Member Briefing Aril 2, 2024
ISM Manufacturing Index Breaks Higher
The ISM manufacturing index surprised to the upside in March rising by the most in three years (up 2.5 points) to an expansionary-reading of 50.3 for the first time in 16 months. Despite the better-than-expected print for the headline index, the details were more mixed. New orders and production were up and consistent with expansion, but so too were prices paid. In short, a pickup in manufacturing activity is welcome news for the broader economy, but can be troublesome for the Fed if it acts as a headwind to the recent disinflationary trend in consumer price inflation.
- To that end, the prices paid measure rose to 55.8, or the highest reading in 20 months, and is consistent with a broad expansion in prices paid by manufacturers last month.
- The employment component ticked higher, at 47.4. But it remains consistent with a contraction in manufacturing hiring last month.
- The production index rose by the most of any component, up 6.2 points with just two industries (furniture and machinery) reporting a decrease in output last month.
- Select comments from the transportation equipment, computer & electronic products, primary metals, and wood products all mentioned they expect orders to pick up.
As Solar Eclipse Nears Viewing Enthusiasm Grows – Employers Should Prepare
We’re less than one week away from a total solar eclipse in the U.S., and Niagara Falls is bracing for the “largest influx of visitors” the city has ever had. Dozens of school districts across the region have already closed schools for the day, and Canadian officials have declared a state of emergency in anticipation of up to one million visitors on April 8—compared to the typical 14 million visitors who travel there over the course of the year just to see the famous waterfalls. The eclipse will be visible throughout the entire U.S., but the path of totality follows a narrow band from Texas up to the Northeast.
The solar eclipse is one relatively large distraction, and as employers, “we manage around distractions as opposed to eliminating the distraction,” Ruhal “Rue” Dooley, SHRM-SCP, a SHRM Knowledge Center advisor pointed out. That might mean having eclipse parties. “Some employers can afford that luxury, and those employers should allow for that,” Dooley said, which could “advance the brand of the organization.” But party or no party, employers need to be clear about work expectations, he said. Issue precautions about safely viewing the eclipse, be aware of potential commuting issues—be flexible, if possible, with scheduling—and remind those working outdoors to take precautions when the eclipse casts their area in total darkness.
Global Headlines
Middle East
- Israel and Hamas: The Latest News – The Guardian
- Israel And U.S. Discussed Rafah Yesterday—After Netanyahu Canceled Original Meeting – Forbes
- Hamas Bot Involved in New Gaza Ceasefire Negotiations, Official Says - CNN
- Pope Francis Again Calls For Cease-Fire In Gaza During Easter Message - Forbes
- Netanyahu to Leave Hospital on Tuesday Following Hernia Surgery - Reuters
- Israel Army Withdraws From Gaza's Al-Shifa Hospital - Yahoo
- Israeli Air Strike Destroys Iranian Consulate, Kills Top Commander in Syria - BBC
- Interactive Map- Israel’s Operation in Gaza – Institute for the Study of War
- Map – Tracking Hamas’ Attack on Israel – Live Universal Awareness Map
Ukraine
- Ukraine and Russia: The Latest News – The Guardian
- Barrage of Russian Attacks Aims to Cut Ukraine's Lights - BBC
- Ukraine Says it Downed Two of Three Russian Drones Overnight - CNBC
- Ukraine's Energy System far from Collapse Despite Weeks of Russian Strikes – Reuters
- Crypto Fuels Russian Shadow Trade for Weapons Parts - WSJ
- France Wants China to Send ‘Clear Messages’ to Russia Over Ukraine War - Politico
- Israel’s government passes law to temporarily shut down Al Jazeera – The Hill
- Interactive Map: Assessed Control of Terrain in Ukraine – Institute for the Study of War
- Map – Tracking Russia’s Invasion of Ukraine – Live Universal Awareness Map
Other Headlines
- Rising Global Threats Force ‘Epoch-Making’ Shift in World Order – The Hill
- Extreme Drought in Southern Africa Leaves Millions Hungry – Politico
- How Xi Jinping Plans to Overtake America – The Economist
- Japan Non-Manufacturer Sentiment Hits 30-Year High -CNBC
- Germany Fans Banned from Buying Number 44 Kits over Nazi Symbolism - BBC
- U.S. Strategy to Limit China’s Rise as a Technological Power is Working, Analyst Says - CNBC
- US Plans Trilateral Summit With Japan, South Korea in July, Japanese Media Report – Reuters
- Turkey’s Erdogan Suffers Setback in Nationwide Election - WSJ
- Argentina and Colombia to Mend Ties – Reuters
Policy and Politics
Johnson says Ukraine aid will come up ‘right after’ recess and will include some ‘innovations’
Speaker Mike Johnson (R-La.) said Sunday that he expects to move a package including aid for Ukraine with “some important innovations” when the House returns from recess. In an interview on “Sunday Night in America With Trey Gowdy,” Johnson stressed the difficult position he’s in, with a historically narrow House majority, but said he was working throughout the current work period to come up with a package and plans to put it on the floor when the House gavels back into session.
