Member Briefing August 7, 2023
July Jobs Report: U.S. Payroll Growth Totaled 187,000, Hourly Earnings Rise
Job growth in July was less than expected, pointing to a slower pace in the U.S. economy, the Labor Department reported Friday. Nonfarm payrolls expanded by 187,000 for the month, slightly below the Dow Jones estimate for 200,000. Though the headline number was a miss, it actually represented a modest gain from the downwardly revised 185,000 for June.
The unemployment rate was 3.5%, against a consensus estimate that the jobless level would hold steady at 3.6%. Average hourly earnings, a key figure as the Federal Reserve fights inflation, rose 0.4% for the month, good for a 4.4% annual pace. Both numbers were higher than the respective estimates for 0.3% and 4.2%. Hours worked nudged down to 34.3. Jobs in manufacturing dipped by 2,000. Year to date, the sector has added just 11,000 employees, a significant slowdown from its pace of 385,000 in 2021 and 390,000 in 2022. However, the number of workers in the industry in July—12,985,000—is just short of the number in February, 12,988,000. The latter was the most since November 2008.
War in Ukraine Headlines
The Fed Is No Longer Predicting a Recession, but Workers Are Less Certain
The U.S. labor market remains incredibly resilient, even as the Federal Reserve in July pushed up its benchmark interest rate to the highest level in 22 years. Morning Consult data shows that the incidence of lost pay or income across regions and demographics is still relatively modest as unemployment remains near historic lows. The share of U.S. adults reporting pay losses fell to 10.4% from 10.6% in June, boding well for a labor market that continues to hum along. The incidence of pay losses among high-income adults has fallen especially rapidly in recent months.
Feelings of job insecurity increased in July, with the share of employed U.S. adults expecting a loss of employment income in the next four weeks rising to 17.0%, up from 16.1% in June. The uptick was driven in large part by a sharp increase in job insecurity among high earners, despite a smaller share of this cohort reporting lost pay compared with the previous month. Volatility within this income bracket has been especially high in recent months, as macroeconomic news has been hard to interpret.
More Economists Say a Recession-Free Soft Landing Could Become a Reality
After months of forecasts predicting a recession, more economists are now taking the possibility of an economic “soft landing” more seriously. A soft landing means that central banks will have increased benchmark interest rates enough to cool inflation without causing a recession. And now, after several months of rate increases, it appears that might be happening.
US consumer inflation was 3% in June on a year-over-year (YOY) basis, within striking distance of the Federal Reserve’s goal of 2%. Canada’s inflation was even lower, at 2.7% YOY. The most recent UK report of 7.9% inflation was well above the 2% goal, but the decrease was also more than expected. In June, the euro zone reported 5.5% inflation, about half what it was last fall. At the same time, many countries’ economies have proven to be fairly resilient. Consumer spending and hiring haven’t crashed as a result of the interest rate increases. In fact, the US economy grew by 2.4% in the second quarter, ahead of predictions.
COVID Update - Covid Hospitalizations are Rising Again. Here's What to Know
Signs indicate that Covid is making a comeback after months of falling cases. But does the United States need to brace itself for a surge? Experts told NBC News that while cases are going up, they are not currently expecting a huge spike in Covid and wouldn’t advise people to change their behavior for now.
Hospitalizations have been trending upward since the beginning of July — the first increase seen this year, according to data from the Centers for Disease Control and Prevention. The agency reported 8,035 new hospital admissions for the week ending July 22, a 12.1% increase compared to the week prior, though still one of the lowest points in the pandemic. At the same time last year, for comparison, that number was more than 44,000.
NYS COVID Update
The Governor updated COVID data for the week ending July 28.
