SHANGHAI — China’s economic growth continued to decelerate in the third quarter, as gross domestic product came in at 4.9%, softened by the country’s zero-tolerance COVID measures and energy shortages.
The year-on-year GDP growth rate, published on Monday by the National Bureau of Statistics for the three-month period through September, was below the median 5% expansion forecast by 29 economists in a Nikkei poll released earlier this month.
The figure slid from 7.9% for the April-to-June quarter, weighed down by high commodity prices amid uncertainty kindled by the China Evergrande Group’s debt crisis, which is piling risk onto the property and banking sectors.
The reading also reflects weak overall activity, including in manufacturing and consumer spending. Retail sales of consumer goods, a barometer of household spending, edged up by 4.4% in September, compared to 2.5% in August, but was still well below the double-digit growth that had continued till June.
Certain factors have persuaded economists to be cautious, at least for the near term. Rising coal prices are hitting the profitability of electricity providers, making the utilities reluctant to generate power. As it prioritizes supplying power to sectors that touch everyday life, the government is capping supplies to the steel, cement and other energy-intensive industries. The result has been less production and more inflation.
The statistics office last week announced that the producer price index for manufactured goods in September rose by 10.7% from a year earlier, the strongest surge in the past 25 years, as far back as comparable data goes.
The government forecasts China’s economy to grow 6% for all of 2021, the International Monetary Fund projects 8% and the Asian Development Bank 8.1%.
The economy expanded 9.8% in the first nine months of the year, largely driven by trade as both exports and imports jumped nearly 23% in yuan terms.
Service sector growth of 19.3%, led by software and information technology services, also stoked the nine-month expansion.
The statistics office said GDP grew 0.2% in the third quarter from the previous three months, which the U.K.’s Capital Economics noted is the second lowest since China began revealing such data in 2010.
Growth lost more steam in September as industrial production slid to 3.1% from 5.3% in August, while the official manufacturing Purchasing Managers’ Index fell to 49.6. It slipped below 50 — which the statistics office says “reflects the overall economy is in recession” — for the first time since February 2020.
Meanwhile, officials have been playing down the country’s power crunch and worries over the Evergrande crisis.
“The energy supply shortage is temporary, and its impact on the economy is controllable,” Fu Lingxuan, the National Bureau of Statistics’ spokesperson told reporters on Monday, citing recent measures to boost coal supply.
Zou Lan, head of financial markets at the country’s central bank, said Evergrande had “blindly diversified and expanded business,” urging the property group to offload assets to raise funds to pay off debts.
“The risk exposure of individual financial institutions to Evergrande is not big and the spillover effect for the financial sector is controllable,” Zou said on Friday.
While fallout from the power shortages and concerns over the property market may have eased from September, their impact on China’s broader economy should not be underestimated and will be a major downside risk in the fourth quarter, warned Shanghai-based Yue Su, principal economist at The Economist Intelligence Unit.
“The slowdown in the property sector will affect the activities of firms in areas such as construction contracting, building materials and home furnishing,” said Su, adding that energy-intensive industries will face rising costs as well.
Hong Kong-based Tommy Wu of Oxford Economics said policymakers are likely to take more steps to shore up growth, including ensuring ample liquidity in the interbank market, accelerating infrastructure development and relaxing some aspects of overall credit and real estate policies.
And not all economists agree with China’s official data.
Julian Evans-Pritchard of U.K.-based Capital Economics said the research firm’s in-house measure, the China Activity Proxy, tracked a sharp 3.9% quarter-on-quarter contraction in the third quarter, compared to a 3.0% expansion in the previous quarter.
“For now, the blow from the deepening property downturn is being softened by very strong exports,” said Evans-Pritchard. “But over the coming year, foreign demand is likely to drop back as global consumption patterns normalize coming out of the pandemic and backlogs of orders are gradually cleared.”
The benchmark Shanghai Composite Index dropped as much as 0.92% on Monday morning, before closing for the midday break down 0.35%.
the historical PPP GDP figures of Mainland China and exchange rates of Chinese yuan to Int’l. dollar are based on the World Economic Outlook Database April 2019 “Download WEO Data: April 2019 Edition” (Press release). International Monetary Fund. April 9, 2019. Retrieved April 29, 2019.
the historical PPP GDP figures of Mainland China and exchange rates of Chinese yuan to Int’l. dollar are based on the World Economic Outlook Database October 2019 “Download WEO Data: October 2019 Edition” (Press release). International Monetary Fund. October 2019. Retrieved 2020-01-19.
Quarterly GDP data: national data. stats.gov.cn. February 2020. Retrieved 27 February 2020.
The IMF, a grouping made up of 190 member states, promotes international financial stability and monetary cooperation. It also acts as a lender of last resort for countries in financial crisis.
In the IMF’s latest World Economic Outlook report released on Tuesday, the group’s economists say the most important policy priority is to vaccinate sufficient numbers of people in every country to prevent dangerous mutations of the virus. He stressed the importance of meeting major economies’ pledges to provide vaccines and financial support for international vaccination efforts before new versions derail. “Policy choices have become more difficult … with limited scope,” IMF economists said in the report.
The IMF in its July report cut its global growth forecast for 2021 from 6% to 5.9%, a result of a reduction in its projection for advanced economies from 5.6% to 5.2%. The shortage mostly reflects problems with the global supply chain that causes a mismatch between supply and demand.
For emerging markets and developing economies, the outlook improved. Growth in these economies is pegged at 6.4% for 2021, higher than the 6.3% estimate in July. The strong performance of some commodity-exporting countries accelerated amid rising energy prices.
The group maintained its view that the global growth rate would be 4.9% in 2022.
In key economics, the growth outlook for the US was lowered by 0.1 percentage point to 6% this year, while the forecast for China was also cut by 0.1 percentage point to 8%. Several other major economies saw their outlook cut, including Germany, whose economy is now projected to grow 3.1% this year, down 0.5 percent from its July forecast. Japan’s outlook was down 0.4 per cent to 2.4%.
While the IMF believes that inflation will return to pre-pandemic levels by the middle of 2022, it also warns that the negative effects of inflation could be exacerbated if the pandemic-related supply-chain disruptions become more damaging and prolonged. become permanent over time. This may result in earlier tightening of monetary policy by central banks, leading to recovery back.
The IMF says that supply constraints, combined with stimulus-based consumer appetite for goods, have caused a sharp rise in consumer prices in the US, Germany and many other countries.
Food-price hikes have placed a particularly severe burden on households in poor countries. The IMF’s Food and Beverage Price Index rose 11.1% between February and August, with meat and coffee prices rising 30% and 29%, respectively.
The IMF now expects consumer-price inflation in advanced economies to reach 2.8% in 2021 and 2.3% in 2022, up from 2.4% and 2.1%, respectively, in its July report. Inflationary pressures are even greater in emerging and developing economies, with consumer prices rising 5.5% this year and 4.9% the following year.
Gita Gopinath, economic advisor and research director at the IMF, wrote, “While monetary policy can generally see through a temporary increase in inflation, central banks should be prepared to act swiftly if the risks to rising inflation expectations are high. become more important in this unchanged recovery.” Report.
