Member Briefing August 1, 2023
A Deeper Look at the Net 42,000 Jobs Gained in Manufacturing in Q4 2022
Manufacturing experienced a net increase of 42,000 jobs in the fourth quarter of 2022, slowing from 65,000 in the third quarter. Manufacturers saw gross job gains of 465,000 in the fourth quarter, with 416,000 from expanding establishments and 49,000 from new establishments. At the same time, gross job losses totaled 423,000 in the fourth quarter, with 365,000 from contracting establishments and 58,000 from closing establishments.
In addition, the Bureau of Labor Statistics reported the formation of 7,000 manufacturing start-ups in the fourth quarter of 2022, the same pace as in the previous three quarters. The start-up rate represented 2.1% of all establishments in the sector. Those new establishments (or “births”) employed 30,000 workers in the fourth quarter, up from 28,000 in the prior quarter. Overall, manufacturing start-up rates rose sharply in 2021 but have cooled since then, albeit at levels that remain elevated relative to pre-pandemic paces, including for employment.
War in Ukraine Headlines
Ukraine and Russia: The Latest News – The Guardian
Ukraine Reports Fierce Fighting in Northeast - Reuters
Zelensky After Moscow Drone Attack: War Coming Back to Russia - BBC
Vladimir Putin Says African and Chinese Initiatives Could be Basis for Peace in Ukraine – Sky News
Russia Will Monitor Saudi-Hosted Ukraine Peace Talks - Politico
Ukraine Removes Soviet Hammer and Sickle From Huge Kyiv Statue - WSJ
Girl and Her Mother Killed in Russian Strikes as Ukraine Reports Frontline Progress - Reuters
Grain Prices Could Rise Up to 15% From Black Sea Deal Pause, IMF Says – Bloomberg
Pope Francis Calls Russia to Renew Ukraine Grain Deal – Catholic News Agency
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
Contraction in China Factory Activity Extends Into a Fourth Month
China’s factory activity contracted for a fourth consecutive month in July, while non-manufacturing activity slowed to its weakest this year as the world’s second-largest economy struggles to revive growth momentum in the wake of soft global demand. The official manufacturing purchasing managers’ index came in at 49.3 in July — compared with 49.0 in June, 48.8 in May and 49.2 in April — according to data from the National Bureau of Statistics released on Monday. July’s reading was slightly better than the 49.2 median forecast in a Reuters poll.
Monday’s figures also showed China posting its weakest official non-manufacturing PMI reading this year, coming in at 51.5 in July — compared with 53.2 in June, 54.5 in May and 56.4 in April. Employment sub-indexes for both manufacturing and non-manufacturing sectors declined in July, pointing to lingering softness as youth unemployment hit successive record highs in China. The service industry — a major sector that hires young workers — sub-index slowed 1.3 percentage points in July from the previous month, according to the NBS.
Officials Juggle Several US Goals as they Award CHIPS Money
A new Commerce Department office tasked with dispensing tens of billions of federal funding for domestic semiconductor manufacturing faces a challenging job. The experts at the CHIPS program office are charged with enticing the world’s largest chipmakers to the U.S. to fashion cutting-edge semiconductors. The goal is to break the dependence that many American manufacturers of missiles, spy satellites, telecom gear and medical devices have on suppliers primarily based in Taiwan and South Korea.
Congress allocated $52 billion for the effort last year. In recent decades, the most successful U.S. industrial policy interventions have been similar to this one: funding for “high-risk, high-reward” R&D, according to a Peterson Institute study. The new office has received more than 400 statements of interest from semiconductor manufacturers. Preliminary applications will be accepted starting in September. Six expert teams will review the applications and decide on the amounts each firm will receive. National security experts will weigh applications based on companies’ security measures and supply chain resiliency capabilities.
COVID Update - New Covid Vaccines Are Coming to the U.S. This Fall, But Uptake May be Low
A new round of Covid vaccines is coming to the U.S. this fall — but many Americans may not roll up their sleeves and take one. That’s largely because pandemic fatigue, the belief that Covid is “over” and confusion over personal risk levels could deter some people from getting an additional shot, experts in public health and health policy told CNBC. But they said public health officials and health-care providers could potentially increase uptake of the new vaccines by communicating a new and simple message this fall: Covid vaccines are likely going to become a routine part of protecting your health moving forward.