- Weekly: 20
- Total Reported to CDC: 79,941
- Average Daily Patients in Hospital statewide: 648
- Average Daily Patients in ICU Statewide: 61
7 Day Average Cases per 100K population
- 4.5 positive cases per 100,00 population, Statewide
- 4.6 positive cases per 100,00 population, Mid-Hudson
DiNapoli: State Falling Short on Renewable Electricity Goals
New York state will have to take multiple steps to increase renewable electricity generation to achieve the objectives of the Climate Leadership and Community Protection Act (CLCPA). Success will also require state agencies to consistently and proactively identify and address problems, continue streamlining permit and interconnection study procedures, and develop the necessary infrastructure to connect renewable projects to the grid and New Yorkers' homes, according to a report issued today by State Comptroller Thomas P. DiNapoli.
DiNapoli’s report found that renewable generators in New York would need to produce an additional 78,073-gigawatt hours above 2022 levels, an increase of over 200%, to reach the CLCPA’s 2030 goal of 70% renewable electricity consumption. The analysis is based on projections from the New York Independent System Operator (NYISO). NYISO has also projected that the state would need to add 20 gigawatts of installed renewable capacity by 2030, which is triple the 2022 capacity of approximately 6.5 gigawatts. In the last 20 years, New York added 12.9 gigawatts of total electric generation, including both fossil fuel and renewable sources.
The Future of the Workforce Will Depend on Policy Decisions
A new report, The American Workforce Transformation – Challenges and Opportunities, issued by Littler, looks at the key factors contributing to ongoing labor shortages, including the growing “skills gap,” and the industry sectors that have been most impacted. The report also examines the benefits and disruptions that artificial intelligence (AI) and other new technologies are bringing to the workplace and provides insights on what can be done to meet the challenges. The report provides several recommended policy proposals:
- Modernizing federal labor market reporting data.
- Reauthorizing the Workforce Innovation and Opportunity Act (WIOA.
- Diversifying and Expanding the National Apprenticeship System.
- Considering short-term federal Pell grants for job-training programs.
Food Inflation Has Dropped Dramatically Since Last Year—But Many U.S. Households Still Say It’s Too High
Despite recent trends of cooling inflation, grocery prices in the second quarter of 2023 remained a concern among U.S. households—especially for families with children—according to a report by data consulting company Dunnhumby, suggesting American shoppers remain worried about surging grocery bills even as price increases ease.
Some 61.8% of American households acknowledged having difficulty covering an unexpected expense of $400, up 1.3% from November 2022, according to the report. However, families with children told Dunnhumby they have been even more hard hit over the past year: 72% would not be able to pay the $400, and 36% of them have either skipped or reduced the size of their meals for financial reasons.
Weekly Jobless Claims Rise Moderately; Layoffs Drop to 11-Month Low
The number of Americans filing new claims for unemployment benefits rose slightly last week, while layoffs dropped to an 11-month low in July as labor market conditions remain tight. Initial claims for state unemployment benefits increased 6,000 to a seasonally adjusted 227,000 for the week ended July 29, the Labor Department said on Thursday. Economists polled by Reuters had forecast 227,000 claims for the latest week.
The number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 21,000 to 1.700 million during the week ending July 22, the claims report showed. These so-called continuing claims remain low by historical standards, indicating that some laid-off workers are experiencing short spells of unemployment.
Bank of England Raises Key Interest Rate by Quarter Percentage Point
The Bank of England on Thursday raised its key interest rate for the 14th time in a row and said it may do so again as it tries to cool the fastest rise in consumer prices in the Group of Seven advanced democracies. The U.K.’s central bank increased its bank rate to 5.25% from 5%, lifting it to its highest level since February 2008 and matching recent moves by both the Federal Reserve and the European Central Bank.
The BOE signaled that it may be in the final stages of its long series of rate rises. The central bank forecast that inflation would be below its 2% target from mid-2025 if it were to raise its key rate to 6%, which financial markets viewed as the likely peak before Thursday’s announcement. The BOE also described its policy stance as “restrictive,” meaning it is weakening activity and cooling inflation. Previous falls in the inflation rate have largely been due to energy prices, which aren’t affected by BOE policy. That is a further indication that policy makers aren’t convinced they need to push rates much higher to get inflation under control.
