Member Briefing August 30, 2023
JOLTS: Job Openings Fall to 8.82 Million in July vs. 9.46 Million Expected
The July JOLTS report showed clear signs of continued cooling in labor demand growth. Total openings fell to 8.8 million in July, a decline from the downwardly-revised 9.2 million openings in June and the lowest level since February 2021. The quit rate fell another tick and is now back to where it was before the pandemic began. Gross hiring growth kept slowing, but involuntary separations including layoffs remained in check, a sign that while demand for new workers is moderating, demand for existing workers is holding up. Today's report likely will fuel more speculation that the Federal Reserve's path to a "soft landing" remains open, but the overall downward trajectory in labor demand keeps one far from assured.
- Monday’s report was the lowest number of job openings since February 2021, although the total level remains about 26% above pre-pandemic levels.
- The number of unemployed persons per job openings fell to 1.51, well below the cycle peak of 2.01.
- There were 550,000 openings in the manufacturing sector, down from 580,000 in June and 885,000 in July of 2022.
- Over the month, job openings decreased in professional and business services (-198K), health care and social assistance (-130K) and state and local government (-128K)
- Gross hirings fell to 5.8 million in July, down about 170K from June and the slowest pace of hiring since January 2021.
- Involuntary separations—largely layoffs—were more or less unchanged in July and have come down after a small spike earlier in the year.
- The number of workers quitting their jobs declined by 253K in a sign that workers are feeling somewhat less confident about switching to more lucrative employment elsewhere.
- Since peaking at 3.0% a year and a half ago, the quit rate has come steadily down in a sign that employers' voracious demand for new workers is abating.
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- Ukraine Says It Retook Robotyne Village From Russians – New York Times
- Ukraine Says it Liberates Strategic Southeastern Settlement - Reuters
- Vatican Defends Pope's Praise of 'Great' Russian Empire After Fury in Ukraine - NBC
- Ukraine Hatches Plan to Reopen Black Sea Grain Route, Defying Russian Blockade - WSJ
- Germany Arrests a Man Accused of Illegally Exporting Electronic Components for Drones to Russia - AP
- Kremlin Says Putin Won't Attend Prigozhin's Funeral - Reuters
- After Prigozhin’s Death, Mourners Gather at Wagner Memorial in Moscow - BBC
- Russian Mercenaries Gather at Funeral of Prigozhin's Logistics Chief - Reuters
- U.S., Allies Seek Long-Term Military Aid for Ukraine to Show West’s Resolve - WSJ
- 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
U.S., China Agree on Steps to Ease Trade Tensions
The U.S. and China agreed to set up new channels of communication for economic and commercial issues, Commerce Secretary Gina Raimondo said Monday, including a new bilateral forum to discuss export control measures to reduce misunderstanding of national security policies. The agreement, reached during a four-hour meeting between Raimondo and Chinese Commerce Minister Wang Wentao, is aimed at easing tensions that followed Washington’s step to restrict China-bound exports of advanced semiconductors and equipment in October. That action led to retaliation from Beijing, including a ban on some chip-making materials and the sale of products made by U.S. chip maker Micron Technology.
“This is meant to be a dialogue, where we increase transparency, and when we are clear about what we are doing,” Raimondo told U.S. business representatives during a reception at the U.S. ambassador’s residence. The first meeting of the new gathering called “export control enforcement information exchange” will take place Tuesday between senior officials from the two countries.
Some U.S. Manufacturers Adapt, Find Reasons to be Cheerful About Their Prospects
Domestic manufacturing has been in the dumps for a while. A survey from the Institute for Supply Management found that the sector has been shrinking for nine straight months. And S&P Global reported this week that demand for manufactured goods fell in July at a faster pace than in June. But when you dig a little deeper, you can see signs that manufacturers are adapting to today’s economic climate. Some are slimming down capacity and reducing headcount; others are making different products.
The administration is pouring money into domestic sectors it sees as strategically important. The Defense Department is trying to spend more on American-made components. The Inflation Reduction Act of 2022 set aside money for clean energy and the CHIPS Act has given a boost to the domestic semiconductor industry. “There’s a lot of monies that are appropriated already that have a lot of legs on them for these industries,” said Chris Blench, co-founder of Mavericks Manufacturing Partners in Escondido, California. “And so we’re trying to position ourselves so that we can continue to benefit from all those monies that are allocated to those projects.”
COVID Update - New York on High Alert Over New COVID Variant Detected in U.S.