While rising commodity prices have fueled some emerging and developing economies, many of the world’s poorest countries have been left behind, as they struggle to gain access to the vaccines needed to open their economies. More than 95% of people in low-income countries have not been vaccinated, in contrast to immunization rates of about 60% in wealthy countries.
IMF economists urged major economies to provide adequate liquidity and debt relief for poor countries with limited policy resources. “The alarming divergence in economic prospects remains a major concern across the country,” said Ms. Gopinath.
Yuka Hayashi covers trade and international economy from The Wall Street Journal’s Washington bureau. Previously, she wrote about financial regulation and elder protection. Before her move to Washington in 2015, she was a Journal correspondent in Japan covering regional security, economy and culture. She has also worked for Dow Jones Newswires and Reuters in New York and Tokyo. Follow her on Twitter @tokyowoods
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As many economists say China enters what is now the final phase of one of the biggest real-estate booms in history, it is facing a staggering bill: According to economists at Nomura, $ 5 trillion plus loans that developers had taken at a good time. Holdings Inc.
The debt is almost double that at the end of 2016 and last year exceeded the overall economic output of Japan, the world’s third-largest economy.
With warning signs on the debt of nearly two-fifths of growth companies borrowed from international bond investors, global markets are poised for a potential wave of defaults.
Chinese leaders are getting serious about addressing debt by taking a series of steps to curb excessive borrowing. But doing so without hurting the property market, crippling more developers and derailing the country’s economy is turning into one of the biggest economic challenges for Chinese leaders, and one that resonates globally when mismanaged. could.
Luxury Developer Fantasia Holdings Group Co. It failed to pay $206 million in dollar bonds that matured on October 4. In late September, Evergrande, which has more than $300 billion in liabilities, missed two interest-paying deadlines for the bond.
A wave of sell-offs hit Asian junk-bond markets last week. On Friday, bonds of 24 of 59 Chinese growth companies on the ICE BofA Index of Asian Corporate Dollar Bonds were trading at over 20% yields, indicating a high risk of default.
Some potential home buyers are leaning, forcing companies to cut prices to raise cash, and could potentially accelerate their slide if the trend continues.
According to data from CRIC, a research arm of property services firm e-House (China) Enterprise Holdings, overall sales among China’s 100 largest developers were down 36 per cent in September from a year earlier. Ltd.
It revealed that the 10 largest developers, including China Evergrande, Country Garden Holdings Co. and china wenke Co., saw a decline of 44% in sales compared to a year ago.
Economists say most Chinese developers remain relatively healthy. Beijing has the firepower and tighter control of the financial system needed to prevent the so-called Lehman moment, in which a corporate financial crisis snowballs, he says.
In late September, Businesshala reported that China had asked local governments to be prepared for potentially intensifying problems in Evergrande.
But many economists, investors and analysts agree that even for healthy enterprises, the underlying business model—in which developers use credit to fund steady churn of new construction despite the demographic less favorable for new housing—is likely to change. Chances are. Some developers can’t survive the transition, he says.
Of particular concern is some developers’ practice of relying heavily on “presales”, in which buyers pay upfront for still-unfinished apartments.
The practice, more common in China than in the US, means developers are borrowing interest-free from millions of homes, making it easier to continue expanding but potentially leaving buyers without ready-made apartments for developers to fail. needed.
According to China’s National Bureau of Statistics, pre-sales and similar deals were the region’s biggest funding sources since August this year.
“There is no return to the previous growth model for China’s real-estate market,” said Hous Song, a research fellow at the Paulson Institute, a Chicago think tank focused on US-China relations. China is likely to put a set of limits on corporate lending, known as the “three red lines” imposed last year, which helped trigger the recent crisis on some developers, he added. That China can ease some other restrictions.
While Beijing has avoided explicit public statements on its plans to deal with the most indebted developers, many economists believe leaders have no choice but to keep the pressure on them.
Policymakers are determined to reform a model fueled by debt and speculation as part of President Xi Jinping’s broader efforts to mitigate the hidden risks that could destabilize society, especially at key Communist Party meetings next year. before. Mr. Xi is widely expected to break the precedent and extend his rule to a third term.
Economists say Beijing is concerned that after years of rapid home price gains, some may be unable to climb the housing ladder, potentially fueling social discontent, as economists say. The cost of young couples is starting to drop in large cities, making it difficult for them to start a family. According to JPMorgan Asset Management, the median apartment in Beijing or Shenzhen now accounts for more than 40 times the average family’s annual disposable income.
Officials have said they are concerned about the risk posed by the asset market to the financial system. Reinforcing developers’ business models and limiting debt, however, is almost certain to slow investment and cause at least some slowdown in the property market, one of the biggest drivers of China’s growth.
The real estate and construction industries account for a large portion of China’s economy. Researchers Kenneth S. A 2020 paper by Rogoff and Yuanchen Yang estimated that industries, roughly, account for 29% of China’s economic activity, far more than in many other countries. Slow housing growth could spread to other parts of the economy, affecting consumer spending and employment.
Government figures show that about 1.6 million acres of residential floor space were under construction at the end of last year. This was roughly equivalent to 21,000 towers with the floor area of the Burj Khalifa in Dubai, the tallest building in the world.
Housing construction fell by 13.6% in August below its pre-pandemic level, as restrictions on borrowing were imposed last year, calculations by Oxford Economics show.
Local governments’ income from selling land to developers declined by 17.5% in August from a year earlier. Local governments, which are heavily indebted, rely on the sale of land for most of their revenue.
Another slowdown will also risk exposing banks to more bad loans. According to Moody’s Analytics, outstanding property loans—mainly mortgages, but also loans to developers—accounted for 27% of China’s total of $28.8 trillion in bank loans at the end of June.
As pressure on housing mounts, many research houses and banks have cut China’s growth outlook. Oxford Economics on Wednesday lowered its forecast for China’s third-quarter year-on-year GDP growth from 5% to 3.6%. It lowered its 2022 growth forecast for China from 5.8% to 5.4%.
As recently as the 1990s, most city residents in China lived in monotonous residences provided by state-owned employers. When market reforms began to transform the country and more people moved to cities, China needed a massive supply of high-quality apartments. Private developers stepped in.
Over the years, he added millions of new units to modern, streamlined high-rise buildings. In 2019, new homes made up more than three-quarters of home sales in China, less than 12% in the US, according to data cited by Chinese property broker Kei Holdings Inc. in a listing prospectus last year.
In the process, developers grew to be much bigger than anything seen in the US, the largest US home builder by revenue, DR Horton. Inc.,
Reported assets of $21.8 billion at the end of June. Evergrande had about $369 billion. Its assets included vast land reserves and 345,000 unsold parking spaces.
For most of the boom, developers were filling a need. In recent years, policymakers and economists began to worry that much of the market was driven by speculation.
Chinese households are prohibited from investing abroad, and domestic bank deposits provide low returns. Many people are wary of the country’s booming stock markets. So some have poured money into housing, in some cases buying three or four units without the intention of buying or renting them out.
As developers bought more places to build, land sales boosted the national growth figures. Dozens of entrepreneurs who founded growth companies are featured on the list of Chinese billionaires. Ten of the 16 soccer clubs of the Chinese Super League are wholly or partially owned by the developers.