Only about 17% of the U.S. population — around 56 million people — have received Pfizer and Moderna’s bivalent Covid vaccines since they were approved last September, according to the Centers for Disease Control and Prevention. Bivalent means they target two strains of the virus. Less than half of adults 65 and older have received a bivalent shot, while rates for all other age groups sit at around 20%.
Senate Passes Defense Policy Bill, Setting up Showdown With the House
The Senate passed its version of the National Defense Authorization Act (NDAA) last week – setting up a showdown with the Republican-controlled House. The NDAA sets the policy agenda and authorizes funding for the Department of Defense annually. The House passed its own version of the bill earlier this month after adopting a series of controversial amendments pushed by hardline conservatives. Now that the Senate has passed its NDAA bill, lawmakers will need to reconcile the Senate bill and the House bill by negotiating a compromise version that can pass both chambers.
The Senate bill sets a topline national defense funding level of $886 billion and includes a 5.2% pay raise for service members, according to a summary from the Senate Armed Services Committee. It also includes support for Ukraine by extending the Ukraine Security Assistance Initiative through fiscal year 2027 and authorizes increased funding for efforts to respond to threats, including research on foreign influence operations. The Senate passed its version of the bill with a bipartisan vote of 86 to 11.
Global Steel Output Remains Flat
Global steel production fell slightly from May to June, down -1.8% for the month to 158.8 million metric tons worldwide, though the result effectively shows no year-over-year change (-0.1%) from the June 2022 tonnage. Through six months of production, the world’s 2023 total for raw-steel output is 943.8 million metric tons, down -1.1% from the January-June 2022 result.
The current rate of production is trailing the pace forecast for 2023 demand in World Steel’s recent outlook report: It projects 2023 steel demand rising 2.3% to 1.82 billion metric tons, and then improving further by 1.7% to 1.85 billion metric tons for 2024. In line with that forecast, falling industrial demand and weak construction activity, and the expectation of economic recession, appear to be limiting steelmakers expansion efforts.
Read more at American Machinist
Inside the Q2 GDP Numbers
Real GDP grew 2.4% at the annual rate in the second quarter of 2023. As such, the U.S. economy continues to show signs of resilience despite ongoing challenges and worries about the outlook. The U.S. economy is expected to grow by 2.0% and 1.2% in 2023 and 2024, respectively. Even as the probability of a “soft landing” has increased, there continues to be sizable downside risks in the economic outlook.
Economic growth was buoyed by strength in nonresidential fixed investment, service-sector consumer spending and state and local government spending. Goods spending was positive but weaker than desired, and there were drags on growth from both net exports and residential fixed investment. In the Q2 GDP data, there were solid gains in fixed investment for structures (up 9.7%), equipment (up 10.8%) and intellectual property products (up 3.9%). Private manufacturing fixed investment in structures soared to $87.7 billion in Q2, an all-time high, with the sector accounting for 18.3% of total structures spending in the quarter, a record pace. (See accompanying chart.)
Read more at The Bureau of Economic Analysis
China Curbs Exports of Drone Equipment Amid U.S. Tech Tension
China on Monday announced export controls on some drones and drone-related equipment, saying it wanted to safeguard "national security and interests" amid escalating tension with the United States over access to technology. The restrictions on equipment including some drone engines, lasers, communication equipment and anti-drone systems would take effect on Sept. 1, the commerce ministry said. The controls would also affect some consumer drones, and no civilian drones could be exported for military purposes, a ministry spokesperson said in a statement.
U.S. lawmakers have said that more than 50% of drones sold in the U.S. are made by Chinese-based company DJI, and they are the most popular drone used by public safety agencies.DJI said on Monday it always strictly complied with and enforced laws and regulations of the countries or regions in which it operates, including China's export control regulatory requirements.
Euro Zone Economy Shows Resilience as Second-Quarter GDP Beats Expectation, Inflation Slips
The euro zone returned to growth in the second quarter of 2023, with a greater than expected expansion after narrowly avoiding a technical recession around the turn of the year, preliminary data showed on Monday. Gross domestic product in the euro zone expanded by 0.3% in the second quarter. Among the bloc's biggest countries, France and Spain grew at a sustained pace on the back of stronger exports and tourism while Germany, the euro zone's biggest country, registered no growth and Italy suffered a contraction.
Euro zone inflation fell in July, and new growth figures showed economic activity picking up in the second quarter of this year — but economists still fear a recession could be in the cards. Headline inflation in the euro area was 5.3% in July, according to preliminary data released Monday, lower than the 5.5% registered in June. However, it remains well above the European Central Bank’s 2% target for the 20-member bloc.
