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Gary Kelly, Chief Executive Officer of Southwest Airlines Co., speaks during an event in the new Southwest Airlines Co. International Terminal at William P. Hobby Airport in Houston, Texas.

Carter Smith | Bloomberg | Getty Images

Gary Kelly, CEO of Southwest Airlines, will step down in February and spend more than 17 years at the helm building the airline and leading it through crises from the Great Recession to the Covid-19 pandemic.

The Dallas-based airline has named corporate veteran Bob Jordan, executive vice president of corporate services, more than three decades old, as Kelly’s successor and hired him to lead the company’s turnaround.

“I think now is the perfect time,” said Kelly, 66, in an interview. “We have stabilized.”

Kelly will hold the position of executive chairman until “at least” 2026, the company said.

Kelly was in the top job with the low-cost airline during the financial crisis, a merger, aggressive expansion and the grounding of the Boeing 737 Max. The pandemic devastated travel demand, causing Southwest its first annual loss since 1972 last year.

Southwest is now trying to regain a foothold and benefit from an increase in travel demand. This increase is coming from domestic recreational customers in the US, which Southwest is focused on as it carries more US passengers than any other airline. Southwest saw sales soar over the past month for the past month and posted profit for the first quarter of the year thanks to more than $ 1 billion in federal aid.

Jordan, 60, led the 2011 acquisition of competitor AirTran, Southwest’s frequent flyer program, the latest in e-commerce platform and a number of acquisitions and other programs designed to cut labor costs during the pandemic, Southwest said.

“We’re leaving the pandemic in really good shape, especially when compared to our competitors,” Jordan told CNBC.

Successor’s priorities

Jordan said in an interview that his priorities are to fix Southwest’s balance sheet and hire employees to support increasing travel demand. He said if hiring isn’t high on the list next year it’s really tight.

He also said the company’s strategy of aggressively adding targets that ranged from Hawaii to Florida during the pandemic is likely to cool.

“There is still a lot to do to get out of the pandemic,” Jordan said. “You have to play a little offensive and a little bit defensive.”

Southwest stock ended the day down 1% to $ 55.19, more than its peers.

FREDERIC J. BRAUN | AFP | Getty Images

Job hunting has been dampened in 12 states that have opted out of federal unemployment programs in the past few weeks, suggesting new analysis suggests policies may not work as planned.

States have ended the pandemic-era benefits – including an additional $ 300 per week – since June 12, about three months before it expired on September 6.

They are the first of a total of 25 states, all run by Republican governors, and withdrawing from programs to encourage recipients to look for work amid record jobs.

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Generous benefits provide an incentive to stay home and make it difficult for companies to hire, the governors claim. Critics say that social benefits do not have much of an impact on workers’ decisions and that cutting funds will hurt the economy by cutting household spending.

However, workers in the dozen states that have already cut federal aid are looking for jobs with less vigor than in other areas, according to an analysis published Tuesday by Jobsite Indeed.

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According to Indeed’s economist AnnElizabeth Konkel, this is the opposite dynamic one would expect given the political intent to end the services early.

“People in these states are currently searching less than the average job seeker,” she said.

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In Alaska, Iowa, Mississippi, and Missouri, whose benefits ended June 12, job searches are about 4% below the national average, according to Indeed data.

Activity is 1% lower in eight states – Alabama, Idaho, Indiana, Nebraska, New Hampshire, North Dakota, West Virginia, and Wyoming – that ended on June 19.

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“You’d think they’d be looking for more,” said Konkel. “At least for now, this is suppressing the idea that federal unemployment benefits are the main reason for friction in the labor market.”

The data, as measured by clicks on job postings, could shift in the coming weeks, she said.

How performance gains will affect the job market is difficult to say with certainty without letting more time pass, says Michael Strain, director of economic studies at the American Enterprise Institute, a right-wing think tank.

But it is likely that the labor market has rebounded to the point where the $ 300 weekly supplement has a negative impact, he said.

“The challenge to public order is to balance the good with the bad,” said Strain.

“In June 2021, I think unemployment benefits are doing more harm than good – to workers and the economy at large, because of the generosity we offer them,” he added.