“When it comes to the supplemental, we’ve been working to build that consensus. We’ve been talking to all the members, especially now over the district work period. When we return after this work period, we’ll be moving a product, but it’s going to, I think, have some important innovations,” Johnson said. Johnson floated as examples the possibilities of extending a loan to Ukraine — an idea that gained some traction earlier this month as a way to back Ukraine while assuaging conservative concerns about providing more aid as the country fights against Russian aggression. Johnson also mentioned the REPO for Ukrainians Act, which would authorize the president to seize Russian sovereign assets frozen in the U.S. and give them to Ukraine to use against Russia.
Citizens Budget Commission Warns Against Hiking Taxes and High Spending in State Budget
Patrick Orecki, director of state studies at the Citizens Budget Commission, is urging lawmakers to rethink their spending plans. “There’s about $8 billion to $9 billion in state operating fund spending added on top of what the governor had already put forward, so the Legislature is planning to spend a lot more money and do it permanently,” he said.
The other issue CBC is focused on is projected outyear budget gaps. “Not only on paper do we have projected budget gaps going into the next few years, but we’re building a structural gap too,” Orecki explained. “There’s a big misalignment between the recurring revenue that the state has, and our recurring spending. So that’s a big red flag.”
Learn more at NY State of Politics
Business Owners Fight GOP Efforts to Make Them Police Workers’ Immigration Status
Republican state lawmakers trying to deter migrants from illegally entering the U.S. by making it tougher for them to find work keep hitting the same roadblock: business owners. Bills in Arizona, Iowa and West Virginia to mandate more use of a federal system called E-Verify that checks potential employees’ legal status have all passed one chamber of their GOP-controlled state legislatures but aren’t moving ahead in the other, in large part because of lobbying by business groups.
Arizona business groups have also focused on the contracting provisions of the bill in their state, saying its vague language would require businesses to track the legal status of any contractor or subcontractor who does even a little work. “I think at a minimum, we would end up embroiled in legal suits about who is liable,” said Kimber Lanning, chief executive of Local First Arizona, a small-business coalition.
Health and Wellness
Percentage of New Yorkers With Mental Illness Rose and State's Efforts to Increase Number of Beds Have Proceeded Slowly
The mental health needs of New Yorkers have greatly increased, with 21.1% of adults struggling with mental Illness and 5.1% with a severe mental illness in 2021-2022, according to federal data. Between 2013 and 2022, there was a 23% increase in the number of individuals served by the State’s public mental health system, with nearly 900,000 residents utilizing the services. According to a report by State Comptroller DiNapoli, the rising need for mental health services coincided with a loss of 990 beds, a 10.5% drop in capacity, in inpatient psychiatric facilities statewide between April 2014 and December 2023.
In Dec. 2023, there were 3,999 inpatient psychiatric beds in New York City and 4,458 in the rest of the state. Counties with the greatest number of psychiatric inpatient beds were largely downstate. The ratio of beds to population was approximately 1 to 2,084 in New York City and 1 in 2,544 in the rest of the state. There were 20 counties, with a total population of 898,895, that had no psychiatric inpatient beds at all. The last decade reflects a continuation of a long-term decline in the overall number of inpatient psychiatric beds in New York – particularly in state-operated psychiatric centers – due to policy decisions made decades ago.
Read more at The Comptroller’s Website
Election 2024
- Race Between Trump And Biden Closest It’s Been In Months—As Democrats Gain Momentum - Forbes
- Trump’s VP Search is Starting to Get Serious – Politico
- Senate Rankings: 5 Seats Most Likely to Flip – The Hill
- Real Clear Politics Latest GOP Primary Polls – Real Clear Politics
- Real Clear Politics Latest General Election Polls – Real Clear Politics
- Latest Polls - FiveThirtyEight
Industry News
Baltimore Harbor News
Baltimore Bridge Collapse a ‘National Economic Catastrophe,’ Says Maryland Governor
The collapse of Baltimore’s Francis Scott Key Bridge on Tuesday is likely to send shock waves across the U.S. economy, as a key shipping route for certain goods remains snarled for the foreseeable future, officials said Sunday. The channel that’s now blocked by the wreckage is a primary access point for the Port of Baltimore, which Maryland Gov. Wes Moore described as among the “busiest [and] most active” in the nation.
U.S. Transportation Secretary Pete Buttigieg echoed that sentiment. “It’s important not just to the people and the workers of Baltimore, but to our national supply chains to get that port back up and running as quickly as possible,” Buttigieg said on CBS’ “Face the Nation.” “Parts of the non-federal channel are already being worked on and there is a 1,000-ton-capacity lift crane on a barge being put into place now,” Buttigieg said. There’s another 600-ton crane on the way, he added.