Real-estate giants borrow not only from banks but also from shadow-banking organizations known as trust companies and individuals who invest their savings in investments called wealth-management products. Overseas, they became a mainstay of international junk-bond markets, offering juicy produce to snag deals.
A builder, Kaisa Group Holdings Ltd. , defaulted on its debt in 2015, was still able to borrow and later expand. Two years later it spent the equivalent of $2.1 billion to buy 25 land parcels, and $7.3 billion for land in 2020. This summer, Cassa sold $200 million of short-term bonds with a yield of 8.65%.
Neil Gough (11 June 2015). “Idle Home Builders Hold China’s Economy Back”. The New York Times. By some economists’ estimates, real estate and related industries account for more than 20 percent of China’s gross domestic product
Labor availability is the most-cited concern, and of the those experiencing hiring difficulties, 58 percent point to enhanced federal unemployment benefits as the culprit. With expanded federal unemployment benefits having ended on Labor Day — reducing unemployment pay by $300 a week — businesses widely believed this cut-off would lead to a surge in job applicants.
But the expected surge hasn’t yet materialized. A study released in late August authored by economists Kyle Coombs of Columbia University, Arindrajit Dube of the University of Massachusetts Amherst, and others, showed that in the 22 states that ended these federal employment benefits earlier in June, there was only a small rise in employment in subsequent months — 4.4 percent.
Small businesses are now addressing the labor shortage directly by improving pay and benefits. Of those businesses surveyed, more than four in 10 say they’ve increased compensation to help attract and retain talent, and 44 percent have started allowing more flexible work arrangements. Nearly half have also begun implementing improved health and safety measures.
These changes don’t come without a cost. More than half (54 percent) of business owners surveyed say they anticipate raising prices to compensate for increased labor costs and inflation. Once this cost is passed on to consumers, individuals who previously received federal unemployment benefits may, at last, feel increasing financial pressure to re-enter the job market.
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Last year, three cryptocurrency enthusiasts bought a cruise ship. They named it the Satoshi, and dreamed of starting a floating libertarian utopia. It didn’t work out.
In the evening of 7 December 2010, in a hushed San Francisco auditorium, former Google engineer Patri Friedman sketched out the future of humanity. The event was hosted by the Thiel Foundation, established four years earlier by the arch-libertarian PayPal founder Peter Thiel to “defend and promote freedom in all its dimensions”. From behind a large lectern, Friedman – grandson of Milton Friedman, one of the most influential free-market economists of the last century – laid out his plan.
He wanted to transform how and where we live, to abandon life on land and all our decrepit assumptions about the nature of society. He wanted, quite simply, to start a new city in the middle of the ocean.
Friedman called it seasteading: “Homesteading the high seas,” a phrase borrowed from Wayne Gramlich, a software engineer with whom he’d founded the Seasteading Institute in 2008, helped by a $500,000 donation from Thiel. In a four-minute vision-dump, Friedman explained his rationale.
Why, he asked, in one of the most advanced countries in the world, were they still using systems of government from 1787? (“If you drove a car from 1787, it would be a horse,” he pointed out.) Government, he believed, needed an upgrade, like a software update for a phone. “Let’s think of government as an industry, where countries are firms and citizens are customers!” he declared.
The difficulty in starting a new form of government, said Friedman, was simply a lack of space. All the land on Earth was taken. What they needed was a new frontier, and that frontier was the ocean. “Let a thousand nations bloom on the high seas,” he proclaimed, with Maoish zeal.
He wanted seasteading experiments to start as soon as possible. Within three to six years, he imagined ships being repurposed as floating medical clinics. Within 10 years, he predicted, small communities would be permanently based on platforms out at sea. In a few decades, he hoped there would be floating cities “with millions of people pioneering different ways of living together”.
Politics would be rewritten. The beauty of seasteading was that it offered its inhabitants total freedom and choice. In 2017, Friedman and the “seavangelist” Joe Quirk wrote a book, Seasteading, in which they described how a seasteading community could constantly rearrange itself according to the choices of those who owned the individual floating units.
(Quirk now runs the Seasteading Institute; Friedman remains chair of the board.) “Democracy,” the two men wrote, “would be upgraded to a system whereby the smallest minorities, including the individual, could vote with their houses.”
In the decade following Friedman’s talk, a variety of attempts to realize his seasteading vision were all thwarted. “Seavilization,” to use his phrase, remained a fantasy. Then, in October 2020, it seemed his dream might finally come true, when three seasteading enthusiasts bought a 245-metre-long cruise ship called the Pacific Dawn. Grant Romundt, Rüdiger Koch and Chad Elwartowski planned to sail the ship to Panama, where they were based, and park it permanently off the coastline as the centrepiece of a new society trading only in cryptocurrencies.
In homage to Satoshi Nakamoto, the pseudonym of bitcoin’s mysterious inventor (or inventors), they renamed the ship the MS Satoshi. They hoped it would become home to people just like them: digital nomads, startup founders and early bitcoin adopters.
Their vision was utopian, if your idea of utopia is a floating crypto-community in the Caribbean Sea. No longer was seasteading a futuristic ideal; it was, said Romundt, “an actual ship”. The Satoshi also offered a chance to marry two movements, of crypto-devotees and seasteaders, united by their desire for freedom – from convention, regulation, tax.
Freedom from the state in all its forms. But converting a cruise ship into a new society proved more challenging than envisaged. The high seas, while appearing borderless and free, are, in fact, some of the most tightly regulated places on Earth. The cruise ship industry in particular is bound by intricate rules. As Romundt put it: “We were like, ‘This is just so hard.’”
As with many stories about techno-libertarian fantasies, the tale of the Satoshi begins in an all-male, quasi-frat house in San Francisco in the late 90s. Romundt – a softly spoken Canadian with the optimistic, healthy glow of someone who combines entrepreneurial success with water sports – was living with a bunch of software engineers, all of whom shared an intense dedication to personal improvement.
“I was a huge Tony Robbins fan,” Romundt told me in one of several Zoom calls from his office in Panama. (Robbins’ themes of individual freedom, self-mastery and the accrual of significant wealth are evident from the titles of his books from that time: Unlimited Power; Lessons in Mastery; Unleash the Power Within; The Power to Shape Your Destiny, and, next level, Awaken the Giant Within.)
After his San Francisco stint, Romundt, the son of a hairdresser, created ScissorBoy in 2009, a popular online TV series on hairdressing, and then ScheduleBox, a website which offered a digital receptionist service for hairstylists to book in their clients. (Always digitally inclined, he had, according to his website, the world’s “most advanced mobile paperless office in 1995”.) “I used to work 17 hours a day, so I didn’t have a lot of freedom,” he told me. He did, however, make enough money to semi-retire in 2016 and then spent “no more than five hours a month” running his business.
The giant fully awakened, he moved back to Canada, where he lived on a houseboat on Lake Ontario and went kayaking in the mornings as the sun came up. Enraptured by his lifestyle, Romundt wondered why everyone wasn’t living this way. On a flight one day, he saw a man wearing a T-shirt with “Stop arguing. Start seasteading” printed on it. Romundt was curious, they got talking, and the man turned out to be Joe Quirk, who was by this time running the Seasteading Institute.