UAW Says Costly EV Transition Won’t Change Union’s Demands
The United Auto Workers union is amplifying calls for wage increases and job security, and President Shawn Fain says it shouldn’t matter that the car companies are facing an expensive transition to electric vehicles. The UAW leader in recent weeks has hardened his stance with General Motors and Jeep-maker Stellantis as labor talks in Detroit get under way. Auto executives have become more vocal about wanting flexibility to shift more factory work to EVs, a potential threat to unionized jobs.
The Detroit car companies formally kicked off talks with the UAW in July with the key objective of keeping their own labor costs in check, especially following a period of high inflation. The current contract expires Sept. 14, and analysts have said the risk of a strike is high. While the negotiations are dealing with more traditional issues such as wages, the companies’ pivot to EVs is an overarching tension point that creates an air of uncertainty with the talks.
South Korean Experts Seek to Verify Room-Temperature Superconductor Claim
South Korean experts said on Thursday they would set up a committee to verify claims that a room temperature superconductor has been discovered, which has driven investor frenzy as well as peer skepticism since. The Korean Society of Superconductivity and Cryogenics, a group of experts, said in a statement on Thursday it had asked Quantum Energy Research Centre to submit samples in order to verify its researchers' findings of a room-temperature superconductor material, made public last month on a website showing research before formal publication.
Superconductors, substances with no electrical resistance, are considered valuable as they can allow electrical currents to pass through without losing energy. But the handful of materials discovered so far only exhibit superconductivity at extremely cold temperatures or high pressures, making them impractical for widespread use.
Pentagon Orders Three Guided-Missile Destroyers
The U.S. Dept. of Defense issued a multi-year contract for General Dynamics Bath Iron Works of three new guided-missile destroyers (DDG 51), with construction to begin in 2023, 2024, and 2026. The contracts include options for engineering change proposals, design budgeting requirements, and post-delivery availabilities on the individual ships over the period of construction.
The current model, Flight III Arleigh Burke-class destroyer – of which there are six currently under construction at Bath Iron Works – is a 505-ft, 8,300-ton vessel used to conduct anti-aircraft warfare, anti-surface warfare, tactical land strikes, and anti-submarine warfare. In addition to carrying the Aegis combat system, the destroyers are armed with multiple and surface-to-air missiles, Tomahawk missiles, anti-submarine rockets, and anti-sub helicopters.
U.S. Steelmakers Are Still Expanding as Demand Slows
Steelmakers are investing in new plants, anticipating a big payoff from the steel needed for federal infrastructure projects, increased car production and new electric-battery facilities. Nucor, Steel Dynamics and United States Steel are among the steelmakers making big investments in new or expanded plants. Steel executives expect additional steel consumption will come from billions of dollars of infrastructure spending on road and bridge repairs, solar- and wind-energy facilities and higher automobile production. Large, new plants to make semiconductors and electric-vehicle battery plants also are expected to lift the construction industry’s appetite for metal.
Steelmakers’ confidence in improving demand comes during a relatively soft period for the industry. Prices and demand for steel have been falling since spring after manufacturers and steel distributors bought steel early in the year to restock depleted inventories. Nucor, Steel Dynamics, Cleveland-Cliffs and U.S. Steel all recently reported lower sales and earnings in the quarter ended in June from a year earlier.
Interactive Map/Graph Help Visualize the Global 500
The new Fortune Global 500 list shows the number and strength of companies from Europe in decline. The U.S. and China, meanwhile, emerged as the twin engines of the Fortune Global 500. In the past decade, Italy dropped from eight companies on the list to five, France from 31 to 24, and Britain from 26 to 15. Only Germany held steady, inching up from 29 to 30. The Swiss and Dutch, two non-G7 strongholds, dipped from 14 to 11 and 11 to 10, respectively. (Worth noting: The number of companies from Japan plummeted from 62 to 41.)
Why? Companies focused on technology and emerging economies have consolidated their global position. While the U.S. and China each saw the rise of Big Tech companies, no European or Japanese tech companies made a similar leap forward. A second reason is that many European companies have been blocked from growing at home by domestic and European regulators.