Member Briefing April 6, 2022
Fed’s Balance Sheet Runoff Will be Rapid, Brainard Says
Federal Reserve Governor Lael Brainard on Tuesday said she expects a combination of interest rate increases and a rapid balance sheet runoff to bring U.S. monetary policy to a “more neutral position” later this year, with further tightening to follow as needed. To do so, she said, the Fed will raise rates “methodically” and, as soon as next month, begin to reduce its nearly $9 trillion balance sheet, quickly arriving at a “considerably” more rapid pace of runoff than the last time the Fed shrank its holdings.
The rapid portfolio reductions “will contribute to monetary policy tightening over and above the expected increases in the policy rate reflected in market pricing and the Committee’s Summary of Economic Projections,” she said. The hawkish tone from one of the Fed’s usually more dovish policymakers sent stocks down and Treasury yields up to multi-year highs, as investors digested the implications of a more aggressive policy path.
Invasion of Ukraine Headlines
- Top U.S. Military Officer Expects Ukraine Conflict to be “Measured in Years” – CBS
- Potential for Great Power Conflict ‘Increasing,’ Milley Says – Department of Defense
- Zelensky Calls for Removing Russia From U.N. Security Council – WSJ
- Lavrov Says West Trying to Sink Russia-Ukraine Talks With War Crimes ‘Hysteria’ – Reuters
- Russia Set for Steep Slump and Long Stagnation in Wake of Ukraine War – WSJ
- US, UK, Australia Team up on Hypersonic Weapons With Eye on Russia and China – Politico
- Treasury Blocks Russia from Paying Debt, Raising Default Threat – Politico
- U.S. and Allies Vow Action Over Reports of Russian Atrocities in Ukraine – WSJ
- The Invasion of Ukraine has Turned Japan Definitively Against Russia – The Economist
- Map – Tracking Russia’s Invasion of Ukraine – Live Universal Awareness Map
New York Set to Ban Natural Gas in New Buildings
ew York Governor Kathy Hochul will soon release a budget that likely will include a plan to make New York the first state to ban natural gas and other fossil fuels in new construction, according to Food & Water Watch and other environmental groups.
In her State of the State address in January, Hochul committed to “zero on-site greenhouse gas emissions for new construction no later than 2027.” The gas industry has warned that giving up on gas would boost consumer costs because electric heat is much more expensive. With the economy recovering from the COVID-19 pandemic, New York’s gas use rose to around 3.44 billion cubic feet per day (bcfd) in 2021. That compares with a record high of 3.63 bcfd in 2018.
Negotiations Continue on Already Late State Budget – What’s in or out so Far?
Lawmakers may have returned to Albany after leaders took the weekend to continue negotiating the budget, but the state Legislature is no closer to passing a spending plan than it was on Friday. Lawmakers approved a short term budget extender on Monday to keep the government running and state employees paid. With spring recess set to begin for lawmakers at the end of the week, Albany leaders are rushing to finalize a deal on a range of issues affecting everyday New Yorkers. They hope to have bills passed by Wednesday or Thursday.
A number of big issues still separate negotiators – bail and discovery reform chief among them. Other proposals that hang in the balance include a big expansion of state support for child care, funding for a new stadium for the Buffalo Bills, and the legalization of to-go cocktails.
US COVID – CDC Announces Sweeping Agency Review
CDC Director Rochelle Walensky told employees that Jim Macrae, associate administrator for primary health care at the Health Resources and Services Administration, would be conducting a one-month review of the organization that has been in the public spotlight amid the COVID-19 pandemic. Walensky said that on Monday, Macrae will begin evaluating current COVID-19 efforts and “provide me with insight on how the delivery of our science and program can be further strengthened during this critical time of transition.”
The review comes more than two years after the coronavirus pandemic began. The CDC has faced intense scrutiny during the global pandemic.
COVID and Diabetes, Colliding in a Public Health Train Wreck
After older people and nursing home residents, perhaps no group has been harder hit by the pandemic than people with diabetes. Recent studies suggest that 30 to 40 percent of all coronavirus deaths in the United States have occurred among people with diabetes, a sobering figure that has been subsumed by other grim data from a public health disaster that is on track to claim a million American lives sometime this month.
A study published earlier this month suggested that those with mild COVID infections had a 28% chance of developing diabetes compared to those who never got COVID-19. Another study published in the Lancet, also found that people who had low to no risk factors for diabetes had a 38% increased risk after a COVID-19 infection.
CDC: COVID Lockdowns Caused ‘Traumatic’ Stress In Teenagers
A new survey conducted by the Centers for Disease Control and Prevention revealed an alarming rise in the number of teenagers who are struggling with their mental health. During the first six months of 2021, 44% of the teenagers surveyed reported they felt persistently sad or hopeless. The CDC said that coronavirus lockdowns were one of the reasons why the number was so high.
The agency said that nearly 20% of teens contemplated suicide. Females were more than twice as likely as males to seriously consider suicide. Female students also reported higher rates of drinking and smoking. In 2009, 26.1% of teenagers reported feeling sad and hopeless. That percentage rose to nearly 37% in 2019 before jumping another seven points amid the coronavirus pandemic as many teens found themselves isolated from their peers. Not only were they separated from their friends, but they also dealt with emotional abuse at home.