So far, the Seasteading Institute had experienced variable, or zero, success with its projects. Early ideas for a “Baystead” and “Coaststead” off the coast of San Francisco and a “Clubstead”, a resort off the coast of California, never made the leap to reality. An attempt to create a floating island prototype in French Polynesia in 2017 met with fairly fierce resistance from the people of French Polynesia and collapsed a year later when the government pulled out of the scheme.
After meeting Quirk, Romundt decided he wanted to try again. Quirk introduced him to two other aspiring seasteaders, the passionately libertarian American Elwartowski and the bitcoin-wealthy German engineer Koch. Together, the trio founded a company, Ocean Builders. Using their own money, they funded the first attempt at a single residential seastead, in the form of a floating white octagonal box 12 nautical miles off the coast of Thailand.
Elwartowski and his girlfriend, Nadia Summergirl, lived there for two months in early 2018, until the Thai government discovered the seastead’s existence and declared it a threat to the country’s independence, possibly punishable by life imprisonment or death. Elwartowski and Summergirl had to flee the country before the Thai navy dispatched three ships to dismantle the floating box.
The seasteading movement did not die there. In 2019, Romundt, Koch and Elwartowski moved their company to Panama, where they had found a government willing to back their next project: the SeaPod. These would be individual floating homes held 3 metres above the water by a single column and a tripod-shaped base beneath the ocean.
The man responsible for their design, Koen Olthuis, is a Dutch “aquatect”, an architect specialising in water-based schemes. In rendered drawings, the SeaPods look fantastical, like a giant’s white helmet emerging monstrously from the waves. Inside, every surface is curved, as if you were living within the smooth, colourless confines of a peppermint.
Romundt compared the SeaPods to the architecture in The Jetsons, the 60s cartoon where the characters lived in glassy orbs in the sky. “It’s like that,” he told me, “but on water.” The team built a factory from scratch in Linton Bay, a marina on the north coast of Panama, hired a team of about 30 engineers and mechanics, and, in early 2020, began building the first SeaPod prototype.
Progress was slow. Even once they had a successful prototype, Romundt predicted the factory would only make two SeaPods a month. They’d had the idea before of buying a cruise ship – a quick way of scaling up the community – but the cost had always been prohibitive.
By autumn 2020, though, the situation had changed. Like many parts of the travel industry, the cruise ship business was collapsing because of the pandemic: multiple cruise lines were going into administration, empty ships filling up ports like abandoned cars in a scrubby field, or being sent to the scrapyard. Cruise ships, the Ocean Builders trio realised, would be going cheap.
Sure enough, they found a bargain. In October 2020, Romundt, Koch and Elwartowski bought the ex-P&O cruise ship Pacific Dawn for a reported $9.5m. (Built in 1991 for $280m, the ship could have sold pre-pandemic for more than $100m, one industry insider told me.) They instructed Olthuis to draw up the plans, placing the ship at the heart of a floating community surrounded by SeaPods.
“We had a kind of funny idea,” Olthuis told me. In his scheme, the Satoshi would connect, via two looping tunnels on the water, to human-made floating platforms designated for agriculture, manufacturing and parkland. From the air, the whole community would form the shape of the bitcoin B.
The scheme had the support of the Panama government. In fact, the Ministry of Tourism hoped that a new ocean community would be a draw for visitors. In a page-long statement, the ministry told me how a floating development fitted in with its Sustainable Tourism Masterplan 2020-2025, by highlighting the country’s biodiversity and “the blue heritage of Panama”. It didn’t seem to mind the idea of a load of crypto-investors floating off their coastline, not paying any tax.
“Out of adversity comes opportunity, so they say,” wrote Elwartowski, on 10 October 2020, introducing Viva Vivas, the new company that he had created to run the Satoshi. Its name was adapted from the Latin phrase, “vive ut vivas”, meaning “live so that you may live”.
Ten days later, he announced the venture on Reddit: “So, I am buying a cruise ship and naming it MS Satoshi … AMA.” The responses were quick (“Need an apprentice aviation mechanic?” “I know how to use a yo-yo! Any room for me??”) and included the inevitable sceptics. (“Anyone remember the good old days of the Fyre festival?”) But plenty took the proposition seriously and wanted to go over the small print. (“Where is power coming from? Gas? Internet? Food? Water? Toiletries? What taxes will she be subject to?”)
Elwartowski answered every question with grave attention to detail. There would be generators at first, followed quickly by solar power. This would be an eco-friendly crypto-ship. High-speed wireless internet would come from land; utilities would be included in the fees at first, but would be metered when the systems were upgraded: “You don’t want to have pay for someone else’s mining rig in their cabin,” he wrote, referring to the resource-intensive computational process that introduces new crypto “coins” into the system.
As for tax, you would not pay any on earnings made from ventures based in territory beyond Panama. You would be free to make, or mine, as much money as you liked. It would be a remote worker’s regulatory paradise.
But as the Reddit Q&A continued, Elwartowski’s meticulous responses revealed some of the more knotty practicalities of life on board. It turned out that the only cooking facilities would be in the restaurant. For safety reasons, no one was allowed to have a microwave in their rooms – though some cabins had mini-fridges, noted Elwartowski, determinedly sidestepping the point.
He offered residents a 20% discount at the restaurant and mentioned that some interested cruisers had already talked about renting part of the restaurant kitchen so they could make their own food. “We want entrepreneurs to come up with solutions and try them out,” he wrote, in a valiant attempt to convert a fairly fundamental stumbling block into wild startup energy. “This is your place to try new things.” Not all the Redditors were convinced. “No microwave but mining rig. Incoherent scam.”
Marketing of the Satoshi soon began in earnest. Her 777 cabins were to be auctioned off between 5 and 28 November, while the ship was crossing the Atlantic towards Panama. Viva Vivas listed the options, including cabins with no windows ($570 a month), an ocean view ($629), or a balcony ($719). Ocean Builders held a series of live video calls for potential customers which attracted 200 people at a time, Olthuis told me, with Romundt, an expert steward of the multilateral video call, at the helm.
On the Viva Vivas website, a Frequently Asked Questions page covered the basics of the cabin auction process, fees and logistics. Specially trained staff would be hired to keep the ship Covid-free and through a partnership with a platform called coinpayments.net, multiple cryptocurrencies would be supported for payment, including bitcoin, ethereum, digibyte, bitcoin cash, litecoin, dai, dash, ethereum classic, trueUSD, USD coin, tether, bitcoin SV, electroneum, cloak, doge, eureka coin, xem and monero.
The final entry on the FAQ page, regarding the possibility of having pets on board, gave a bracing insight into the tension between the idea of freedom and the reality of hundreds of people closely cohabiting on a cruise ship. The answer linked to a separate document, containing a 14-point list of conditions including one that declared no animal should exceed 20lbs in weight, and any barking or loud noises could not last for longer than 10 minutes.