State health officials say they are on high alert over a new COVID-19 strain, identified last week in the U.S., that is markedly different in structure than previous iterations of the omicron variant. BA.2.86 — which has been found in cases in Israel, Denmark, South Africa, Michigan and Virginia — does not appear to be present in New York, according to a detailed genetic sequencing analysis conducted last week by the Wadsworth Center at the state Department of Health.
Amid news of the new variant, Wadsworth Center experts transferred COVID-19 sequencing information to its collaborators at Syracuse University. The analysts then searched all wastewater data from the last six months to confirm the unusual new strain was not detected in New York. This process will continue to be used to help monitor for the new variant in wastewater samples, health officials said. This enhanced surveillance program provides a greatly increased opportunity for detecting BA.2.86 should it enter the state, according to health officials.
Home Prices Rose Again in June but Higher Mortgage Rates Complicate Housing's Outlook
The S&P Case-Shiller US National Composite home price index increased by 0.7% in June compared with May on a seasonally adjusted basis. That was in line with the 0.7% increase the month before. The index remains just 0.02% off its all-time peak exactly a year ago. The index measuring home prices in the 20 largest US cities also gained in June, rising 0.9% month over month and exceeding the Bloomberg consensus estimate of a 0.8% gain.
Year over year, the national housing index was unchanged in June, up from a decline of 0.4% the month before. The 20-city index decreased by 1.2% on a non-seasonally adjusted basis. Chicago, Cleveland, and New York again reported the highest year-over-year gains among the 20 cities in June at 4.2%, 4.1%, and 3.4%, respectively. the five-month stretch of rising prices from February to June surprised onlookers, prompting some analysts to revise their home price forecasts. For instance, the Goldman Sachs housing team now expects an increase of 1.8% in home prices this year, up from the 2.2% decline they predicted before.
EU Must be Ready to Accept New Members by 2030 - Charles Michel
The European Union must be ready to enlarge by 2030 if it wants to remain "credible", European Council President Charles Michel said Monday at the Bled Strategic Forum in Slovenia. "As we prepare the EU’s next strategic agenda, we must set ourselves a clear goal. I believe we must be ready — on both sides — by 2030 to enlarge," Michel said to an audience that included the leaders of Albania, Bosnia and Herzegovina, Moldova, Montenegro and North Macedonia, all official candidates for EU accession. "This is ambitious, but necessary. It shows that we are serious," Michel said.
Three countries - Ukraine, Moldova and Bosnia and Herzegovina - have gained candidate status since the start of the invasion in February 2022. Ukraine’s path to membership is seen as the most critical for ensuring a geopolitical European Union, but it is also the most politically fraught. the renewed desire for enlargement raises questions about the EU’s capacity to integrate new members, an issue likely to make the agenda when the 27 EU heads of state meet in Granada, Spain, in early October, a day after a gathering of the European Political Community that will be attended by the leaders of these candidate counties.
The Panama Canal Traffic Jam: Will the Supply Chain Suffer?
Drought conditions in the Panama Canal are challenging supply chains that rely on this important waterway to rethink their strategies to move product as shallower-than-usual waters have reduced the number of vessels allowed to traverse the canal per day and restricted maximum ship weights. It’s coming at a cost of both time and money. Because the tonnage is restricted, some companies have had to offload cargo, specifically containers onto truck or rail for transport.
The Panama Canal Authority has reduced the number of vessels that can pass through the canal per day from 36 to 32; media outlets are reporting wait times have reached up to three weeks and some are reporting a backlog of over 200 ships. Companies are seemingly facing a lose-lose situation. If they decide their vessel should continue to traverse the canal, they face extended wait times due to the pileup; similarly, companies that decide to find an alternative route face extended shipping times.
Hedge Fund MFN Pushes for Equity Voice in Yellow’s Bankruptcy
Boston-based MFN Partners is pushing to select directors to the Yellow’s board and for the appointment of an official group to represent shareholders’ interests in the chapter 11 case. The WSJ’s Soma Biswas reports the move comes as Yellow is drawing so much interest in its real-estate assets that it may be able to pay off all of its financial debt. That raises the question of whether there will be anything left for Yellow stockholders to cover their lost equity. If MFN gets its request for the appointment of a special group of shareholders, the firm could bill its legal fees to Yellow. Adding to the bankruptcy-court drama.