Trucking Giant Yellow Shuts Down Operations
Yellow, one of the oldest and biggest U.S. trucking businesses, shut down on Sunday, wrecked by a string of mergers that left it saddled with debt and stalled by a standoff with the Teamsters union. The Nashville, Tenn., company sent out notices to customers and employees saying it was ceasing all operations at midday Sunday. The Teamsters said the company notified the union it intends to file for bankruptcy. Since 2009, Yellow’s annual revenues have hovered close to $5 billion, but the company has posted losses most years and never a profit above $25 million.
A failure imperils nearly 30,000 jobs, including around 22,000 Teamsters members. Hundreds of its nonunion employees were laid off Friday after the company stopped taking in new shipments from customers. It would be the biggest collapse in terms of revenue and jobs for the fickle U.S. trucking industry, though customers say disruptions should be limited. Many shifted their cargoes to rivals in recent weeks, hastening Yellow’s demise. Competitors said their volumes jumped last week.
The US Senate Passes Nuclear Fuel Security Act to Boost Domestic Uranium Production
The United States Senate last voted overwhelmingly to create a Nuclear Fuel Security Program, aimed at increasing domestic supplies of uranium. The bipartisan Nuclear Fuel Security Act was passed by a vote of 96-3 for inclusion in the fiscal year 2024 National Defense Authorization Act. The Nuclear Fuel Security Act of 2023 establishes a program to increase domestic production and ensure the availability of domestically produced uranium. This move is seen as an important step towards reducing reliance on foreign sources and strengthening national security.
Amendment #999 directs the Department of Energy (DOE) to prioritize activities to increase domestic production of low-enriched uranium (LEU) for existing reactors and accelerate efforts to ensure the availability of high-assay, low-enriched uranium (HALEU) for advanced reactors.
Exxon And Chevron Profits Fall To Pre-Ukraine War Levels As Oil Prices Declined
Chevron and Exxon each reported their weakest quarterly profits in more than a year Friday, as financial gains at the two largest American oil companies moderate after spiking to record levels in the immediate aftermath of Russia’s invasion of Ukraine. Exxon earnings came in at $7.9 billion for the three-month period ending June 30, while Chevron raked in $5.8 billion during the stretch.
Tumbling energy prices largely spurred the slide in profits, as international benchmark Brent crude is down roughly 30% from over $120 per barrel to $84 per barrel since last June. Despite the seismic shift in earnings, quarterly profit and revenue at the rival firms were mostly in line with analyst expectations. Shares of Exxon slipped 2% and Chevron’s stock lost 1% in early Friday trading while major indexes gained.
EV Technology Could be a Risk to Maritime Shippers
the battery technology involved in the zero-emission automobiles is exposing under-prepared maritime shippers to the risk of hard-to-control fires, industry, insurance and emergency response officials said. That risk has been put under the spotlight by the burning car carrier drifting off the Dutch coast. The Dutch coastguard said the fire's cause was unknown, but Dutch broadcaster RTL released a recording in which an emergency responder is heard saying "the fire started in the battery of an electric car."
While all logistics companies deal with the risk of EV lithium ion batteries burning with twice the energy of a normal fire, the maritime industry has not kept up with the developing technology and how it creates greater risk, maritime officials and insurers said. There were 209 ship fires reported during 2022, the highest number in a decade and 17 percent more than in 2021, according to a report from insurer Allianz Global Corporate & Specialty. Of that total, 13 occurred on car carriers, but how many involved EVs was not available.
Inside Walmart’s Warehouse of the Future
Inside a sprawling Walmart warehouse in Brooksville FL, hundreds of jobs slinging boxes are changing into roles managing robotic arms, conveyor belts and screens. The central Florida warehouse, surrounded by cow pastures and housing developments, has been one of this county’s largest private employers since it opened in 1991, say local officials. By the end of the year, it will be the first U.S. Walmart warehouse of its kind to use automation to handle most products.
In Brooksville, as sections of robotic arms and screens are gradually installed across the more than 1–million–square-foot facility, some of its roughly 900 workers say they are skeptical about transitioning to new roles that require different skills. Jose Vargas, 49, who has worked at the Brooksville warehouse for 20 years and transitioned to an automated role about two years ago, said some of his co-workers on the yet-to-be automated side of the building are hesitant to make the leap.