If a pet repeatedly disturbed the peace – more than three times a month or five times in a year – it would no longer be allowed to live on board. “Any pet related conflict,” instructed point 13, “shall be resolved in accordance with Section V (F) of the Satoshi Purchase Agreement or Section IV (F) of the Satoshi Master Lease, where applicable.” Dogs would only be permitted in balcony cabins, and it was advised that owners buy a specific brand of “porch potty”, a basket of fake grass where your pet could relieve itself. (Pet waste thrown overboard would result in a $200 fine.)
One Reddit respondent – maxcoiner on Reddit, Luke Parker in real life – was as close to the target market of the Satoshi as it was possible to imagine. A longtime follower of the seasteading movement, he was also such an early and successful bitcoin adopter that he and his wife were able to retire early thanks to their investments. The Satoshi was the most plausible idea for a seastead he’d ever heard. “I did not buy a room during the Satoshi’s sale window,” he told me over email, “but it was hard to keep my hand off that button.”
A variety of considerations held him back. “The wife,” as he put it, had her doubts. He wasn’t sure about the “ginormous leap down in luxury” from living in deep residential comfort on land in the US midwest to living in a very small cabin on board a 30-year-old cruise ship. He was worried, too, by the limited facilities – “No kitchen of my own? Tiny bathrooms? Tiny everything?” Also, the constant rocking of the ship on the water: “I just can’t stomach that life around the clock.” He preferred the idea of the SeaPods. If Parker was going to live on a boat, he concluded, he’d prefer to buy his own luxury catamaran.
On 29 November, Elwartowski published another post on the Viva Vivas website, announcing the official opening of the Satoshi in January 2021. “This will be a new experience for all of us so we must manage your expectations,” he warned. The novelty was too much for Parker. “It takes a rare kind of person indeed to move your life on to a deserted cruise ship in Central America with so little information up front,” he told me. If Parker, part of that highly select, freedom-seeking, system-abandoning, overlapping community of seasteaders and bitcoiners, wasn’t going to buy, it was hard to imagine who would. As he put it: “This may have been the smallest sales demographic in history.”
Over 30 years of service, the Satoshi herself had seen enough of the world to know every permutation of life at sea – apart, perhaps from what it might be like to be a permanent home to 2,000 crypto-investors. Built in 1991 in the Fincantieri shipyard in Trieste, Italy, she is one of only two cruise ships designed by the Italian architect Renzo Piano. (The other, the Crown Princess, was sent to the scrapyard last year, a Covid casualty.) Her first incarnation was as the Regal Princess (owned by Princess Cruises), after which she became the Pacific Dawn (P&O Australia).
Throughout her life, she has been admired for her distinctive features: a domed roof rising above the navigation bridge, water slides that curl round her funnel and a stern whose elegantly rounded form is in marked contrast to the blunt, sawn-off rears of some giant cruise liners. Those who prefer an understated cruising experience also appreciate her discreet size: compared to the largest cruise ship in the world, The Symphony of the Seas (18 decks, 23 swimming pools) she is a modest vessel (11 decks, two swimming pools).
For many years, the Pacific Dawn cruised the south Pacific, enjoying a serene phase of life, interrupted only by an onboard swine flu outbreak in 2009 and the time she lost power and came within 70 metres of crashing into the Gateway Bridge on the Brisbane River. In 2011, a devoted Facebook group was established by fans. “Dawnie was the party ship,” remembered one. “I fell in love with my wife all over again,” added another, crediting the ship for his romantic renewal. Then, in 2020, it briefly looked as though Dawnie was set to join her sister on the scrapyard, after her sale to British cruise company, Cruise and Maritime Voyages, collapsed in the pandemic. Her fans were grief-stricken, weeping emojis piling up on the Facebook group. (“Well 2020 just became even shittier,” said Kathie.) When it was revealed that the ship had been rescued by Ocean Builders, there was a wave of relief, if a little mystification at her new name. “She’ll always be Dawn to me.”
On 29 October 2020, Dawn began her journey to Panama, sailing from Limassol, Cyprus to Piraeus, Greece. A week later, she was handed over to her new owners Ocean Builders and officially became the Satoshi. Koch flew over from Panama to cross the Atlantic aboard their new purchase. The team hired a management company, Columbia Cruise Services, to run the ship and provide a minimum crew of about 40 people, mostly Ukrainian, including a cook, engineers and cleaning staff. A seasoned British cruise captain, Peter Harris, arrived to take charge. “We didn’t know anything about running a cruise,” Romundt told me, “so it was like, we didn’t want to have to figure all this stuff out.”
As soon as Capt Harris joined the ship and met Koch on board, he realised there would be challenges ahead. “I was thinking a week into the job, I can see I’m going to be resigning,” Harris told me, immaculate in a striped shirt on a video call from his home in Kent. Koch, he said, was admirable in his ambition, and a likable, law-abiding man, but he was naive about how shipping worked and had an abhorrence of rules. “He didn’t understand the industry,” said Harris, who has the frank, upbeat air of a born leader for whom hierarchy is a kind of creed. “He just thought he could treat it like his own yacht.”
To sail anywhere, Harris explained, a ship requires certificates of seaworthiness. These expired on the day the deal with P&O was completed. Usually, a new buyer would ensure they lasted a couple of months to cover any onward journey, but no one on the Ocean Builders side had checked. By the time Columbia Cruise Services came on board and informed the team of the situation, the contracts had all been signed. Before the Satoshi could cross the Atlantic, the team were obliged to sail the ship to Gibraltar and have her removed from the water, a process known as dry-docking, to perform essential repairs and renew the certificates.
The Atlantic crossing began on 3 December. Harris – who didn’t resign, grateful for the four-month contract mid-pandemic – found it oddly lovely. With only 40 or so people on board, rather than the usual 2,000-odd, the atmosphere was relaxed, if a little surreal. Among other things, P&O had left about 5,000 bottles of wine and 2,000 bottles of spirits on board. Harris asked Koch if he wanted to charge the crew for drinks, but Koch, generous by nature, said no. “Obviously, we restricted them to three drinks a day,” said Harris. “Otherwise, I wouldn’t have had a crew.”
As the crossing continued, questions about how the project would actually work once the Satoshi arrived in Panama grew more pressing. According to Harris, Elwartowski thought he could convince the Panamanian authorities to let the ship anchor permanently in its waters and de-register as a ship, becoming a floating residence instead, so as to avoid some of the more exacting requirements of maritime law. But while Panama was happy to have the ship moored off its coast, it specified that the ship had to remain officially designated as a ship. Which led to another difficulty: the discharge of sewage. Though the ship had an advanced wastewater management system, which could turn sewage into drinking-quality water, they were not permitted to discharge this wastewater into Panamanian waters, and so would have had to sail 12 miles out every 20 days or so to empty tanks into international waters.
Such obstacles made the ship an off-putting proposition for insurers. No one would agree to cover them. “They wouldn’t even tell us why we weren’t insurable, they just kept saying no,” Romundt said. “It’s kind of hard to remedy something if you don’t know what the problem is.” Of the several insurance experts I asked about this, none were willing to comment on the case, citing a lack of expertise, presumably because no one had ever tried to insure a cruise ship turned floating crypto-community before. Harris, however, had his theories: that a risk-averse insurance industry was wary of both a bitcoin business and a ship that would presumably be mostly populated by quick-to-litigate Americans.