More Headlines
- Francis Scott Key Bridge Collapse Live Updates - NBC
- Alternative Route to Open for ‘Essential’ Shipping - BBC
- Chemicals, Lumber and Soap Are Among Exports on Trapped Baltimore Ship - WSJ
- How a Panama Canal Change Brought Big Ships Like the Dali to Baltimore – Washington Post
- The Frantic Calls to Halt Baltimore Bridge Traffic Before Ship Crash - WSJ
- Biden to Travel to Baltimore on Friday to Visit Bridge Collapse – The Hill
How Gen Z Is Becoming the Toolbelt Generation
Long beset by a labor crunch, the skilled trades are newly appealing to the youngest cohort of American workers, many of whom are choosing to leave the college path. Rising pay and new technologies in fields from welding to machine tooling are giving trade professions a face-lift, helping them shed the image of being dirty, low-end work. Growing skepticism about the return on a college education, the cost of which has soared in recent decades, is adding to their shine.
Enrollment in vocational training programs is surging as overall enrollment in community colleges and four-year institutions has fallen. The number of students enrolled in vocational-focused community colleges rose 16% last year to its highest level since the National Student Clearinghouse began tracking such data in 2018. The ranks of students studying construction trades rose 23% during that time, while those in programs covering HVAC and vehicle maintenance and repair increased 7%.
China Factory Activity Expands for First Time in Six Months
The Caixin/S&P Global China manufacturing purchasing managers’ index was 51.1 in March — its strongest since February 2023 — after coming in at 50.9 in February. Economists had expected the reading to hit 51, according to a Reuters poll. The 50-point mark separates expansion from contraction. This reading corroborates another official survey of manufacturing activity that surpassed market expectations and came at its strongest in 11 months. The official survey for non-manufacturing activity in China recorded its most robust reading since June, adding to encouraging recent export and retail sales data.
“Overall, the manufacturing sector continued to improve in March, with expansion in supply and demand accelerating, and overseas demand picking up,” Wang Zhe, a senior economist at Caixin Insight Group, said in the survey release. “Manufacturers increased purchases and raw material inventories amid continued improvement in business optimism. However, employment remained in contraction and a depressed price level worsened,” Caixin’s Wang said.
Tesla’s $25,000 Car Means Tossing Out the 100-Year-Old Assembly Line
Tesla has a plan to fend off cheaper competition from China with a $25,000 electric car. But first it has to overhaul a 100-year-old manufacturing process pioneered by Henry Ford. The company is moving to what it calls an “unboxed” approach, which is more like building Legos than a traditional production line. Instead of a large, rectangular car moving along a linear conveyer belt, parts are assembled simultaneously in dedicated areas and then the subassemblies are all put together at the end. Tesla says the change could reduce manufacturing footprints by more than 40%, allowing the carmaker to build future plants far faster and at less expense.
If the new assembly process is successful, Tesla says it can slash production costs in half. That will be key to delivering a cheap enough car to stoke demand that’s slowed of late and pressured the electric-car maker’s stock price. Tesla shares are down 29% so far this year, compared to a 10% increase in the S&P 500 during the same period. it’s not the first time Tesla has made significant changes to improve long-held manufacturing practices. With its Model Y, instead of stamping various pieces of the car, Tesla turned to die-casting machine presses to “gigacast” — or create giant molds — of the front and rear of the vehicle. That eliminated the need for hundreds of parts and welds.
New Pollution Rules Aim to Lift Sales of Electric Trucks
The Biden administration finalized a rule Friday that’s expected to make a greater share of the U.S. truck fleet electric. The truck rules do not explicitly mandate a shift toward electric vehicles (EVs). Instead, they set average pollution limits for truckmakers’ fleets that are expected to push them in the direction of electric and other lower-emitting technologies like hybrids. One possible scenario outlined in the rule shows that sales of lighter heavy-duty trucks could be 60 percent electric in 2032, sales of medium heavy-duty trucks could be 40 percent electric in 2032 and sales of heavy heavy-duty trucks could be 30 percent electric in 2032.
A trade group representing truck manufacturers expressed concerns about the rule. no electric long-haul tractors are currently in mass production. Most electric trucks can’t go more than 170 miles on a charge. Electric semis require bigger and heavier batteries, which means they must carry lighter loads to avoid damaging roads. Fleet operators will have to use more trucks to transport the same amount of goods. Power generation and transmission will have to massively expand to support millions of new “zero-emission” trucks. An electric semi consumes about seven times as much electricity on a single charge as a typical home does in a day. Truck charging depots can draw as much power from the grid as small cities.