Yellow’s biggest pension fund, however, said it would oppose MFN’s move to form an official committee for shareholders. MFN is also a significant shareholder in XPO, which competes in the same less-than-truckload wing of the trucking sector that includes Yellow. For Yellow stock to have any value, it would need to pay off its unsecured creditors, including the Central States Pension Fund. Central States has asserted it is owed billions of dollars in compensation for contributions Yellow would have made in the future had it survived.
US Consumer Confidence Fell More Than Forecast in August
The Conference Board Consumer Confidence Index® declined in August to 106.1 (1985=100), from a downwardly revised 114.0 in July. The Present Situation Index—based on consumers' assessment of current business and labor market conditions—fell to 144.8 (1985=100) from 153.0. The Expectations Index— based on consumers' short-term outlook for income, business, and labor market conditions—declined to 80.2 (1985=100) in August, reversing July's sharp uptick to 88.0. Expectations were a hair above 80—the level that historically signals a recession within the next year.
- 20.7% of consumers said business conditions were "good," unchanged from July. 17.2% said business conditions were "bad," up from 16.2%.
- 40.3% of consumers said jobs were "plentiful," down from 43.7% in July.
- 14.1% of consumers said jobs were "hard to get," up from 11.3%.
- 16.2% of consumers expect business conditions to improve, down from 17.2% in July.
- Meanwhile, 16.8% expect business conditions to worsen, up from 14.5%.
- 16.7% of consumers expect more jobs to be available, down slightly from 16.6% in July.
- 18.0% anticipate fewer jobs, up from 15.6%.
Toyota to Resume Japan Production on Wednesday After System Failure Hits Plants
Toyota will resume operations at 25 production lines of a dozen plants in its home market from Wednesday morning and add the final two plants from the afternoon, it said. The company continues to investigate the cause of the glitch, which it said was not due to a cyberattack and prevented it from ordering components. The plants together account for about a third of the automaker's global production, Reuters calculations showed.
Toyota's domestic production had been on the rebound after a series of output cuts it blamed on semiconductor shortages. Output was up 29 percent in January-June, the first such increase in two years. Its Japan output averaged about 13,500 vehicles daily in the first half, Reuters calculations showed. That excludes vehicles from group automakers Daihatsu and Hino. Operations were halted for a day last year when a supplier suffered a cyberattack, hampering Toyota's ability to order parts. Toyota resumed operations using a back-up network.
World’s Steelmakers Maintaining Production Discipline
Global steel production fell only slightly from June to July, dropping just -0.2% to 158.5 million metric tons in the latest monthly summary from the World Steel Assn. The monthly output results have been generally consistent since March, indicating steelmakers worldwide are limiting their output in order to achieve some discipline over excess supply and weak prices.Even so, the current rate of production has stabilized higher than the 2022 rate, so that the year-over-year results for July 2023 are 6.6% higher than the 2022 figure, although the year-to-date total for January-July is even (-0.1%) with last year’s total.
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. Despite that forecast, falling industrial demand and weak construction activity, and the expectation of economic recession, appear to be directing steelmakers production plans.
Boeing Prepares to Resume 737 MAX Deliveries to China
Boeing Co is preparing to restart deliveries of its 737 MAX jets to China after a four-year halt, Bloomberg News reported on Friday, citing people familiar with the matter.The initial handovers are expected to take place within weeks, according to the report. "For (737 MAX) deliveries, we will be ready to deliver for our customers when that time comes," Boeing said in a statement.
China was the first country to ground Boeing's 737 MAX following fatal accidents, though about 90% of the jets resumed commercial operation in the country in June.
SMBs Are Rethinking Group Health Benefits Amid Rising Costs
With the cost of employee benefits rising, smaller employers can struggle to offer meaningful benefits packages. SMBs have less bargaining power with health insurers and often lack a dedicated HR professional to manage employee benefit packages. As a result, only 39% of organizations with 3-9 employees and 67% of organizations with 10-199 workers offer health benefits, according to data from the Kaiser Family Foundation.
On top of increasing premiums and deductibles for both businesses and employees, group health plans often fail to acknowledge the individual. Traditional employee benefits aren’t entirely inclusive and leave little flexibility or personalization for employees’ unique needs. The Kaiser Family Foundation also reports that 75% of employers with fewer than 200 employees only offer one health plan. Yet, factors such as gender, age, preferred health care provider, and location all influence what benefits an employee values. Fortunately, there are alternative health benefit options specifically designed for small businesses and their employees.