After trying multiple insurers and brokers, Romundt began to realise that the cruise ship industry was, as he put it, “plagued by over-regulation”. (Along with airlines and nuclear power, according to Harris, it’s in “the top three”.) The Ocean Builders’ great freedom project, whose intrinsic purpose was to offer an escape from oppressive rules and bureaucracy, was being hobbled by oppressive rules and bureaucracy. As Elwartowski would reflect a few months later on Reddit: “A cruise ship is not very good for people who want to be free.”
To Romundt, the whole cruise ship business began to seem like an impenetrable old boys’ network. He estimated that, given six months, they could have hired a crack marine legal team and navigated a way through the loopholes. But by mid-December, the Satoshi was already halfway across the Atlantic, burning through gallons of diesel, with a 40-person crew they’d have to keep on board even when she was stationary in Panama because a cruise ship requires constant maintenance. A ship can cost, even when docked, up to $1m a month to run. “Because, you know,” said Romundt, “it’s huge.”
Fuel alone was costing the Ocean Builders trio about $12,000 a day. According to Harris, Koch wanted to try to make the ship more fuel-efficient by installing a smaller engine, which he thought he could do while the ship was at anchor. “We were like, how are you going to cut a hole in the ship’s side big enough to get the engine out, which is below water level, and not sink the ship?” Harris shook his head, his memories of Koch clearly fond, if perplexed. “I was forever saying, ‘No, Rudi you can’t do this; no, Rudi you can’t do that.’”
Before the Satoshi hove into view of the white sands of a Panama beach, Romundt, Koch and Elwartowski had to make a call. They couldn’t afford to keep the ship moored and empty for months on end while they tried to solve the insurance problem, a problem they weren’t even sure they’d be able to solve. They were insured to sail her, and they could go on sailing her, but they didn’t want to run a travel company. They wanted to run a floating society of like-minded freedom-lovers arranged in the shape of the bitcoin B. It wasn’t even clear that there were enough people who wanted to do that. Koch admitted to Harris that the cabins weren’t selling.
“It was almost like a fantasy, James Bond-ish,” said one cruise industry insider. “But to their credit they believed in it.”The dream was over, they realised, before it had even begun. The project was dead, except it wasn’t quite, as they still owned the ship, which was still steaming across the Atlantic with Koch, Harris and the crew on board. The Satoshi, already thousands of miles into a 5,500-nautical-mile voyage, had travelled too far to be turned around mid-ocean, so on she sailed. They’d have to sell her, the Ocean Builders realised, but who was going to be crazy enough to buy a cruise ship in the middle of a pandemic? Only a company who wanted to tear her apart. On 18 December, while she was still at sea, the team announced the sale of the Satoshi to a scrapyard in Alang, India. The Satoshi was once again destined for dismemberment.
On 19 December, Elwartowski announced on the Viva Vivas website that the Satoshi’s journey was coming to an end. “We have lost this round. The New Normal, Great Reset gains another victim,” he wrote, looping in the collapse of the Satoshi with a popular Covid conspiracy theory that the pandemic and its response had been stage-managed by a global elite. (Over subsequent months, Elwartowski’s activity on Reddit would include other Covid themes, including suspicion of government vaccination programmes.) Romundt emailed their list of potential customers to let them know the ship’s fate. Deposits for cabins would be refunded.
The Satoshi arrived in Balboa, Panama on 22 December. On Christmas Eve, she anchored off the coast of Colon. There, Romundt joined Koch and the crew on the ship. Elwartowski, meanwhile, stayed in Panama City. “He didn’t want to get on board,” said Romundt. Koch spoke to Joe Quirk one evening on the phone while he was sitting in the ship’s cafe drinking a bottle of wine, feeling regretful that the onboard hospital he’d planned to open to medical entrepreneurs would never come to life. Even so, Koch was “utterly unbowed”, reported Quirk in a Seasteading Institute blog post entitled How the Grinch Stole the Cruise Ship.
Romundt, a man more driven by the practical issues at hand than the romantic symbolism of his endeavours, realised that, though the entire plan had fallen apart, he was still the part-owner of a massive cruise ship. He decided to spend Christmas on board, along with the crew. Master key in hand, he wandered around the Satoshi, making sure to enter every room that said Do Not Enter. He toured the engine room, and sat on the sun deck.
He worked, because he can’t help working, even at Christmas, but he also went on all the water slides, alone. (Harris told me he’d turned them on specially for Christmas Day.) Though Romundt doesn’t usually drink, he had a glass of wine and called all his friends saying, “I’m on my own cruise ship for Christmas!” He had the kind of good time it is perhaps only possible to have when you have just made an unbelievably expensive mistake born of a desire to invent an entirely new way of living and involving the purchase of a huge floating vessel. “I was king of the ship!” he said, still delighted.
Even scrapping the Satoshi proved to be a debacle. After a deal had been done with the Indian scrapyard, the Ocean Builders team realised that according to the Basel Convention, which covers the disposal of hazardous waste, they weren’t allowed to send the ship from a signatory country (Panama) to a non-signatory country (India). The contract with the scrapyard had to be cancelled.
All was not completely lost, at least for the Satoshi herself. The cruise ship industry is a compact ecosystem. The grapevine did its thing. A ship broker heard about the plight of the Satoshi, realised it was precisely the kind of ship a new client of his was looking for, and did a quick deal.
The client was Ambassador Cruise Line, the first British cruise company to launch for 10 years. According to Ambassador’s ebullient, red-sweatered chair, Gordon Wilson, the company’s name is intended to reflect the highly optimistic idea that ambassadors, like cruise ships, take the best of their own culture with them wherever they go. The Satoshi would be the first ship in the company’s new fleet, which would offer cruises to the over-50s. Many of the new team at Ambassador had come over from Cruise and Maritime Voyages, who had nearly bought the Satoshi before it went bust in 2020.
As such, they knew the ship well, which sped up the sale. Wilson wouldn’t confirm the amount – “they thought it was a good price” – but the trade press reported that Ocean Builders sold her for $12m, more than they paid for her, though possibly not quite enough to cover the elaborate costs of running an empty cruise ship for three months.
On 23 February 2021, the Satoshi set sail from Panama, heading all the way back across the ocean she’d just crossed. She arrived in Bar, Montenegro on 27 March. Wilson went over to visit her, and, like Romundt, relished the experience of climbing aboard his new asset. Exploring the engine rooms of an empty cruise ship seemed to give these men a particular sensation: perhaps just the buzz of owning something so vast and powerful; a mechanical, proprietary thrill.
The Ocean Builders team, meanwhile, returned to their own private missions. Elwartowski was on sabbatical, Romundt told me. He did not want to talk to me for this story. Koch, who also declined to be interviewed, was building his own boat in Panama, and working with Romundt on the SeaPods. Over Zoom, Romundt gave me a tour of the SeaPod factory, and showed off the hulking sheets of fibreglass that would form the structure’s mould. “It feels like touching a UFO,” he said, stroking his invention.