Read more at The Hill and The WSJ
U.S. Tech Giants Turn to Mexico to Make AI Gear, Spurning China
Some of the biggest U.S. companies in artificial intelligence have asked their Taiwanese manufacturing partners to step up production of AI-related hardware in Mexico, seeking to diminish reliance on China. Taiwan-based Foxconn, the world’s largest contract electronics manufacturer, and other Taiwanese companies are heeding the call and investing more in Mexico, according to industry executives and analysts.
They are taking advantage of the U.S.-Mexico-Canada Agreement, the free-trade deal that took effect in 2020. It has attracted billions of dollars from manufacturers aiming to move operations from China to Mexico, a process known as nearshoring. The North American nations “hope to replace products imported from Asia as much as possible,” said James Huang, chairman of the Taiwan External Trade Development Council. “Based on this consensus, Mexico is poised to become the most important manufacturing base for the USMCA.”
GE Stock Flies Near High Amid Countdown To GE Aerospace
General Electric will soon emerge as an aerospace and defense company, shedding its diversified conglomerate past. Ahead of its final breakup, GE held events in March that dug deeper into the post-split companies — GE Aerospace and GE Vernova. On April 2, the "new GE," GE Aerospace, will emerge as a stand-alone company. It will continue to use the GE stock ticker and remain on the S&P 500 index. Vernova, home to the gas power and wind energy business, launches the same day. It will trade under the ticker symbol GEV and join the S&P 500.GE's health care spinoff, GE HealthCare Technologies (GEHC), debuted last January.
In 2021, an embattled General Electric announced a three-way breakup — into independent, publicly traded aviation, health care and energy companies. Before that, the icon of American manufacturing shed a series of assets, from lightiforng to locomotives. In 2023, GE earnings surged 264% as revenue grew 17%, capped off by a solid fourth quarter, according to the company's 2023 Annual Report. Its aerospace business drove results while renewable energy and power both improved performance. While Q4 earnings beat, the company's 2024 guidance fell short of expectations.
Read more at Investor’s Business Daily
Postal Service Replaces FedEx With UPS For Air Cargo
UPS announced Monday that it will become the primary air cargo provider for the United States Postal Service, in what it called a “significant partnership expansion,” replacing FedEx after the company failed to negotiate terms to extend its own contract. UPS said it was awarded a “significant air cargo contract” from USPS, that makes the shipping chain the primary air cargo provider for the postal service after a transition period.
Negotiations to extend FedEx’s contract concluded on March 29 after the two parties were “unable to reach agreement on mutually beneficial terms” for an extension, according to a April 1 SEC filing from the company. FedEx’s contract is set to expire on Sept. 29, and the company will provide its air cargo services throughout the U.S. and Puerto Rico through its expiration date, according to the SEC filing.
Construction Spending Declined in February
Construction spending in the U.S. unexpectedly saw further downside in the month of February, according to a report released by the Commerce Department on Monday. The report said construction spending dipped by 0.3 percent to an annual rate of $2.091 trillion in February after edging down by 0.2 percent to a revised rate of $2.097 trillion in January.The continued decrease came as a surprise to economists, who had expected construction spending to climb by 0.6 percent during the month.
The unexpected decline largely reflected a steep drop in spending on public construction, which slumped by 1.2 percent to an annual rate of $474.4 billion. Spending on educational construction plunged by 1.8 percent to an annual rate of $100.5 billion, while spending on highway construction tumbled by 1.6 percent to a rate of $147.3 billion. Spending on private construction in February came in at an annual rate of $1.617 trillion, virtually unchanged from the revised January estimate. While spending on residential construction climbed by 0.7 percent to an annual rate of $901.1 billion, spending on non-residential construction slid by 0.9 percent to a rate of $716.0 billion.
Auto Sales Due With GM, Ford Hot After Upbeat Profit Outlooks
Cox Automotive forecasts U.S. new-vehicle sales in Q1 will increase 5.6% year over year and reach 3.8 million units. The year-over-year increase in Q1 sales suggests that the new-vehicle market in the U.S. continues to recover slowly from the 10-year low – 13.8 million total sales – recorded in 2022. Sales volume in March is expected to show gains over March 2023 and 2022 as the market continues to expand.
Healthy sales are being supported by significantly improved new-vehicle inventory levels. At the beginning of March, the total supply of available new vehicles was up more than 50% compared to last March, according to the latest vAuto Live Market View data. The March seasonally adjusted annual rate (SAAR), or selling pace, is expected to finish near 15.5 million, up 0.6 million over last year’s pace but down slightly from February’s surprisingly strong 15.8 million level. This March has 27 sales days, the same as last year but two more than last month. Through Q1, the SAAR is forecast at 15.4 million, up from 15.0 million, or a 2.7% increase, compared to Q1 2023.