$ 300 per week

Unemployment benefit usually replaces around half of the wages before a worker is laid off.

Congress increased weekly aid by $ 600 in the early days of the Covid pandemic. Lawmakers have also provided funding for the long-term unemployed and groups such as the self-employed and gig workers who are normally not eligible for government benefits.

Since then, they’ve cut the weekly grant in half – to $ 300 a week – and provided federal benefits through Labor Day.

According to an estimate by University of Chicago economist Peter Ganong, that additional $ 300 will pay about 42% of recipients as much or more than their previous salary. (These are primarily low-wage workers.)

“That makes it a bad financial deal for a large part of the workforce,” said Strain.

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Employment participation has remained relatively constant, which is a particular cause for concern when there was a record number of job vacancies in April, he said.

However, economists have pointed to reasons other than benefits for labor market dynamics.

For one, Covid health issues would likely keep some at home, they said.

A highly contagious variant of Covid makes up a larger proportion of US cases, and only 56% of US adults are fully vaccinated against Covid-19. The Biden government said Tuesday it will likely miss its target of vaccinating 70% of adults by July 4th.

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Childcare can continue to be a challenge for families if the daycare centers are permanently closed, the schools do not learn personally again or the summer camps are not fully utilized.

Rebooting the economy (and the job taking place that comes with it) isn’t as easy as flipping a switch, economists said.

“I don’t think it’s the whole puzzle,” said Konkel of the improved benefits. “I think it’s part of the puzzle.”

Some also question the notion of labor shortages.

“Nobody says it’s a ‘customer shortage’ when companies offer high prices and poor service,” said Bharat Ramamurti, deputy director of the National Economic Council, in a tweet. “But some say it is a ‘labor shortage’ when companies offer low wages and poor social benefits.”

The Federal Reserve Bank of San Francisco estimated that the $ 300 allowance had a “small but likely noticeable” impact on job searches and labor availability in early 2021.

If 7 out of 28 unemployed people get job offers that they would normally take, the availability of the additional $ 300 per week is forecast to force 1 in 7 to turn down the offer.

Beyond $ 300, most Republican states are also ending pandemic unemployment benefits for the self-employed and gig workers prematurely. These workers lose their benefits completely.

“I don’t think it’s right from a political point of view to bring these workers down to zero,” said Strain.

Instead, eligibility for these benefits should gradually tighten and workers should be notified, he said.

The racial wealth divide between white and Black families in the U.S. is more of a chasm than a gap.

In 2019, the median household wealth for white families was nearly $190,000, almost eight times higher than that of Black households, according to Federal Reserve data.

“Baby bonds” are one proposal to help close the divide. Unlike regular bonds, they are not a debt instrument traded in the public markets. Instead, the proposal would create a federally funded trust fund account for every newborn baby in the U.S.

“I support this idea called baby bonds,” Sen. Cory Booker, D-N.J., told CNBC. Booker has proposed a baby bonds policy called the American Opportunity Accounts Act, which has been co-signed by many of his Democrat colleagues.

The bill, if passed, would create a savings account for every child with at least $1,000 in it.

“Depending on the wealth of your family, every child will get a deposit annually up to [age] 18 into that account, upwards of $2,000 for the lowest income children,” Booker told CNBC.

When the child turns 18, depending on the families’ income, they could have nearly $50,000 in this account. If the child comes from a well-off family, they’d end up with just over $1,600 by age 18 since they wouldn’t be getting annual payments.

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According to investment firm Morningstar, Booker’s American Opportunity Accounts Act could reduce the racial wealth gap by 40%. Plus, baby bond recipients would only be able to use the funds for wealth-building activities, including buying a home, continuing education or starting a business.

According to analyses from Booker’s office and from the City University of New York, a baby bonds program could cost the U.S. government $60 billion to $80 billion.

“It’s a little bit more than food stamps,” said Naomi Zewde, an assistant professor in CUNY’s Graduate School of Public Health and Health Policy.

However, baby bonds cannot close the racial wealth gap alone, and conservative policy experts argue that baby bonds could reduce incentives to save or to pursue higher education.

Watch the video above to learn more about how baby bonds could work, the economics behind the proposal, and what may be next for these policies on the federal and state levels.

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