Seeing the pod’s nascent form, I felt a boringly pragmatic urge to ask Romundt what happened if, once afloat, you needed to buy a pint of milk. My question seemed to miss the point, too wedded to old-fashioned notions of locality and human connection. The Pods had been designed to have a hatch in the roof, Romundt said. He was talking to some drone creators and imagined people flying to their pods independently, landing on the roof and entering through the hatch. Perhaps that’s how you’d get your milk.
At her new home in Montenegro, meanwhile, the Satoshi needed some sprucing up. For the fourth time in her three decades on the water, she had been renamed. “We thought Ambience a lovely name for a ship,” said Wilson, pronouncing it in the French style, Ambi-ence. “This is a very elegant ship,” he added, proudly. “She looks like a cruise liner; she does not look like a floating block of flats.”
When Ambience finally sets sail on her maiden voyage, from the industrial dock of Tilbury across the North Sea to Hamburg in April 2022, she will offer a more traditional experience to her passengers. “Back to what cruising is all about,” said Wilson. The atmosphere will be refined. There will be promenading on deck and plentiful opportunities for photography as the horizon swallows the evening sun. There will be cocktails at the bar, a five-course dinner and a glittery show. It is unlikely bitcoin will be accepted as currency. The water slides will be removed.
According to ADP’s monthly employment report, August employment data highlights a “downshift” in the labor market recovery marked by a decline in new hires following significant job growth from the first half of the year.
Despite the slowdown, ADP chief economist Nela Richardson says job gains are approaching 4 million this year but are still 7 million jobs lower than employment before the pandemic.
Service jobs continued to head up growth, with the leisure and hospitality sector adding 201,000 jobs, followed by the healthcare industry’s job gains of 39,000.
August job additions were in line with July gains of 326,000, but trail behind additions of more than 600,000 each month since April.
With the unemployment rate of 5.4% still stubbornly above pre-pandemic levels below 4%, experts have cautioned that the post-Covid labor market recovery could drag on for years. Despite strong gains in past months, the Federal Reserve last week said its performance was still too “turbulent” to warrant a change in pandemic-era monetary policy, and Wednesday’s disappointing report should only bolster that argument.
“The delta variant of Covid-19 appears to have dented the job market recovery,” Mark Zandi, the chief economist of Moody’s Analytics, said in a statement alongside the report, adding that the labor market remains strong, but well off its performance in recent months. “Job growth remains inextricably tied to the path of the pandemic.”
The August jobs report, set to be released Friday, will give policymakers some insight into how the economy has responded to the delta surge. The U.S. added 943,000 jobs last month, according to the most recent report, but that data was compiled before the Centers for Disease and Control and Prevention first raised alarms about the transmissibility of the delta variant.
Though it may still take several months to assess the total impact of the delta variant, economists expect that women and Black and Hispanic workers, who were more likely to lose their jobs amid the onset of the pandemic, will continue bearing disproportionate burdens.
What To Watch For
The onset of the pandemic wiped out roughly 8.8 percent of jobs in public education as schools were forced to shutter, but Pollak said the delta surge is unlikely to trigger deeper layoffs. Instead, she expects delays to office reopenings driven by school closures to limit the recovery of other jobs reliant on work travel and office presence.
The Bureau of Labor Statistics will release its August jobs report on Friday. Economists expect the economy to have added 720,000 jobs last month, compared to 943,000 in July.
I’m a reporter at Forbes focusing on markets and finance. I graduated from the University of North Carolina at Chapel Hill, where I double-majored in business journalism and economics while working for UNC’s Kenan-Flagler Business School as a marketing and communications assistant. Before Forbes, I spent a summer reporting on the L.A. private sector for Los Angeles Business Journal and wrote about publicly traded North Carolina companies for NC Business News Wire. Reach out at firstname.lastname@example.org. And follow me on Twitter @Jon_Ponciano
Whidbey Island is a lovely place about 30 miles north of Seattle on the Puget Sound. Most days the tranquil sounds of rolling waves and chirping birds provide an escape from the hustle and bustle of the city. But these days, all is not so serene. Residents are complaining about the ruckus created by humongous container ships anchored off their shore.
“We’ve never seen them this close before,” a Whidbey Islander told a local news station. “We’re hearing the throbbing noise at night. … It’s a nuisance.” The noise has been so loud that residents have been complaining to the county sheriff’s office about it.
Whidbey Islanders are getting a front row seat to the growing U.S. trade deficit, which is hitting record highs. It’s fueled by a surge in demand for imports, mostly from East Asia. There’s so much cargo being shipped to the U.S. from Asia right now that the ports of Seattle and Tacoma are chock-full of container ships.
“We are seeing a historic surge of cargo volume coming into our ports,” says Tom Bellerud, the chief operations officer of The Northwest Seaport Alliance, which manages all cargo processing at the ports of Seattle and Tacoma. “The terminals are having a difficult time keeping up with processing all the cargo off these vessels fast enough.”
On both land and at sea, the entire supply chain is struggling to keep up. In the Pacific Northwest, it’s become such a clusterfest that the U.S. Coast Guard has been redirecting boats to anchor off the coast of Whidbey Island and other places they typically don’t park. Ship crews are having to wait days, even weeks, for the chance to dock at the ports and offload their precious goods.
It’s the same story up and down the West Coast. In San Francisco Bay, the traffic jam of container ships has gotten so bad that the U.S. Coast Guard has been asking ships not to enter the bay at all. Robert Blomerth, director of the USCG’s San Francisco Vessel Traffic Service, said last week that there were 16 container ships waiting in the open ocean outside the Golden Gate to get in and unload their cargo. He says it’s “completely abnormal.”
When we spoke to Gene Seroka, the head of the Port of Los Angeles, he said his port had 19 ships waiting to dock and they’re now waiting, on average, about five days to get in. In normal times, they don’t have to wait at all.
Lars Jensen, CEO of Vespucci Maritime, has spent 20 years studying the industry and he says what’s going on is unprecedented. “The container shipping industry is in a state of chaos that I don’t think it has ever been since it was invented,” he says.
The maiden voyage of the first container ship set sail from Newark, N.J., back in 1956. It may be hard to fathom just how big a deal this innovation was. It was just a big ship that carried containers, literally metal boxes. But these metal boxes enabled ships to carry dramatically more cargo, and, by standardizing shipping practices and using new machines to handle the boxes, shippers were able to slash costs and the time it takes to load, unload and transport that cargo.
Now economists are concerned that the plumbing provided by these miracle boxes and the vessels that transport them is clogged. It’s making it more difficult for stores to restock their shelves, manufacturers, carmakers and builders to get the parts they need, and farmers to export their products. It’s an important reason, analystssay, that we’re seeing consumer prices surge.
How did shipping get topsy-turvy?
In the early days of the pandemic, global trade hit an iceberg and sank into the abyss. The decline of maritime shipping was so dramatic that American scientists saw a once-in-a-lifetime opportunity to study what happened to whales in the absence of a constant deluge of vessels. The noise from the ships apparently stresses them out — kind of like they’re currently stressing out the residents of Whidbey Island.
Greater tranquility for whales in the first half of 2020 was the result of shipping companies canceling their trips and docking their ships. Then the economy rebounded, and American consumers unleashed a tidal wave of demand that swept through the shipping industry when they started shifting their spending patterns. Unable to spend money on going out, many started spending their money (and their stimulus checks) on manufactured goods — stuff that largely comes from China on container ships.
