’s baby powder. J&J, which maintains and reiterated on Monday that its talc products are safe, created and spun off LTL, assigned its talc liabilities to the unit, and placed it in bankruptcy in 2021. J&J had argued in court that its use of the bankruptcy system was not an attempt to reduce the size of payouts to cancer claimants and said it had agreed to fund LTL’s talc liabilities up to the value of $61bn. However, in a 56-page ruling, Judge Thomas Ambro said that wanting to protect the J&J brand or to “comprehensively resolve litigation” was not an appropriate pretext for using the bankruptcy system. J&J said it would appeal against the decision.
TikTok faces prospect of death by 50 cuts
Reuters Breakingviews says TikTok CEO Shou Zi Chew will have to do more than appear in front of a U.S. House of Representatives committee in March to convince lawmakers that the platform doesn’t spy on American users and assure them that necessary safety measures are in place. Individual U.S. states are weighing their own approaches to the Bytedance-owned short-video app, and Chew may need to petition local leaders, from Republicans like Texas Governor Greg Abbott to Democrats like California state Senator Bill Dodd. Nearly half of the 50 U.S. states have banned the app on government-owned devices.
WORKFORCE
Worker surveillance is backfiring on employers
An increasing number of employers are embracing workplace monitoring because they believe it will ensure the productivity of remote employees, but there’s mounting evidence that electronic surveillance can, in some cases, do more harm than good: surveillance can lead to stress, cause employees to quit and even make workers do their job worse – on purpose. David Welsh, a professor at Arizona State University, who researches organizational and behavioral ethics, says being monitored could make employees more likely to break rules. In one study, he and his research colleagues found that U.S. employees who were under surveillance took more unapproved breaks, intentionally worked more slowly and stole more office equipment than their un-monitored peers. Meanwhile, Rudolf Siegel, a researcher at Universität des Saarlandes in Germany, and co-author of a recent meta-analysis on the effects of electronic monitoring, says “what was really surprising is that we found no positive effect on performance.” Data showed that monitoring employees offered no benefits, and instead damaged workplace culture and encouraged counterproductive behavior. Karen Levy, associate professor in the Department of Information Science at Cornell University, observes: “It raises our stress levels to be under observation all the time, and it impinges on our sense of autonomy and dignity . . . So, managers who over-monitor workers may also see people leave for workplaces where they feel more respected.”
COMPLIANCE
Apple violated work rules according to U.S. labor watchdog
Apple has been found to have broken U.S. labor laws on multiple occasions following a year-and-a-half investigation stemming from former employees’ complaints. The National Labor Relations Board (NLRB) general counsel's office found that “various work rules, handbook rules, and confidentiality rules” imposed by the tech giant “tend to interfere with, restrain or coerce employees” from exercising their rights to collective action, according to spokesperson Kayla Blado. In addition, she said, the agency “found merit to a charge alleging statements and conduct by Apple — including high-level executives — also violated the National Labor Relations Act.” Unless Apple settles, the board’s regional director will issue a complaint against the firm. One of the executives in question is chief executive Tim Cook, who in a September 2021 email to staff said: “People who leak confidential information do not belong here.” Some employees protested, saying they had the right to speak about issues including workplace harassment and pay transparency. 
INVESTMENT
SEC official says FTX failure shows need for private placement reform
Caroline Crenshaw, a commissioner of the Securities and Exchange Commission, has called for better disclosures for investors who buy company stock through private placements, highlighting inadequate disclosures at cryptocurrency exchange FTX. Large private companies, including unicorns worth $1bn or more, should report “useful, substantive information,” including their size, operation details and revenue, the Democrat said.
BlackRock steps up spending on U.S. lobbying in face of anti-ESG attacks
BlackRock increased its spending on lobbying in the U.S. last year after being criticized over its use of environmental, social and governance (ESG) factors in investing.
INSURANCE
Tesla Insurance data has driven changes to vehicle design, Musk says
Tesla CEO Elon Musk has said that telematics insurance data collected via the electric vehicle maker's proprietary insurance offering has been used to alter the production of vehicle parts. Speaking during a recent earnings call, Musk said that Tesla Insurance allows the company to minimise the cost of repair for its vehicles. He explained: “It is giving us a good feedback loop into minimising the cost of repair of Teslas – for all Teslas worldwide – because we obviously want to minimise the cost of repairing a Tesla if it's in a collision . . . Previously, we didn't have good insight into that because other insurance companies would cover the cost – and actually, the costs in some cases were unreasonably high.” He said the company's insurance offering had enabled Tesla to “adjust the design of the car and made changes in the software of the car to minimise the cost of repair.”
CORPORATE
Bed Bath & Beyond to close 87 more stores
Bed Bath & Beyond is closing 87 stores, as well as five Buybuy Baby branches, and its entire chain of Harmon drug stores. The company said it is working with its advisors "to consider multiple paths" to allow it to run the business as efficiently as possible; earlier this month it defaulted on its loans, and is expected to file for bankruptcy protection in the near future. The filing, if and when it comes, could see hundreds of vacant stores in need of new tenants; however, in many cases, retail landlords have been working to line up new occupants to take other BB&B stores, which GlobalData managing director Neil Saunders described in a research note as "rather messy and lack basic merchandising discipline". Adam Schwegman, senior vice president of leasing for North American Properties, said the company recently completed plans for a 22,000-square-foot anchor space previously occupied by BB&B at one of its Atlanta-area shopping centers. The landlord will subdivide the space, with Barnes & Noble taking 15,000 square feet and two other tenants, an apparel and a beauty retailer whose leases are still being finalized, filling the remaining footprint. 
STRATEGY
Goldman Sachs restructures asset holdings in Russia
Goldman Sachs has restructured its assets in Russia and could move to exit the country completely. In March 2022, the bank said it had been winding down its business in Russia following the invasion of Ukraine, and in November said it had reduced its credit exposure to the country.
CYBERSECURITY
FBI cracks ransomware group that targeted school districts
The FBI has cracked the international ransomware network Hive, the U.S. Justice Department has announced. In coordination with law enforcement agencies in Germany and the Netherlands, the Department took control of Hive’s websites and servers used for communicating with the group’s members. The agency will be providing recent and previous victims with decryption keys they can use to avoid paying $130m in ransom demands. Hive, which used ransomware-as-a-service (RaaS) methods whereby members identified victims and used an already developed ransomware strain to attack, targeted over 1,500 victims in more than 80 countries and has received over $100m in ransom payments since 2021.
OTHER
China development loans to emerging economies at a 13-year low in 2021, study says
Development loans to emerging economies by China's two main trade policy banks - the Export-Import Bank of China (China EximBank) and the China Development Bank (CDB) - hit a 13-year low in 2021 due to Beijing curtailing funding for large-scale oil projects, according to research by Boston University Global Development Policy Center.  "We expect an overall shift toward lower volume, higher quality investment from China," Kevin Gallagher, director of the university's Global Development Policy Center, said, adding  "China's domestic priorities beyond COVID-19 are still significant, given the large amounts of debt and the swings in renminbi that may necessitate the need to be conservative with dollar holdings so they can serve as insurance on the home front."


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