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Hutchins Roundup: Small businesses, foreign investment, and more – Brookings Institution

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4 years ago

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Studies in this week’s Hutchins Roundup find nearly 40% of small businesses reported access to capital a major COVID-19 challenge, foreign investment leads to technology spillovers in investors’ countries, and more.

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In an April survey of more than 66,000 small business owners and employees, conducted via Facebook, Georgij Alekseev of NYU’s Stern School and co-authors explore the impact of the COVID-19 shock on operations, employment, and financing. The biggest challenge—reported by nearly 40% of businesses—was access to capital. While 78% of businesses were concerned about their cash flows for the spring, only a quarter could access formal sources of financing, and most relied on informal or personal sources of saving. Access to loan and credit guarantees, alongside salary subsidies and tax deferrals, were the most popular policy proposals among respondents. The authors note pervasive gender disparities in the responses. Older and larger, but also majority-male, businesses were more likely to be open and more optimistic about their survival. Female employers and employees reported greater effects of the pandemic on their work, particularly with regards to balancing caretaking and household responsibilities, and women were more likely to quit their jobs in response to school closures.

Foreign venture capital investment can help otherwise unfunded domestic firms succeed—but when the technologies are in critical areas such as artificial intelligence, fintech, and robotics, foreign investment has the potential to launch the U.S. into economically and militarily detrimental arms races, says Ufuk Akcigit of the University of Chicago and co-authors. Using data from foreign investments in U.S. companies between 1976 and 2015, the authors find that when there is foreign investment in a U.S. company, the investor’s country sees an increase in patent applications in similar technology and in citations of the U.S. start-ups’ patents. These “knowledge flows” are larger in patents subject to government secrecy orders. Moreover, the larger the technology gap between the U.S. and a given country, the more that country invests in the technology. But foreign investment also is associated with more patents generated by the U.S. startup. The authors conclude that, when weighing the merits of foreign investment, the U.S. government should consider both the benefits to U.S. innovation and the potential economic and military consequences of technology spillovers to other countries.

Keith A. Bailey and James R. Spletzer of the Census Bureau use the Longitudinal Employer-Household Dynamics (LEHD) survey data to measure multiple jobholding and find that 7.8% of workers in the U.S. are multiple jobholders and this rate has been trending upward over the past 20 years. The estimate is about 2 percentage points higher than the widely cited Current Population Survey (CPS) measure. The new measure counts individuals as multiple jobholders if, based on unemployment insurance records in the LEHD, they held at least one job consistently over three quarters and held one or more additional jobs within the same period; the CPS relies on a combination of survey responses and    point in time evidence of wages. The authors note that while differences in definitions and reference periods (quarterly vs. monthly) explain the different levels of multiple jobholding, they do not explain the different trends. Moreover, the new measure is strongly cyclical, increasing during expansions and decreasing in contractions; the CPS-based measure is not cyclical.  Using the new data, the authors find women and younger people are more likely to hold multiple jobs. In addition, they find that multiple job holding occurs across income groups and second or third jobs account for 25% or more of multiple jobholders’ incomes.

Source: Congressional Budget Office

“I think financial conditions are very accommodative, unless you’re a small business or mid-size business in a person-to-person contact industry. I think we could do more. I think we should continue to look at whether there’s more that can be done there. The challenge on that is, we’re lenders not spenders. If we’re going to do more on, say, Main Street to make that a more accessible program, that’s more of a decision for Treasury and Congress than the Fed, because it’s going to involve taking greater risk of losses. But I do think looking at that will be appropriate,” says Robert Kaplan, President of the Federal Reserve Bank of Dallas.

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Tesla shares soar more than 14% as Trump win is seen boosting Elon Musk’s electric vehicle company

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6 days ago

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November 6, 2024

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NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.

Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.

“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”

Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.

Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.

Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.

Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.

In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.

The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.

And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.

Tesla began selling the software, which is called “Full Self-Driving,” nine years ago. But there are doubts about its reliability.

The stock is now showing a 16.1% gain for the year after rising the past two days.

The Canadian Press. All rights reserved.

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S&P/TSX composite up more than 100 points, U.S. stock markets mixed

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4 weeks ago

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October 16, 2024

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TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.

The S&P/TSX composite index was up 103.40 points at 24,542.48.

In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.

The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.

The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.

The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.

This report by The Canadian Press was first published Oct. 16, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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S&P/TSX up more than 200 points, U.S. markets also higher

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October 11, 2024

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TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.

The S&P/TSX composite index was up 205.86 points at 24,508.12.

In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.

The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.

The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.

The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.

This report by The Canadian Press was first published Oct. 11, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

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