At first, it wasn’t the ships that were the problem; it was the containers. When the buying spree began, Chinese exporters struggled to get their hands on enough empty boxes, many of which were still stranded in the U.S. because of all the canceled trips at the beginning of the pandemic. More importantly, processing containers here has been taking longer because of all the disruptions and inefficiencies brought about by the pandemic. Containers have been piling up at dockyards, and trains and trucks have struggled to get them out fast enough.
“The pandemic has exacerbated longstanding problems with the nation’s supply chain, not just at the ports but in the warehouses, distribution centers, railroads, and other places that need to run smoothly in order for Longshore workers to move cargo off of the ships,” says Cameron Williams.
He’s an official at the International Longshore and Warehouse Union, which represents dock workers, primarily on the West Coast. Dock workers have been working through the pandemic to handle the increased cargo volume, he says, and at least 17 ILWU workers lost their lives to COVID-19. “We continue to work hard and break records month after month to clear the cargo as quickly as the supply chain allows,” Williams says.
It’s been all hands on deck to supply ravenous consumers and businesses with the stuff they want. The resulting traffic jams at West Coast ports means it takes longer to unload stuff, which then extends the time it takes for ships to get back across the Pacific to reload.
That congestion was already creating massive delays on both ends of the shipping supply chain, tying up large numbers of containers and ships and leading to growing backlogs and shortages. Then, in March 2021, the Ever Given, one of the largest container ships in the world, got stuck in the Suez Canal in Egypt. While the blockage didn’t directly affect the Asia-West Coast shipping corridor, it added to the global shortage of ships and containers by stranding even more of them out at sea.
As if all this weren’t enough, last month there was a COVID-19 outbreak at the Yantian International Container Terminal in China, which is normally one of the busiest ports in the world. The Chinese government implemented stringent measures to control the outbreak, and as a result, more than 40 container ships had to anchor and wait. “In terms of the amount of cargo, what’s going on in South China right now is an even larger disturbance than the Suez canal incident,” Jensen says.
The effects on the American economy
With so much shipping capacity bogged down, importers and exporters have been competing for scarce containers and vessels and bidding up the price of shipping. The cost of shipping a container from China/East Asia to the West Coast has tripled since 2019, according to the Freightos Baltic Index. Many big importers pay for shipping through annual contracts, which means they’ve been somewhat insulated from surging prices, but they are starting to feel the pain as they renegotiate contracts.
Rising shipping costs and delays are starving the economy of the stuff it needs and contributing to shortages and inflation. It’s not just consumers and retailers that are affected: American exporters are complaining that shipping companies are so desperate to get containers back to China quickly that they’re making the return trip across the Pacific without waiting to fill up containers with American-made products. That’s bad news for those exporters — and for America’s ballooning trade deficit.
As for when it’s going to get better, none of the people we spoke to believes it’ll be anytime soon. And it’s not even considered peak season for the shipping industry yet. That typically begins in August, when American stores start building their inventories for the back-to-school and holiday seasons. The residents of Whidbey Island may have to continue dealing with the nuisance of gigantic, noisy ships cluttering up the horizon for the foreseeable future.
Last week’s new unemployment claims were higher than the previous week’s revised claims of 375,000, which marked the lowest level during the pandemic, and much worse than the 360,000 claims economists were expecting.
The number of Americans filing claims under the Pandemic Unemployment Assistance program, which extends benefits to self-employed workers not eligible for traditional state programs, also jumped, hitting 118,025, according to the weekly data released Thursday.
Despite the rise in new weekly claims, the total number of Americans receiving any form of benefit fell sharply to 14.8 million in the week ending May 29, about 560,000 less than the week prior and much lower than the 30.2 million weekly claims filed in the comparable week last year.
“What the claims information doesn’t tell us is how much faster the job market will heal or where so-called full employment will ultimately be because the latest data tells the story of more than 9 million job openings and an equal number of officially unemployed,” Bankrate senior economic analyst Mark Hamrick wrote in a Thursday email, referring to the Federal Reserve’s goal of full employment, which would mean the only people unemployed would be those unable to work. “The easiest part of putting people back to work occurred from May through August of last year, when more than a million jobs per month were added to payrolls.”
5.8%. That was the unemployment rate in May, according to the Labor Department’s monthly jobs report, down from 6.1% in April.
What To Watch For
On Wednesday, the Fed said it wants to see more progress in the labor market, which is still down 7.6 million jobs since the onset of the pandemic, before it moves to raise rates and tighten policy. The Fed has long insisted the economy is still fragile and in need of assistance due to the ongoing pandemic, but the central bank is likely to change its messaging in light of expected job growth by the end of this year. Officials on Wednesday said they are looking ahead to two interest rate hikes by the end of 2023—sooner than previously expected.
At least 26 states—including Alabama, Mississippi and South Carolina—have announced they will stop participating in the federal government’s supplemental unemployment benefits program, which provides an extra $300 a week to jobless Americans, by July 3. Some officials are claiming the payments disincentivize workers to find jobs, but in a note to clients late last month, JPMorgan economists said the early end to the unemployment insurance, which is set to expire in September, looks “tied to politics, not economics.”
They argued that many of the states that have announced the early reduction are not showing signs of a tight labor market or strong earnings growth—two factors used to justify ending the enhanced benefits. Meanwhile, some states have moved on legislation that would authorize one-time “signing bonuses” for unemployed residents who find work.
I’m a reporter at Forbes focusing on markets and finance. I graduated from the University of North Carolina at Chapel Hill, where I double-majored in business journalism and economics while working for UNC’s Kenan-Flagler Business School as a marketing and communications assistant. Before Forbes, I spent a summer reporting on the L.A. private sector for Los Angeles Business Journal and wrote about publicly traded North Carolina companies for NC Business News Wire. Reach out at email@example.com. And follow me on Twitter @Jon_Ponciano
The Act gave the British working classes a contributory system of insurance against illness and unemployment. It only applied to wage earners, however, and their families and the unwaged had to rely on other sources of support, if any.Key figures in the implementation of the Act included Robert Laurie Morant, and William Braithwaite.
Across the world, 72 countries offer a form of unemployment benefits. This includes all 37 OECD countries. Among OECD countries for a hypothetical 40-year-old unemployment benefit applicant, the US and Slovakia are the least generous for potential benefit duration lengths, with PBD of six months. More generous OECD countries are Sweden (35 months PBD) and Iceland (36 months PBD); in Belgium, the PBD is indefinite.
The Unemployment Insurance Act 1920 created the dole system of payments for unemployed workers in the United Kingdom. The dole system provided 39 weeks of unemployment benefits to over 11 million workers—practically the entire civilian working population except domestic service, farmworkers, railroad men, and civil servants.
Job sharing or work sharing and short time or short-time working refer to situations or systems in which employees agree to or are forced to accept a reduction in working time and pay. These can be based on individual agreements or on government programs in many countries that try to prevent unemployment. In these, employers have the option of reducing work hours to part-time for many employees instead of laying off some of them and retaining only full-time workers. For example, employees in 27 states of the United States can then receive unemployment payments for the hours they are no longer working.