New COVID-19 Variant XE Identified: What to Know and Why Experts Say Not to be Alarmed
A new COVID-19 variant has been identified in the United Kingdom, but experts say there is no cause for alarm yet. The variant, known as XE, is a combination of the original BA.1 omicron variant and its subvariant BA.2. This type of combination is known as a “recombinant” variant.
Public health experts say that recombinant variants are very common and often crop up and disappear on their own. “Right now, there’s really no public health concern,” said Dr. John Brownstein, an epidemiologist and chief innovation officer at Boston Children’s Hospital and an ABC News contributor. “Recombinant variants happen over and over. In fact, the reason that this is the XE variant recombinant is that we’ve had XA, XB, XC, XD already, and none of those have turned out to be any real concern.”
Senators Reach $10 Billion Deal on COVID Funds
Senate Majority Leader Chuck Schumer announced a $10 billion deal on another round of emergency pandemic funding requested by the Biden administration. The money will be directed to domestic needs for vaccines, tests and therapeutic drug treatment. About $5 billion in international aid to combat the pandemic abroad was dropped from the deal because senators could not come to terms on how to pay for it.
Schumer and Sen. Mitt Romney, R-Utah, reinvigorated stalled talks over COVID aid that was originally included in a recent bipartisan $1.5 trillion government spending bill, but the money was scuttled at the last minute when a critical number of House Democrats objected. Some of that money would have been offset by cutting previously approved COVID funds to states, and rank-and-file lawmakers were given little notice of the change agreed to by party leaders.
U.S. Labor Market Is Tightest of Postwar Era, Goldman Gauge Shows
The U.S. jobs market has never been tighter than it is today, increasing the risks to the economy as Federal Reserve policy makers move to rein in inflation, according to Goldman Sachs Group Inc. The Wall Street bank’s economists have compiled a gauge of U.S. labor that they say better tracks wage gains — which are key to inflationary pressures — than other measures. They add the total number of employees and the number of job openings to estimate labor demand. For supply, they count the labor force, or people in work and those looking for positions.
The latest reading of the gap shows an excess of 5.3 million in labor demand versus supply of workers — “the most overheated level of the postwar period both in absolute terms and relative to the population,” Jan Hatzius, Goldman’s chief economist, wrote in a note Monday.
ISM: Services Sector Growth Eases in March, Still Solid
Services economy activity continued to show solid momentum in March, according to the most recent edition of the Services ISM Report on Business, which was issued today by the Institute for Supply Management (ISM). The reading for the report’s key indicator—the Services PMI was 58.3.
- Business activity/production, at 55.5, increased 0.4%, growing, at a faster rate, for the 22nd consecutive month, with 13 services sectors reporting growth;
- New orders, at 60.1, increased 4.0%, growing, at a faster rate, for the 22nd consecutive month, with 15 services sectors reporting growth;
- Employment, at 54.0, increased 5.5%, growing after a month of contraction following seven straight months of growth, with 13 services sectors growing in March; and
- Supplier deliveries—at 63.4 (a reading above 50 percent indicates slower deliveries)—were down 0.5% compared to February, slowing, at a faster rate, for the 34th consecutive month
With Inflation Not Letting Up, Shoppers Cut Back on Staples
American consumers are starting to cut costs on mainstays from toothpaste to baby formula as inflation hits a swath of the economy that had thus far proven resistant to substantial price increases. Procter & Gamble Co., Clorox Co., Kraft Heinz Co. and other consumer-products giants have made a bet that consumers will pay up for household products even as inflation takes hold. Over the past year, the companies have seen profits and market share grow as they have raised prices on products from detergent and diapers to snacks and soda.
Now consumers, hit by soaring costs for everything from gasoline to child care, are drawing a line, analysts and retailers say. Shoppers are buying staples in smaller quantities, switching to cheaper, store-name brands and more rigorously hunting for deals. The shift is especially pronounced among lower-income consumers who splurged on household products amid the heights of the pandemic, they say.
Biden Plans to Extend Student Loan Payment Pause
The White House plans to once again extend the moratorium on federal student loan payments through the end of August, according to multiple people familiar with the matter, including an administration official.
The announcement, expected on Wednesday, comes as the current pause on payments was set to expire May 1, potentially impacting more than 40 million Americans. The new August 31 extension, however, is considerably shorter than what many Democrats have been requesting. It also tees up another fight over the relief just months before the midterm elections.
Colleges Are Trying to Re-Enroll Adult Learners Who Dropped Out. Here’s How It’s Going.
As colleges across the country try to turn around sagging enrollment rates, many are targeting one group in particular: the 36 million adults who left college without a degree. Undergraduate enrollment has decreased by about 8 percent during the pandemic, according to the National Student Clearinghouse Research Center. That has made it even more urgent to bring those students back. Higher-education leaders, politicians, and education nonprofits alike are trying to find the best ways to do so. But how can they make sure students are better prepared to face barriers this time around?
Finding adult learners, re-enrolling them, and retaining them takes time. Many institutions don’t have the bandwidth to do it on their own, which is one of the big gaps InsideTrack is hoping to help fill, said Angela Jaramillo, its strategic partnership director.
Read more at the Chronical of Higher Education (Tiered Subscription)